UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the 16 weeks (fiscal quarter) ended October 9, 2004
|- | ----------------------------------------------------------------------------------------------------------------------------------------------
|  | OR                                                                                                                                            
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from           to           

Commission file number 000-33277

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ALDERWOODS GROUP, INC.(Exact name of registrant as specified in its charter)

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|Delaware                                                                             | 52-1522627                          
|------------------------------------------------------------------------------------ | ------------------------------------
|(State or other jurisdiction of incorporation or organization)                       | (I.R.S. Employer Identification No.)
|311 Elm Street, Suite 1000, Cincinnati, Ohio(Address of principal executive offices) | 45202(Zip Code)                     

Registrant's telephone number, including area code:513-768-7400

Former
name, former address and former fiscal year, if changed since last report:N/A

Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes /x/    No / /

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes /x/    No / /

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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS  DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes /x/    No / /

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APPLICABLE ONLY TO CORPORATE ISSUERS

At
November 6, 2004, there were 40,013,933 shares of Common Stock outstanding.



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ALDERWOODS GROUP, INC.

|           |  |                                             |  |                                                                                                         |  | Page
|---------- |  | ------------------------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                             |  |                                                                                                         |  |     
|Part I.    |  | FINANCIAL INFORMATION                       |  |                                                                                                        
|           |  | Item 1.                                     |  | FINANCIAL STATEMENTS:                                                                                   |  |     
|           |  |                                             |  | CONSOLIDATED BALANCE SHEETS
as of October 9, 2004 and January 3, 2004                                   |  | 1   
|           |  |                                             |  | CONSOLIDATED STATEMENTS OF OPERATIONS
for the 16 and 40 Weeks Ended October 9, 2004 and October 4, 2003 |  | 2   
|           |  |                                             |  | CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the 40 Weeks Ended October 9, 2004                  |  | 3   
|           |  |                                             |  | CONSOLIDATED STATEMENTS OF CASH FLOWS
for the 16 and 40 Weeks Ended October 9, 2004 and October 4, 2003 |  | 4   
|           |  |                                             |  | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS                                                  |  | 5   
|           |  | Item 2.                                     |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                   |  | 29  
|           |  | Item 3.                                     |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                              |  | 51  
|           |  | Item 4.                                     |  | CONTROLS AND PROCEDURES                                                                                 |  | 51  
|           |  | FORWARD-LOOKING STATEMENTS AND RISK FACTORS |  | 51                                                                                                     
|Part II.   |  | OTHER INFORMATION                           |  |                                                                                                        
|           |  | Item 1.                                     |  | LEGAL PROCEEDINGS                                                                                       |  | 58  
|           |  | Item 6.                                     |  | EXHIBITS AND REPORTS ON FORM 8-K                                                                        |  | 59  
|SIGNATURES |  | 64                                         

i

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PART I    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

ALDERWOODS GROUP, INC.        CONSOLIDATED BALANCE SHEETS        Expressed in thousands of dollars  except number of shares

|                                                        |                                                                                                                              | October 9,
2004 |           | January 3,
2004 |  
|------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | --------------- | --------- | --------------- | -
|
|                                                        |                                                                                                                              |                 |           |                 |  
|ASSETS                                                  |                                                                                                                              |                 |           |                 |  
|Current assets                                          |                                                                                                                              |                 |           |                 |  
|                                                        | Cash and cash equivalents                                                                                                    |                 | $         | 10,223          |  
|                                                        | Receivables, net of allowances                                                                                               |                 |           | 56,930          |  
|                                                        | Inventories                                                                                                                  |                 |           | 17,261          |  
|                                                        | Other                                                                                                                        |                 |           | 28,997          |  
|                                                        | Assets held for sale                                                                                                         |                 |           | 103,719         |  
|                                                        |                                                                                                                              |                 |           |                 |  
|                                                        |                                                                                                                              |                 | 217,130   |                 |  
|Pre-need funeral receivables and trust investments      |                                                                                                                              |                 | 345,721   |                 |  
|Pre-need cemetery receivables and trust investments     |                                                                                                                              |                 | 306,037   |                 |  
|Cemetery property                                       |                                                                                                                              |                 | 117,040   |                 |  
|Property and equipment                                  |                                                                                                                              |                 | 536,668   |                 |  
|Insurance invested assets                               |                                                                                                                              |                 | 243,987   |                 |  
|Deferred income tax assets                              |                                                                                                                              |                 | 7,554     |                 |  
|Goodwill                                                |                                                                                                                              |                 | 321,158   |                 |  
|Cemetery perpetual care trust investments               |                                                                                                                              |                 | 236,249   |                 |  
|Other assets                                            |                                                                                                                              |                 | 40,061    |                 |  
|                                                        |                                                                                                                              |                 |           |                 |  
|                                                        |                                                                                                                              | $               | 2,371,605 |                 | $
|                                                        |                                                                                                                              |                 |           |                 |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                    |                                                                                                                              |                 |           |                 |  
|Current liabilities                                     |                                                                                                                              |                 |           |                 |  
|                                                        | Accounts payable and accrued liabilities                                                                                     |                 | $         | 133,317         |  
|                                                        | Current maturities of long-term debt                                                                                         |                 |           | 4,492           |  
|                                                        | Liabilities associated with assets held for sale                                                                             |                 |           | 75,411          |  
|                                                        |                                                                                                                              |                 |           |                 |  
|                                                        |                                                                                                                              |                 | 213,220   |                 |  
|Long-term debt                                          |                                                                                                                              |                 | 494,643   |                 |  
|Deferred pre-need funeral and cemetery revenue          |                                                                                                                              |                 | 86,287    |                 |  
|Non-controlling interest in funeral and cemetery trusts |                                                                                                                              |                 | 550,426   |                 |  
|Insurance policy liabilities                            |                                                                                                                              |                 | 206,094   |                 |  
|Deferred income tax liabilities                         |                                                                                                                              |                 | 19,527    |                 |  
|Other liabilities                                       |                                                                                                                              |                 | 19,557    |                 |  
|                                                        |                                                                                                                              |                 |           |                 |  
|                                                        |                                                                                                                              |                 | 1,589,754 |                 |  
|                                                        |                                                                                                                              |                 |           |                 |  
|Non-controlling interest in perpetual care trusts       |                                                                                                                              |                 | 254,506   |                 |  
|Stockholders' equity                                    |                                                                                                                              |                 |           |                 |  
|                                                        | Common stock, $0.01 par value, 100,000,000 shares authorized, 40,013,042 issued and outstanding (January 3, 200439,984,979) |                 |           | 400             |  
|                                                        | Capital in excess of par value                                                                                               |                 |           | 740,165         |  
|                                                        | Accumulated deficit                                                                                                          |                 |           | (237,954        | )
|                                                        | Accumulated other comprehensive income                                                                                       |                 |           | 24,734          |  
|                                                        |                                                                                                                              |                 |           |                 |  
|                                                        |                                                                                                                              |                 | 527,345   |                 |  
|                                                        |                                                                                                                              |                 |           |                 |  
|                                                        |                                                                                                                              | $               | 2,371,605 |                 | $
|                                                        |                                                                                                                              |                 |           |                 |  

See accompanying notes to the interim consolidated financial statements

1

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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 |  
|----------------------------------------------------------------- | -------------------------------------------- | -------------- | ------- | -------------- | -
|
|                                                                  |                                              |                |         |                |  
|Revenue                                                           |                                              |                |         |                |  
|                                                                  | Funeral                                      |                | $       | 136,966        |  
|                                                                  | Cemetery                                     |                |         | 49,002         |  
|                                                                  | Insurance                                    |                |         | 25,994         |  
|                                                                  |                                              |                |         |                |  
|                                                                  |                                              |                | 211,962 |                |  
|                                                                  |                                              |                |         |                |  
|Costs and expenses                                                |                                              |                |         |                |  
|                                                                  | Funeral                                      |                |         | 111,272        |  
|                                                                  | Cemetery                                     |                |         | 43,153         |  
|                                                                  | Insurance                                    |                |         | 24,399         |  
|                                                                  |                                              |                |         |                |  
|                                                                  |                                              |                | 178,824 |                |  
|                                                                  |                                              |                |         |                |  
|                                                                  |                                              |                | 33,138  |                |  
|General and administrative expenses                               |                                              |                | 14,909  |                |  
|Provision for asset impairment                                    |                                              |                | 445     |                |  
|                                                                  |                                              |                |         |                |  
|Income from operations                                            |                                              |                | 17,784  |                |  
|Interest on long-term debt and refinancing costs (Note 6)         |                                              |                | 50,058  |                |  
|Other expense (income), net                                       |                                              |                | (65     | )              |  
|                                                                  |                                              |                |         |                |  
|Loss before income taxes                                          |                                              |                | (32,209 | )              |  
|Income taxes                                                      |                                              |                | (6,180  | )              |  
|                                                                  |                                              |                |         |                |  
|Net income (loss) from continuing operations                      |                                              |                | (26,029 | )              |  
|Discontinued operations (Note 12)                                 |                                              |                |         |                |  
|                                                                  | Income (loss) from discontinued operations   |                |         | 20,198         |  
|                                                                  | Income taxes                                 |                |         | 7,547          |  
|                                                                  |                                              |                |         |                |  
|Income (loss) from discontinued operations                        |                                              |                | 12,651  |                |  
|                                                                  |                                              |                |         |                |  
|Net income (loss)                                                 |                                              | $              | (13,378 | )              | $
|                                                                  |                                              |                |         |                |  
|Basic and diluted earnings (loss) per Common share:               |                                              |                |         |                |  
|                                                                  | Net income (loss) from continuing operations |                | $       | (0.65          | )
|                                                                  | Income (loss) from discontinued operations   |                |         | 0.32           |  
|                                                                  |                                              |                |         |                |  
|                                                                  | Net income (loss)                            |                | $       | (0.33          | )
|                                                                  |                                              |                |         |                |  
|Basic weighted average number of shares outstanding (thousands)   |                                              |                | 40,003  |                |  
|                                                                  |                                              |                |         |                |  
|Diluted weighted average number of shares outstanding (thousands) |                                              |                | 40,003  |                |  
|                                                                  |                                              |                |         |                |  

See accompanying notes to the interim consolidated financial statements

2

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ALDERWOODS GROUP, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited)        Expressed in thousands of dollars except number of shares

|                           |                                                                            | Shares                                                                             |                                                                                                                                          | Common Stock Par Value |     | Capital in Excess of Par Value |   | Accumulated Deficit |     | Accumulated Other Comprehensive Income |          | Total   |  
|-------------------------- | -------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ---------------------- | --- | ------------------------------ | - | ------------------- | --- | -------------------------------------- | -------- | ------- | -
|Balance at January 3, 2004 |                                                                            | 39,984,979                                                                         |                                                                                                                                          | $                      | 400 |                                | $ | 739,950             |     | $                                      | (222,937 | )       | $
|Comprehensive income:      |                                                                            |                                                                                    |                                                                                                                                          |                        |     |                                |   |                     |     |                                        |          |         |  
|                           | Net loss                                                                   |                                                                                    |                                                                                                                                          |                        |     |                                |   |                     |     |                                        |          | (15,017 | )
|                           | Other comprehensive income (loss):                                         |                                                                                    |                                                                                                                                          |                        |     |                                |   |                     |     |                                        |          |         |  
|                           |                                                                            | Foreign currency translation adjustment, net of income taxes of $nil               |                                                                                                                                          |                        |     |                                |   |                     |     |                                        |          |         |  
|                           |                                                                            | Unrealized loss on insurance invested assets, net of income tax recovery of $2,939 |                                                                                                                                          |                        |     |                                |   |                     |     |                                        |          |         |  
|                           |                                                                            |                                                                                    | Less: reclassification adjustments for realized gains on insurance invested assets included in net income, net of income taxes of $1,096 |                        |     |                                |   |                     |     |                                        |          |         |  
|                           |                                                                            | Unrealized gain on derivatives, net of income taxes of $nil                        |                                                                                                                                          |                        |     |                                |   |                     |     |                                        |          |         |  
|                           |                                                                            |                                                                                    |                                                                                                                                          |                        |     |                                |   |                     |     |                                        |          |         |  
|Comprehensive loss         |                                                                            |                                                                                    |                                                                                                                                          |                        |     |                                |   |                     |     |                                        |          |         |  
|Common stock issued:       |                                                                            |                                                                                    |                                                                                                                                          |                        |     |                                |   |                     |     |                                        |          |         |  
|                           | Stock issued in connection with the settlement of certain unsecured claims |                                                                                    | 5,977                                                                                                                                    |                        |     |                                |   |                     | 31  |                                        |          |         |  
|                           | Stock issued as compensation in lieu of cash                               |                                                                                    | 12,086                                                                                                                                   |                        |     |                                |   |                     | 128 |                                        |          |         |  
|                           | Stock issued under equity incentive plan                                   |                                                                                    | 10,000                                                                                                                                   |                        |     |                                |   |                     | 56  |                                        |          |         |  
|                           |                                                                            |                                                                                    |                                                                                                                                          |                        |     |                                |   |                     |     |                                        |          |         |  
|Balance at October 9, 2004 |                                                                            | 40,013,042                                                                         |                                                                                                                                          | $                      | 400 |                                | $ | 740,165             |     | $                                      | (237,954 | )       | $
|                           |                                                                            |                                                                                    |                                                                                                                                          |                        |     |                                |   |                     |     |                                        |          |         |  

See accompanying notes to the interim consolidated financial statements

3

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ALDERWOODS GROUP, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)        Expressed in thousands of dollars

|                                               |                                                                     | 16 Weeks Ended                             |          | 40 Weeks Ended |       
|---------------------------------------------- | ------------------------------------------------------------------- | ------------------------------------------ | -------- | -------------- | ------
|
|                                               |                                                                     |                                            |          |                |       
|CASH PROVIDED BY (APPLIED TO)                  |                                                                     |                                            |          |                |       
|Operations                                     |                                                                     |                                            |          |                |       
|                                               | Net income (loss)                                                   |                                            | $        | (13,378        | )     
|                                               | (Income) loss from discontinued operations, net of tax              |                                            |          | (12,651        | )     
|                                               | Items not affecting cash                                            |                                            |          |                |       
|                                               |                                                                     | Depreciation and amortization              |          |                | 12,997
|                                               |                                                                     | Amortization of debt issue costs           |          |                | 4,716 
|                                               |                                                                     | Insurance policy benefit reserves          |          |                | 14,693
|                                               |                                                                     | Provision for asset impairment             |          |                | 445   
|                                               |                                                                     | (Gain) loss on disposal of business assets |          |                | (92   
|                                               |                                                                     | Deferred income taxes                      |          |                | (5,723
|                                               | Premium on long-term debt repurchase                                |                                            |          | 31,340         |       
|                                               | Other, including net changes in other non-cash balances             |                                            |          | 3,544          |       
|                                               |                                                                     |                                            |          |                |       
|Net cash provided by continuing operations     |                                                                     |                                            | 35,891   |                |       
|Net cash provided by discontinued operations   |                                                                     |                                            | 4,729    |                |       
|                                               |                                                                     |                                            |          |                |       
|                                               |                                                                     |                                            | 40,620   |                |       
|                                               |                                                                     |                                            |          |                |       
|Investing                                      |                                                                     |                                            |          |                |       
|                                               | Proceeds on disposition of business assets                          |                                            |          | 763            |       
|                                               | Purchase of property and equipment                                  |                                            |          | (14,614        | )     
|                                               | Purchase of insurance invested assets                               |                                            |          | (57,107        | )     
|                                               | Proceeds on disposition and maturities of insurance invested assets |                                            |          | 24,794         |       
|                                               |                                                                     |                                            |          |                |       
|                                               | Net cash used in continuing operations                              |                                            |          | (46,164        | )     
|                                               | Net cash provided by (used in) discontinued operations              |                                            |          | 96,197         |       
|                                               |                                                                     |                                            |          |                |       
|                                               |                                                                     |                                            | 50,033   |                |       
|                                               |                                                                     |                                            |          |                |       
|Financing                                      |                                                                     |                                            |          |                |       
|                                               | Increase in long-term debt                                          |                                            |          | 365,224        |       
|                                               | Repayment of long-term debt                                         |                                            |          | (493,604       | )     
|                                               | Issuance of Common stock                                            |                                            |          | 47             |       
|                                               |                                                                     |                                            |          |                |       
|                                               | Net cash used in continuing operations                              |                                            |          | (128,333       | )     
|                                               | Net cash used in discontinued operations                            |                                            |          | (303           | )     
|                                               |                                                                     |                                            |          |                |       
|                                               |                                                                     |                                            | (128,636 | )              |       
|                                               |                                                                     |                                            |          |                |       
|Decrease in cash and cash equivalents          |                                                                     |                                            | (37,983  | )              |       
|Cash and cash equivalents, beginning of period |                                                                     |                                            | 48,206   |                |       
|                                               |                                                                     |                                            |          |                |       
|Cash and cash equivalents, end of period       |                                                                     | $                                          | 10,223   |                | $     
|                                               |                                                                     |                                            |          |                |       

See accompanying notes to the interim consolidated financial statements

4

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ALDERWOODS GROUP, INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Tabular amounts expressed in thousands of dollars except per share amounts)

NOTE 1.    NATURE OF OPERATIONS

Alderwoods Group, Inc., a Delaware corporation ("Alderwoods Group" and together with its subsidiaries unless the context otherwise requires, the
"Company") is the second-largest operator of funeral homes and cemeteries in North America based on total revenue and number of locations. As at October 9, 2004, the Company operated
683 funeral homes and 110 cemeteries and 61 combination funeral homes and cemeteries throughout North America.

The
Company's funeral operations encompass making funeral and cremation arrangements on an at-need or pre-need basis. The Company's funeral operations offer a
full range of funeral services, including the collection of remains, registration of death, professional embalming, use of funeral home facilities, sale of caskets and other merchandise and
transportation to a place of worship, funeral chapel, cemetery or crematorium.

The
Company's cemetery operations assist families in making burial arrangements and offer a complete line of cemetery products (including a selection of burial spaces, burial vaults,
lawn crypts, caskets, memorials, niches, and mausoleum crypts), the opening and closing of graves and cremation services.

The
Company's insurance operations sell a variety of insurance products, primarily to fund pre-need funeral services.

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The interim consolidated financial statements include the accounts of the Company, its subsidiary companies and operations controlled by the Company through sales
and management agreements. All subsidiaries are wholly owned, except for a few companies with small minority interests. The interim consolidated financial statements also include the accounts of the
funeral trusts, cemetery merchandise and service trusts and perpetual care trusts in which the Company has a variable interest and is the primary beneficiary.

All
significant intercompany balances and transactions have been eliminated in the consolidated financial statements. The interim consolidated financial statements have been prepared
using the U.S. dollar and are presented in accordance with United States generally accepted accounting principles ("GAAP").

The
interim consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, which in management's opinion are necessary for a fair
presentation of the financial results as of October 9, 2004, and for the 16 and 40 weeks ended October 9, 2004, and October 4, 2003. Except for the new accounting policy
described under "Accounting change" and matters discussed under "Comparability" below, the interim consolidated financial statements have been prepared on a basis consistent with the accounting
policies described in the Company's Annual Report on Form 10-K for the 53 weeks ended January 3, 2004, as filed with the U.S. Securities and Exchange Commission ("SEC") and
should be read in conjunction therewith.

The
results of operations for interim periods are not necessarily indicative of the results that may be expected for the full fiscal year or for any other interim period.

5

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Use of estimates

The preparation of the interim consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements, and the reported amounts of revenue,
expenses, and cash flows during the reporting period. As a result, actual amounts could significantly differ from those estimates.

Stock option plan

The Financial Accounting Standards Board's ("FASB") Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("FAS No. 123"), Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based CompensationTransition and Disclosurean Amendment of
FASB Statement No. 123," ("FAS No. 148"), established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation
plans. However, as allowed by FAS No. 123, the Company has elected to continue to apply the intrinsic value-based method of accounting described below, and has adopted the disclosure
requirements of FAS No. 123 and FAS No. 148.

The
Company applies the intrinsic value-based method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations,
including FASB Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25," to account for its fixed plan stock
options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. Any compensation expense recorded
is charged against operations over the service period, which generally matches the option vesting period. No stock-based employee compensation cost was recorded for the 16 and 40 weeks
ended October 9, 2004, or the 16 and 40 weeks ended October 4, 2003, as all options granted under the Company's stock option plan had an exercise price equal to or greater than
the market value of the underlying Common stock on the grant date. The following table illustrates the effect on net income (loss) and net income (loss) per share, if the Company had applied the fair
value recognition provisions of FAS No. 123 to stock-based employee compensation.

|                                                                                                     |                                | 16 Weeks Ended |         | 40 Weeks Ended |  
|---------------------------------------------------------------------------------------------------- | ------------------------------ | -------------- | ------- | -------------- | -
|
|Net income (loss), as reported                                                                       |                                | $              | (13,378 | )              | $
|Total stock-based employee compensation expense determined under fair value-based method, net of tax |                                |                | (649    | )              |  
|                                                                                                     |                                |                |         |                |  
|Pro forma net income (loss)                                                                          |                                | $              | (14,027 | )              | $
|                                                                                                     |                                |                |         |                |  
|Net income (loss) per Common share:                                                                  |                                |                |         |                |  
|                                                                                                     | Basic and diluted, as reported |                | $       | (0.33          | )
|                                                                                                     | Basic and diluted, pro forma   |                |         | (0.35          | )

6

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Comparability

Certain comparative amounts have been reclassified to conform to the presentation adopted in the current year, including, among other things, the identification
of assets and liabilities held for sale as discontinued operations, and removal of amounts receivable from third-party insurance companies offset by an equal amount of deferred pre-need funeral
contract revenue.

Accounting change and recent accounting standards

Consolidation of trusts

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities," which was revised in December 2003
("FIN No. 46R"). FIN No. 46R clarifies the application of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to enterprises that have a
variable interest in variable interest entities, and is effective no later than the end of the first reporting period that ends after March 15, 2004.

The
Company elected to adopt FIN No. 46R at the beginning of its 2004 fiscal year on January 4, 2004. The adoption of FIN No. 46R resulted in the
consolidation of the funeral and cemetery merchandise and service, and perpetual care trusts in the Company's consolidated balance sheet, but did not change the legal relationships among the funeral
trusts, cemetery trusts, perpetual care trusts, the Company, and its holders of pre-need contracts. The Company does not consolidate certain funeral trusts for which the Company does not absorb
a majority of their expected losses and, therefore, is not considered a primary beneficiary of these funeral trusts under FIN No. 46R. The adoption of FIN No. 46R has not
materially impacted the Company's net income or its consolidated statement of cash flows, however other impacts include:





7

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As
a result of the consolidation of the funeral and cemetery merchandise and service trusts, and perpetual care trusts, the Company recorded the following as at January 4,
2004:

|                                       |                                                            | (unaudited) |  
|-------------------------------------- | ---------------------------------------------------------- | ----------- | -
|Trust assets and liabilities recorded: |                                                            |             |  
|                                       | Funeral trust investments                                  |             | $
|                                       | Cemetery merchandise and service trust investments         |             |  
|                                       | Cemetery perpetual care trust investments                  |             |  
|                                       | Non-controlling interest in funeral and cemetery trusts    |             |  
|                                       | Non-controlling interest in perpetual care trusts          |             |  
|                                       | Deferred income tax assets                                 |             |  
|                                       | Deferred income tax liabilities                            |             |  
|                                       | Assets held for sale                                       |             |  
|                                       | Liabilities associated with assets held for sale           |             |  
|Amounts eliminated:                    |                                                            |             |  
|                                       | Amounts receivable from funeral trusts, net of allowances  |             |  
|                                       | Amounts receivable from cemetery trusts, net of allowances |             |  
|                                       | Deferred pre-need funeral contract revenue                 |             |  
|                                       | Deferred pre-need cemetery contract revenue                |             |  

Creditors
of the consolidated trusts have no recourse to the general credit of the Company, except as provided under contracts executed by the Company or its subsidiaries.

Insurance funded pre-need funeral contracts

The Company has changed its accounting policy on accounting for insurance funded pre-need funeral contracts as of January 4, 2004, as the
Company has concluded that its insurance funded pre-need funeral contracts are not assets and liabilities as defined by Statement of Financial Accounting Concepts No. 6, "Elements
in Financial Statements." Accordingly, the Company has retroactively removed from its consolidated balance sheet amounts relating to insurance funded pre-need funeral contracts previously
included in pre-need funeral contracts with an equal and offsetting amount in deferred pre-need funeral contract revenue. The removal of insurance funded pre-need
funeral contracts did not have an impact on

8

---



the
Company's results of operations, consolidated stockholders' equity, or cash flows. Set forth below is the effect of this removal on total assets and liabilities for the Company as of
January 3, 2004, December 28, 2002, and December 31, 2001.

|                                                                       |  | Alderwoods Group |          
|---------------------------------------------------------------------- |  | ---------------- | ---------
|
|
|Total assets, previously stated                                        |  | $                | 3,115,437
|Removal of amounts receivable from third-party insurance companies     |  |                  | (662,434 
|                                                                       |  |                  |          
|Total assets, restated                                                 |  | $                | 2,453,003
|                                                                       |  |                  |          
|Total liabilities, previously stated                                   |  | $                | 2,570,544
|Removal of amounts from deferred pre-need funeral and cemetery revenue |  |                  | (662,434 
|                                                                       |  |                  |          
|Total liabilities, restated                                            |  | $                | 1,908,110
|                                                                       |  |                  |          

The Meaning of Other-Than-Temporary Impairment

In March 2004, the FASB reached consensus on the guidance provided by Emerging Issues Task Force Issue 03-1 ("EITF 03-1"),
"The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments." The guidance is applicable to debt and equity securities that are within the scope
of the FASB Statement of Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities." EITF 03-1 specifies that an impairment
would be considered other-than-temporary unless (a) the investor has the ability and intent to hold an investment for a reasonable period of time sufficient for the
recovery of the fair value up to (or beyond) the cost of the investment and (b) evidence indicating the cost of the investment is recoverable within a reasonable period of time outweighs
evidence to the contrary. EITF 03-1 was scheduled to be effective for reporting periods ending after June 15, 2004. The measurement and recognition provisions relating to
debt and equity securities have been delayed until the FASB issues additional guidance. The Company adopted the disclosure provisions of EITF 03-1 during the fiscal year ended
January 3, 2004. The adoption of the measurement and recognition provisions is not expected to have a material impact on the consolidated financial statements, result of operations or liquidity
of the Company.

9

---



NOTE 3.    PRE-NEED FUNERAL RECEIVABLES AND TRUST INVESTMENTS

The balance in pre-need funeral receivables and trust investments represents customer receivables and funeral trust investments related to
unperformed, price-guaranteed, pre-need funeral contracts. The components of pre-need funeral receivables and trust investments in the consolidated balance sheets are as
follows:

|                                                          |  | October 9, 2004 |         | January 3, 2004 |  
|--------------------------------------------------------- |  | --------------- | ------- | --------------- | -
|
|Customer receivables                                      |  | $               | 39,136  |                 | $
|Allowance for contract cancellations and refunds          |  |                 | (13,896 | )               |  
|Funeral trust investments                                 |  |                 | 292,898 |                 |  
|Amounts receivable from funeral trusts, net of allowances |  |                 | 27,583  |                 |  
|                                                          |  |                 |         |                 |  
|Pre-need funeral receivables and trust investments        |  | $               | 345,721 |                 | $
|                                                          |  |                 |         |                 |  

For
customer receivables, an allowance for cancellations and refunds is provided at the date of pre-need funeral contract sale based on management's best estimates and is offset by an
allowance against deferred pre-need funeral contract revenue.

Certain
of the funeral trusts have not been consolidated, because the Company is not the primary beneficiary. Accordingly, they are reported as amounts receivable from funeral trusts.
Amounts receivable from funeral trusts represent a portion of the proceeds from the sale of pre-need funeral services, deposited in accordance with state and provincial trusting laws with
various financial institutions, together with accrued earnings. The Company will recognize and generally receive these amounts when the merchandise is delivered or service is performed.

At
October 9, 2004, the fair value of funeral trust investments classified as available-for-sale securities was based on quoted market prices. The carrying
values of restricted cash and equivalents, and other investments approximate their fair values, due to their short-term to maturity. Funeral trust investments are evaluated for
other-than-temporary impairment. Other-than-temporary impairment is required to be reflected in current earnings as a realized loss. It is possible that
changes in interest rates, equity prices and other economic conditions in the near term could result in other-than-temporary impairment that could be significant to the Company.

10

---



At
January 4, 2004, the Company adopted FIN No. 46R. The transitional provisions do not require restatement of previously issued financial statements. Accordingly,
the table below shows funeral trust investments at their fair values.

|                                |                         | October 9, 2004 |         | January 4, 2004 |  
|------------------------------- | ----------------------- | --------------- | ------- | --------------- | -
|
|Available-for-sale              |                         |                 |         |                 |  
|                                | Fixed income securities |                 | $       | 72,629          |  
|                                | Equity securities       |                 |         | 71,108          |  
|                                |                         |                 |         |                 |  
|Total available-for-sale        |                         |                 | 143,737 |                 |  
|Restricted cash and equivalents |                         |                 | 114,902 |                 |  
|Other                           |                         |                 | 34,259  |                 |  
|                                |                         |                 |         |                 |  
|Funeral trust investments       |                         | $               | 292,898 |                 | $
|                                |                         |                 |         |                 |  
|Unrealized gains                |                         | $               | 3,720   |                 | $
|Unrealized losses               |                         |                 | (60     | )               |  

Beginning
January 4, 2004, realized investment income from the funeral trust investments, including realized gains and losses are recorded in other expense (income).

During
the 16 weeks ended October 9, 2004, funeral trust available-for-sale securities with a cost of $7,791,000 were sold for proceeds of
$8,067,000, resulting in $425,000 and $149,000 of realized gains and losses, respectively. During the 40 weeks ended October 9, 2004, funeral trust
available-for-sale securities with a cost of $17,705,000 were sold for proceeds of $18,619,000, resulting in $1,249,000 and $335,000 of realized gains and losses, respectively.
The average cost method was used to determine the cost of funeral trust available-for-sale securities disposed of.

The
Company generally recommends to the trustee the mix of equities and fixed income securities in accordance with policies set by an investment committee comprised of members of senior
management. The investment committee sets the mix of investments within the investment parameters set by various state and provincial regulators and with the assistance of independent professional
financial advisors. The policy emphasizes a capital preservation approach while maintaining acceptable levels of income and capital appreciation.

The
Company has determined that unrealized losses in the funeral trust investments are not other-than-temporary, as the unrealized losses were due to temporary
fluctuations in interest rates and equity prices. The Company's funeral trust investment unrealized losses and their duration as at October 9, 2004, are shown in the following table.

|                                      |                         | Less than 12 Months |       | Greater than 12 Months |   | Total
|------------------------------------- | ----------------------- | ------------------- | ----- | ---------------------- | - | -----
|
|Available-for-sale                    |                         |                     |       |                        |   |      
|                                      | Fixed income securities |                     | $     | 1,876                  |   | $    
|                                      | Equity securities       |                     |       | 260                    |   |      
|                                      |                         |                     |       |                        |   |      
|Total temporarily impaired securities |                         | $                   | 2,136 |                        | $ | 48   
|                                      |                         |                     |       |                        |   |      

11

---



Maturities
of fixed income securities are estimated as follows:

|                         |  | October 9, 2004
|------------------------ |  | ---------------
|Due in one year or less  |  | $              
|Due in one to five years |  |                
|Due in five to ten years |  |                
|Thereafter               |  |                
|                         |  |                
|                         |  | $              
|                         |  |                

NOTE 4.    PRE-NEED CEMETERY RECEIVABLES AND TRUST INVESTMENTS

The components of pre-need cemetery receivables and trust investments in the consolidated balance sheets are as follows:

|                                                   |  | October 9, 2004 |         | January 3, 2004 |  
|-------------------------------------------------- |  | --------------- | ------- | --------------- | -
|
|Customer receivables                               |  | $               | 65,313  |                 | $
|Unearned finance income                            |  |                 | (5,705  | )               |  
|Allowance for contract cancellations and refunds   |  |                 | (17,633 | )               |  
|Cemetery merchandise and service trust investments |  |                 | 264,062 |                 |  
|Amounts receivable from cemetery trusts            |  |                 |        |                 |  
|                                                   |  |                 |         |                 |  
|                                                   |  | $               | 306,037 |                 | $
|                                                   |  |                 |         |                 |  

Amounts
receivable from cemetery trusts represent a portion of the proceeds from the sale of pre-need merchandise and services, deposited in accordance with state and
provincial trusting laws with various financial institutions, together with accrued earnings as at January 3, 2004. The Company will recognize and generally receive these amounts when the
merchandise is delivered or service is performed.

For
pre-need cemetery contract sales, other than sales of pre-need cemetery interment rights, which are recognized in accordance with the retail land sales
provisions of Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate," an allowance for cancellations and refunds is provided at the time of sale based on
management's best estimates and is offset by an allowance against deferred pre-need funeral and cemetery revenue. For customer receivables, an allowance is provided at the time of the
pre-need cemetery contract sale.

At
October 9, 2004, the fair value of cemetery merchandise and service trust investments classified as available-for-sale securities was based on quoted
market prices. The carrying values of restricted cash and equivalents, and other investments approximate their fair values, due to their short-term to maturity. Cemetery trust investments
are evaluated for other-than-temporary impairment. Other-than-temporary impairment is required to be reflected in current earnings as a realized loss.
It is possible that changes in interest rates, equity prices and other economic conditions in the near term could result in other than temporary impairment that could be significant to the Company.

12

---



At
January 4, 2004, the Company adopted FIN No. 46R, the transitional provisions of which do not require restatement of previously issued financial statements.
Accordingly, the table below shows cemetery merchandise and service trust investments at their fair values.

|                                                   |                         | October 9, 2004 |         | January 4, 2004 |  
|-------------------------------------------------- | ----------------------- | --------------- | ------- | --------------- | -
|
|Available-for-sale                                 |                         |                 |         |                 |  
|                                                   | Fixed income securities |                 | $       | 143,387         |  
|                                                   | Equity securities       |                 |         | 100,486         |  
|                                                   |                         |                 |         |                 |  
|Total available-for-sale                           |                         |                 | 243,873 |                 |  
|Restricted cash and equivalents                    |                         |                 | 18,079  |                 |  
|Other                                              |                         |                 | 2,110   |                 |  
|                                                   |                         |                 |         |                 |  
|Cemetery merchandise and service trust investments |                         | $               | 264,062 |                 | $
|                                                   |                         |                 |         |                 |  
|Unrealized gains                                   |                         | $               | 5,723   |                 | $
|Unrealized losses                                  |                         |                 | (390    | )               |  

Beginning
January 4, 2004, realized investment earnings from the cemetery merchandise and service trust investments, including realized gains and losses are recorded in other
expense (income).

During
the 16 weeks ended October 9, 2004, cemetery merchandise and service trust available-for-sale securities with a cost of $9,251,000 were sold
for proceeds of $10,066,000, resulting in $871,000 and $56,000 of realized gains and losses, respectively. During the 40 weeks ended October 9, 2004, cemetery merchandise and service
trust available-for-sale securities with a cost of $36,115,000 were sold for proceeds of $37,212,000, resulting in $1,560,000 and $463,000 of realized gains and losses,
respectively. The average cost method was used to determine the cost of cemetery trust available-for-sale securities disposed of.

The
Company recommends to the trustee the mix of equities and fixed income securities in accordance with policies set by an investment committee comprised of members of senior
management. The investment committee sets the mix of investments within the investment parameters set by various state and provincial regulators and with the assistance of independent professional
financial advisors. The policy emphasizes a capital preservation approach while maintaining acceptable levels of income and capital appreciation.

The
Company has determined that unrealized losses in the cemetery merchandise and service trust investments are not other-than-temporary, as the unrealized losses
were due to temporary fluctuations in interest rates and equity prices. The Company's cemetery merchandise and service trust investment unrealized losses and their duration as at October 9,
2004, are shown in the following table.

|                                      |                         | Less than 12 Months |        | Greater than 12 Months |   | Total
|------------------------------------- | ----------------------- | ------------------- | ------ | ---------------------- | - | -----
|
|Available-for-sale                    |                         |                     |        |                        |   |      
|                                      | Fixed income securities |                     | $      | 13,887                 |   | $    
|                                      | Equity securities       |                     |        | 1,450                  |   |      
|                                      |                         |                     |        |                        |   |      
|Total temporarily impaired securities |                         | $                   | 15,337 |                        | $ | 303  
|                                      |                         |                     |        |                        |   |      

13

---



Maturities
of fixed income securities are estimated as follows:

|                         |  | October 9, 2004
|------------------------ |  | ---------------
|Due in one year or less  |  | $              
|Due in one to five years |  |                
|Due in five to ten years |  |                
|Thereafter               |  |                
|                         |  |                
|                         |  | $              
|                         |  |                

NOTE 5.    CEMETERY PERPETUAL CARE TRUST INVESTMENTS

A portion of the proceeds from cemetery sales for interment rights is generally required by law to be paid into perpetual care trusts.

At
January 4, 2004, the Company adopted FIN No. 46R, which requires the consolidation of perpetual care trusts. Previously, perpetual care trusts were not
consolidated, as the principal in these perpetual care trusts cannot be withdrawn by the Company.

At
October 9, 2004, the fair value of perpetual care trust investments classified as available-for-sale securities were based on quoted market prices. The
carrying values of restricted cash and equivalents, and other investments approximate their fair values, due to their short-term to maturity. Perpetual care trust investments are evaluated
for other-than-temporary impairment. Other-than-temporary impairment is reflected as a reduction in perpetual care trust investments with an offsetting
reduction in non-controlling interest in perpetual care trust. It is possible that changes in interest rates, equity prices and other economic conditions in the near term could result in other than
temporary impairment that could be significant to the Company.

14

---





The transitional provisions of FIN No. 46R do not require restatement of previously issued financial statements. Accordingly, the table below shows
perpetual care trust investments at their fair values at October 9, 2004, with no comparative information.

Available-for-saleFixed income securities

$
195,760Equity securities


24,138Total available-for-sale


219,898Restricted cash and equivalents


15,648Other


703Perpetual care trust investments

$
236,249Unrealized gains

$
2,324Unrealized losses


(1,265
)


During
the 16 weeks ended October 9, 2004, perpetual care trust available-for-sale securities with a cost of $11,764,000 were sold for proceeds of
$12,192,000, resulting in $498,000 and $70,000 of realized gains and losses, respectively. During the 40 weeks ended October 9, 2004, perpetual care trust
available-for-sale securities with a cost of $36,382,000 were sold for proceeds of $36,994,000, resulting in $841,000 and $229,000 of realized gains and losses, respectively.
The average cost method was used to determine the cost of perpetual care trust available-for-sale securities disposed of.

The
Company recommends to the trustee the mix of equities and fixed income securities in accordance with policies set by an investment committee comprised of members of senior
management. The investment committee sets the mix of investments within the investment parameters set by various state and provincial regulators and with the assistance of independent professional
financial advisors. The policy emphasizes a capital preservation approach while maintaining acceptable levels of income and capital appreciation.

The
Company has determined that unrealized losses in the perpetual care trust investments are not other-than-temporary, as the unrealized losses were due to
temporary fluctuations in interest rates and equity prices. The Company's perpetual care trust investment unrealized losses and their duration as at October 9, 2004, are shown in the following
table.

|                                      |                         | Less than 12 Months |        | Greater than 12 Months |   | Total
|------------------------------------- | ----------------------- | ------------------- | ------ | ---------------------- | - | -----
|
|Available-for-sale                    |                         |                     |        |                        |   |      
|                                      | Fixed income securities |                     | $      | 67,937                 |   | $    
|                                      | Equity securities       |                     |        | 1,261                  |   |      
|                                      |                         |                     |        |                        |   |      
|Total temporarily impaired securities |                         | $                   | 69,198 |                        | $ | 907  
|                                      |                         |                     |        |                        |   |      

15

---



Maturities
of fixed income securities are estimated as follows:

October 9, 2004Due in one year or less

$
9,083Due in one to five years


57,867Due in five to ten years


19,752Thereafter


109,058$
195,760


NOTE 6.    LONG-TERM DEBT

Long-term debt consists of the following:

October 9, 2004

January 3, 2004(unaudited)Revolving credit facility (a)

$


$
Senior secured term loan B due in 2009 (a)(b)


281,896


245,8917.75% Senior unsecured notes due in 2012 (c)


200,000


12.25% Senior unsecured notes due in 2009 (d)


4,509


330,00012.25% Convertible subordinated notes due in 2012 (e)





31,879Promissory notes and capitalized obligations, certain of which are secured by assets of certain subsidiaries


12,730


23,082499,135


630,852Less, current maturities of long-term debt


4,492


10,896$
494,643

$
619,956


---



16

---









17

---





Year

Percentage2008

103.8752009

101.9382010 and thereafter

100.000




18

---





The
Credit Agreement, the Eight-Year Senior Unsecured Notes and the Seven-Year Unsecured Notes are guaranteed by substantially all of Alderwoods Group's wholly-owned
U.S. subsidiaries, other than Alderwoods Group's insurance subsidiaries and other specified excluded subsidiaries. Alderwoods Group, the parent company, has no independent assets or operations,
and the guarantees of its guarantor subsidiaries are full and unconditional, and joint and several.

In
certain change of control situations, the Company is required to make an offer to purchase the then-outstanding Eight-Year Senior Unsecured Notes and Seven-Year Unsecured
Notes at a price equal to 101% of their stated principal amount, plus accrued and unpaid interest to the applicable repurchase date and, in the case of the Eight-Year Senior
Unsecured Notes, Liquidated Damages, if any.

The
Credit Agreement and the indentures governing the Eight-Year Senior Unsecured Notes and the Seven-Year Unsecured Notes restrict the Company's ability to engage in asset
sales. The Credit Agreement and the indenture governing the Eight-Year Senior Unsecured Notes prohibit dispositions of assets unless the assets disposed of fulfill the requirements of specified
exceptions. The indenture governing the Eight-Year Senior Unsecured Notes excepts, among other exceptions, assets with a fair market value less than $5,000,000. One specified exception
contained in the Credit Agreement is dispositions of any of a group of identified "discontinued assets;" another is dispositions of assets not exceeding $35,000,000 book value in the aggregate over
the life of the Credit Agreement, provided that (i) the consideration received is at least equal to fair market value and (ii) not less than 75% of the consideration is paid in cash or
cash equivalents. Within 270 days of the receipt of net proceeds from any such asset sale, the Company has the ability to apply such net proceeds at its option (or as otherwise required) to
invest in non-current operating assets (or enter into agreements for such investment which agreements are consummated within 360 days of such receipt of asset sale proceeds). Up to
$10,000,000 of such net proceeds in any fiscal year (but not in excess of $35,000,000 in the aggregate over the term of the Credit Agreement) may be applied to make capital expenditures. To the extent
the Company receives net proceeds in excess of additional specified thresholds and such excess is not applied to invest in non-current operating assets or make capital expenditures as
described in the two immediately preceding sentences, the Company must make mandatory repayments under the Credit Agreement and, after all indebtedness under the Credit Agreement has been
repaid, offer to purchase the Eight-Year Senior Unsecured Notes at a purchase price equal to 100.00% of the stated principal amount, plus accrued and unpaid interest and Liquidated Damages,
if any.

Covenants
in the Credit Agreement prohibit the payment of cash dividends and restrict, and under specified circumstances prohibit, the payment of non-cash dividends by the
Company. In addition, covenants in the indenture governing the Eight-Year Senior Unsecured Notes restrict, and under specified circumstances prohibit, the payment of dividends by the Company.

Pursuant
to the indenture governing the Eight-Year Senior Unsecured Notes, the Company has entered into a registration rights agreement (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement, the Company is required, on or prior to May 16, 2005, to file an exchange offer registration statement on an appropriate form under the Securities
Act of 1933 with the U.S. Securities and Exchange Commission. Upon the effectiveness of the exchange offer registration

19

---



statement,
the Company will offer holders of the Eight-Year Senior Unsecured Notes the opportunity to exchange their notes for notes with substantially identical terms covered by the
exchange offer registration statement. In the event (i) the Company fails to timely file an appropriate registration statement, (ii) the registration statement is not timely declared
effective, (iii) the Company fails to timely consummate the exchange offer, or (iv) the registration statement is declared effective, but thereafter ceases to be effective or usable
during periods specified in the Registration Rights Agreement (each of (i) through (iv), a "Registration Default"), then the Company will be subject to liquidated damages within the first
90-day period immediately following the Registration Default of 0.25% per annum of the outstanding principal amount of the Eight-Year Senior Unsecured Notes. The amount of
liquidated damages will increase by an additional 0.25% per annum with respect to each subsequent 90-day period until the Registration Default has been cured, up to a maximum of
1.00% per annum.

NOTE 7.    LEGAL CONTINGENCIES

The Company is a party to legal proceedings in the ordinary course of its business and believes it has made adequate provision for any potential estimated
liabilities. The Company does not expect the outcome of any proceedings, individually or in the aggregate, to have a material adverse effect on the Company's financial position, results of operations
or liquidity.

20

---



NOTE 8.    CHANGES IN OTHER NON-CASH BALANCES

Supplemental disclosures related to the statement of cash flows consist of the following:

|                                             |                                                                            | 16 Weeks Ended                                                                                                              |       | 40 Weeks Ended |       
|-------------------------------------------- | -------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ----- | -------------- | ------
|
|Decrease (increase) in assets:               |                                                                            |                                                                                                                             |       |                |       
|                                             | Receivables, net of allowances                                             |                                                                                                                             |       |                |       
|                                             |                                                                            | Trade                                                                                                                       |       | $              | (2,452
|                                             |                                                                            | Other                                                                                                                       |       |                | 439   
|                                             | Inventories                                                                |                                                                                                                             |       | 2,273          |       
|                                             | Prepaid expenses                                                           |                                                                                                                             |       | 767            |       
|                                             | Pre-need funeral and cemetery contracts                                    |                                                                                                                             |       |               |       
|                                             | Cemetery property                                                          |                                                                                                                             |       | (4,015         | )     
|                                             | Other assets                                                               |                                                                                                                             |       | (10,430        | )     
|Increase (decrease) in liabilities:          |                                                                            |                                                                                                                             |       |                |       
|                                             | Accounts payable and accrued liabilities                                   |                                                                                                                             |       | (4,974         | )     
|                                             | Net effect of pre-need receivables and deferred revenue                    |                                                                                                                             |       | 18,083         |       
|                                             | Other liabilities                                                          |                                                                                                                             |       | (495           | )     
|                                             | Insurance policy liabilities                                               |                                                                                                                             |       | 1,134          |       
|                                             | Other changes in non-cash balances                                         |                                                                                                                             |       | 3,214          |       
|                                             |                                                                            |                                                                                                                             |       |                |       
|                                             |                                                                            | $                                                                                                                           | 3,544 |                | $     
|                                             |                                                                            |                                                                                                                             |       |                |       
|Supplemental information:                    |                                                                            |                                                                                                                             |       |                |       
|                                             | Interest paid                                                              |                                                                                                                             | $     | 22,160         |       
|                                             | Income taxes paid, net of refunds                                          |                                                                                                                             |       | 883            |       
|                                             | Bad debt expense                                                           |                                                                                                                             |       | 955            |       
|Non-cash investing and financing activities: |                                                                            |                                                                                                                             |       |                |       
|                                             | Stock issued in connection with the settlement of certain unsecured claims |                                                                                                                             |       |               |       
|                                             | Stock issued as compensation in lieu of cash                               |                                                                                                                             |       | 44             |       
|                                             | Capital leases entered into                                                |                                                                                                                             |       |               |       
|                                             | Restricted cash investing and financing activities:                        |                                                                                                                             |       |                |       
|                                             |                                                                            | Purchases of funeral, cemetery, and perpetual care trust investments                                                        |       |                | 28,980
|                                             |                                                                            | Proceeds on disposition and maturities of funeral, and cemetery, and perpetual care trust investments                       |       |                | 33,434
|                                             |                                                                            | Increase in non-controlling interests in funeral, cemetery and perpetual care trusts                                        |       |                | 19,809
|                                             |                                                                            | Decrease in non-controlling interests in funeral, cemetery and perpetual care trusts upon fulfillment of pre-need contracts |       |                | 19,996

21

---



NOTE 9.    SUPPLEMENTARY FINANCIAL INFORMATION

A summary of certain balance sheet accounts is as follows:

October 9, 2004

January 3, 2004(unaudited)Receivables, net of allowances:Customer receivables

$
58,584

$
64,242Allowance for doubtful accounts


(11,855
)

(9,963
)Other


10,201


3,965$
56,930

$
58,244Cemetery property:Developed land and lawn crypts

$
36,525

$
34,880Undeveloped land


30,115


31,070Mausoleums


50,400


51,464$
117,040

$
117,414Property and equipment:Land

$
169,684

$
176,614Buildings and improvements


358,850


351,252Automobiles


13,550


13,917Furniture, fixtures and equipment


51,262


45,460Computer hardware and software


20,840


16,632Accumulated depreciation and amortization


(77,518
)

(55,393
)$
536,668

$
548,482Other assets:Intangible assets

$
14,086

$
10,911Deferred finance costs


12,214


8,072Notes receivable


2,525


2,503Other


11,236


9,591$
40,061

$
31,077Accounts payable and accrued liabilities:Trade payables

$
18,179

$
22,008Interest


4,260


15,048Accrued liabilities


47,062


59,353Accrued taxes


50,540


46,050Other


13,276


12,092$
133,317

$
154,551Other liabilities:Notes payable

$
11,811

$
9,763Other


7,746


5,667$
19,557

$
15,430


22

---



|                             |                                                                                     | 16 Weeks Ended                             |     | 40 Weeks Ended |       
|---------------------------- | ----------------------------------------------------------------------------------- | ------------------------------------------ | --- | -------------- | ------
|
|                             |                                                                                     |                                            |     |                |       
|Other expense (income), net: |                                                                                     |                                            |     |                |       
|                             | For funeral, cemetery and perpetual care trust investments:                         |                                            |     |                |       
|                             |                                                                                     | Realized gains                             |     | $              | (1,766
|                             |                                                                                     | Realized losses                            |     |                | 245   
|                             |                                                                                     | Interest and dividend income               |     |                | (6,075
|                             |                                                                                     | Trust investment expenses and income taxes |     |                | 1,358 
|                             | Interest expense related to non-controlling interest in funeral and cemetery trusts |                                            |     | 4,418          |       
|                             | Non-controlling interest in perpetual care trusts                                   |                                            |     | 1,820          |       
|                             | (Gain) loss on disposal of business and other assets                                |                                            |     | (91            | )     
|                             | Other                                                                               |                                            |     | 26             |       
|                             |                                                                                     |                                            |     |                |       
|                             |                                                                                     | $                                          | (65 | )              | $     
|                             |                                                                                     |                                            |     |                |       

The
trust investment and non-controlling interest balances do not have comparable 2003 balances due to the Company adopting FIN No. 46R at the beginning of its 2004 fiscal year on
January 4, 2004.

NOTE 10.    SEGMENT REPORTING

The Company's reportable segments are comprised of the three businesses it operates, each of which offers different products and services: funeral homes,
cemeteries and insurance. There has been no change in the basis of this segmentation, accounting policies of the segments, except for the accounting change and reclassifications described in
Note 2, or the basis of measurement of segment profit or loss from that disclosed in the Company's Annual Report on Form 10-K for the 53 weeks ended
January 3, 2004, as filed with the SEC.

The
Company sells primarily to external customers, though any intersegment sales or transfers occur at market price. The Company evaluates performance based on income from operations of
the respective businesses.

|For the 16 Weeks Ended:             |                 | Funeral |   | Cemetery |  | Insurance |        | Other |   | Consolidated
|----------------------------------- | --------------- | ------- | - | -------- |  | --------- | ------ | ----- | - | ------------
|Revenue earned from external sales: |                 |         |   |          |  |           |        |       |   |             
|                                    | October 9, 2004 |         | $ | 136,966  |  | $         | 49,002 |       | $ | 25,994      
|                                    | October 4, 2003 |         |   | 138,777  |  |           | 46,721 |       |   | 20,176      
|Income from operations:             |                 |         |   |          |  |           |        |       |   |             
|                                    | October 9, 2004 |         | $ | 25,249   |  | $         | 5,849  |       | $ | 1,595       
|                                    | October 4, 2003 |         |   | 30,042   |  |           | 3,786  |       |   | 248         
|Depreciation and amortization:      |                 |         |   |          |  |           |        |       |   |             
|                                    | October 9, 2004 |         | $ | 7,411    |  | $         | 4,525  |       | $ | 51          
|                                    | October 4, 2003 |         |   | 7,443    |  |           | 3,948  |       |   | 47          

23

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|For the 40 Weeks Ended:             |                             | Funeral |   | Cemetery  |  | Insurance |         | Other |   | Consolidated
|----------------------------------- | --------------------------- | ------- | - | --------- |  | --------- | ------- | ----- | - | ------------
|Revenue earned from external sales: |                             |         |   |           |  |           |         |       |   |             
|                                    | October 9, 2004             |         | $ | 366,845   |  | $         | 123,898 |       | $ | 62,104      
|                                    | October 4, 2003             |         |   | 368,861   |  |           | 121,771 |       |   | 46,202      
|Income from operations:             |                             |         |   |           |  |           |         |       |   |             
|                                    | October 9, 2004             |         | $ | 76,680    |  | $         | 16,528  |       | $ | 2,981       
|                                    | October 4, 2003             |         |   | 80,555    |  |           | 13,637  |       |   | 1,352       
|Depreciation and amortization:      |                             |         |   |           |  |           |         |       |   |             
|                                    | October 9, 2004             |         | $ | 18,374    |  | $         | 10,217  |       | $ | 125         
|                                    | October 4, 2003             |         |   | 18,483    |  |           | 10,169  |       |   | 102         
|Total assets at:                    |                             |         |   |           |  |           |         |       |   |             
|                                    | October 9, 2004 (unaudited) |         | $ | 1,169,182 |  | $         | 868,742 |       | $ | 265,373     
|                                    | January 3, 2004             |         |   | 1,218,974 |  |           | 668,357 |       |   | 481,622     
|Goodwill at:                        |                             |         |   |           |  |           |         |       |   |             
|                                    | October 9, 2004 (unaudited) |         | $ | 321,158   |  | $         |        |       | $ |            
|                                    | January 3, 2004             |         |   | 320,500   |  |           |        |       |   |            

The
following table reconciles income from operations of reportable segments to total income from operations and identifies the components of "Other" segment income from operations:

|                                                                   |                                     | 16 Weeks Ended |        | 40 Weeks Ended |  
|------------------------------------------------------------------ | ----------------------------------- | -------------- | ------ | -------------- | -
|
|Income from operations of funeral, cemetery and insurance segments |                                     | $              | 32,693 |                | $
|Other expenses of operations:                                      |                                     |                |        |                |  
|                                                                   | General and administrative expenses |                |        | (14,909        | )
|                                                                   |                                     |                |        |                |  
|Total income from operations                                       |                                     | $              | 17,784 |                | $
|                                                                   |                                     |                |        |                |  

NOTE 11.    PROVISION FOR ASSET IMPAIRMENT

In accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS
No. 144"), the Company reviews its long-lived assets for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable. FAS
No. 144 requires that long-lived assets to be held and used be recorded at the lower of carrying amount or fair value. Long-lived assets to be disposed of are to be
recorded at the lower of carrying amount or fair value, less estimated cost to sell.

Previously,
the Company designated certain parcels of surplus real estate as held for sale, as they do not meet the Company's future geographic and strategic objectives. During the
16 weeks ended October 9, 2004, the Company determined that the carrying amounts of certain of these surplus parcels of

24

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real
estate exceeded their fair market value, less estimated costs to sell. As a result, the Company recorded a long-lived asset impairment provision of $445,000
(2003  $725,000). The Company has recorded a net long-lived asset impairment provision of $937,000 for the 40 weeks ended October 9,
2004 (2003  $4,300,000).

The
fair market value was determined by specific offer or bid, or an estimate based on comparable recent sales transactions. The asset impairment provisions include management estimates.
As a result, actual results could differ significantly from these estimates.

NOTE 12.    DISCONTINUED OPERATIONS OF ASSETS HELD FOR SALE

Over the previous two fiscal years, the Company engaged in a strategic market rationalization assessment to dispose of cemetery and funeral operating locations
that did not fit into the Company's market or business strategies, as well as under-performing locations and excess cemetery land. The Company believes this program is substantially
complete. The Company will on a smaller scale and over time, continue to assess the Company's portfolio of funeral and cemetery locations to ensure they continue to fit in the Company's strategy. Once
a property is added to the disposal list, the Company expects to receive a firm purchase commitment within one year. Certain of the Company's funeral and cemetary operating locations have not been
sold after being added to the disposal list for more than one year. However, the Company continues to include these locations in discontinued operations of assets held for sale. The Company has
entered into sale agreements for many of the locations, but is awaiting regulatory approval. Sale agreements for other locations were terminated prior to closing and the Company is negotiating
agreements with other potential buyers. Any remaining locations are not significant.

During
the 12 weeks ended June 14, 2003, the Company identified Security Plan Life Insurance Company, its wholly-owned home service insurance company, as a
non-strategic asset, because it was not part of the Company's pre-need funeral sales efforts. The Company's continuing insurance operations include Mayflower National Life
Insurance Company and National Capital Life Insurance Company, its wholly-owned pre-need life insurance companies. On June 17, 2004, the Company announced the signing of an agreement by its
subsidiary, Mayflower National Life Insurance Company, to sell all the outstanding shares of Security Plan Life Insurance Company for $85,000,000. The sale concluded on October 1, 2004. After
payment of applicable taxes and expenses,
and recapitalization of Mayflower National Life Insurance Company, the Company has utilized $65,000,000 of the proceeds to further reduce long-term debt. The Company recorded a pre-tax gain on the
sale of $16,011,000.

As
at October 9, 2004, the Company had 41 funeral, 34 cemetery and five combination locations for disposal.

The
Company has classified all the locations identified for disposal as assets held for sale in the consolidated balance sheets and recorded any related operating results,
long-lived asset impairment provisions, and gains or losses recorded on disposition as income from discontinued operations. The Company has also reclassified the prior fiscal periods to
reflect any comparative amounts on a similar basis. All discontinued operations financial information presented under the insurance segment relate to Security Plan Life Insurance Company.

Discontinued
operations consists of long-lived asset impairment provisions, gains and losses recorded on disposition, and operating results of the locations.
FAS No. 144 requires that long-lived assets to be

25

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disposed
of are to be recorded at the lower of carrying amount or fair market value, less estimated costs to sell. Depreciation and amortization is not recorded once an asset has been identified as
held for sale. The fair market value was determined by specific offer or bid, or an estimate based on comparable recent sales transactions. Impairment provisions on assets previously identified as
held for sale resulted from changes in previously estimated proceeds, net asset values and closing costs. The long-lived asset impairment provisions are based on management estimates. As a
result, actual results could differ significantly from these estimates.

The
operating results of discontinued operations are summarized in the following table.

|                                                                                  |           | 16 Weeks Ended |        | 40 Weeks Ended |  
|--------------------------------------------------------------------------------- | --------- | -------------- | ------ | -------------- | -
|
|Revenue                                                                           |           |                |        |                |  
|                                                                                  | Funeral   |                | $      | 3,894          |  
|                                                                                  | Cemetery  |                |        | 4,047          |  
|                                                                                  | Insurance |                |        | 15,871         |  
|                                                                                  |           |                |        |                |  
|                                                                                  |           | $              | 23,812 |                | $
|                                                                                  |           |                |        |                |  
|Gross margin                                                                      |           |                |        |                |  
|                                                                                  | Funeral   |                | $      | (323           | )
|                                                                                  | Cemetery  |                |        | 92             |  
|                                                                                  | Insurance |                |        | 4,202          |  
|                                                                                  |           |                |        |                |  
|                                                                                  |           |                | 3,971  |                |  
|Long-lived asset impairment on assets identified as held for sale                 |           |                | (720   | )              |  
|Other income (expense), net                                                       |           |                | 16,947 |                |  
|                                                                                  |           |                |        |                |  
|Income (loss) from discontinued operations, before tax                            |           |                | 20,198 |                |  
|                                                                                  |           |                |        |                |  
|Depreciation and amortization included in gross margin of discontinued operations |           | $              | 304    |                | $
|                                                                                  |           |                |        |                |  

Details
of assets held for sale at October 9, 2004, are as follows:

|                                                  |                                                         | Funeral |        | Cemetery |   | Total 
|------------------------------------------------- | ------------------------------------------------------- | ------- | ------ | -------- | - | ------
|Assets held for sale                              |                                                         |         |        |          |   |       
|                                                  | Current assets                                          |         | $      | 3,196    |   | $     
|                                                  | Pre-need receivables and trust investments              |         |        | 27,082   |   |       
|                                                  | Cemetery property                                       |         |        |         |   |       
|                                                  | Property and equipment                                  |         |        | 13,464   |   |       
|                                                  | Cemetery perpetual care trust investments               |         |        |         |   |       
|                                                  | Other assets                                            |         |        | 250      |   |       
|                                                  |                                                         |         |        |          |   |       
|                                                  |                                                         | $       | 43,992 |          | $ | 59,727
|                                                  |                                                         |         |        |          |   |       
|Liabilities associated with assets held for sale  |                                                         |         |        |          |   |       
|                                                  | Current liabilities                                     |         | $      | 273      |   | $     
|                                                  | Non-controlling interest in funeral and cemetery trusts |         |        | 23,663   |   |       
|                                                  | Other liabilities                                       |         |        | 925      |   |       
|                                                  |                                                         |         |        |          |   |       
|                                                  |                                                         | $       | 24,861 |          | $ | 50,550
|                                                  |                                                         |         |        |          |   |       
|Non-controlling interest in perpetual care trusts |                                                         | $       |       |          | $ | 18,456
|                                                  |                                                         |         |        |          |   |       

26

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The
non-controlling interest in perpetual care trusts of $254,506,000 included in the Company's consolidated balance sheet includes $18,456,000, which
represents the non-controlling interest in perpetual care trusts for discontinued operations of assets held for sale.

Details
of assets held for sale at January 3, 2004, are as follows:

|                                                 |                                    | Funeral |        | Cemetery |   | Insurance |        | Total
|------------------------------------------------ | ---------------------------------- | ------- | ------ | -------- | - | --------- | ------ | -----
|Assets held for sale                             |                                    |         |        |          |   |           |        |      
|                                                 | Current assets                     |         | $      | 3,952    |   | $         | 2,444  |      
|                                                 | Pre-need contracts                 |         |        | 40,350   |   |           | 63,967 |      
|                                                 | Cemetery property                  |         |        |         |   |           | 16,878 |      
|                                                 | Property and equipment             |         |        | 39,020   |   |           | 3,302  |      
|                                                 | Insurance invested assets          |         |        |         |   |           |       |      
|                                                 | Other assets                       |         |        | 182      |   |           | 326    |      
|                                                 |                                    |         |        |          |   |           |        |      
|                                                 |                                    | $       | 83,504 |          | $ | 86,917    |        | $    
|                                                 |                                    |         |        |          |   |           |        |      
|Liabilities associated with assets held for sale |                                    |         |        |          |   |           |        |      
|                                                 | Current liabilities                |         | $      | 676      |   | $         | 708    |      
|                                                 | Deferred pre-need contract revenue |         |        | 34,020   |   |           | 65,657 |      
|                                                 | Insurance policy liabilities       |         |        |         |   |           |       |      
|                                                 | Other liabilities                  |         |        | 320      |   |           | 4,435  |      
|                                                 |                                    |         |        |          |   |           |        |      
|                                                 |                                    | $       | 35,016 |          | $ | 70,800    |        | $    
|                                                 |                                    |         |        |          |   |           |        |      

NOTE 13.    EARNINGS PER SHARE

The basic and diluted earnings (loss) per share computations for net income (loss) were as follows:

|                                                                                  |                                                                                 | 16 Weeks Ended |         | 40 Weeks Ended
|--------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | -------------- | ------- | --------------
|
|Income (loss) (numerator):                                                        |                                                                                 |                |         |               
|Net income attributable to Common stockholders                                    |                                                                                 | $              | (13,378 | )             
|                                                                                  |                                                                                 |                |         |               
|Shares (denominator):                                                             |                                                                                 |                |         |               
|                                                                                  | Basic weighted average number of shares of Common stock outstanding (thousands) |                |         | 40,003        
|                                                                                  | Effect of stock options assumed exercised                                       |                |         |              
|                                                                                  |                                                                                 |                |         |               
|Diluted weighted average number of shares of Common stock outstanding (thousands) |                                                                                 |                | 40,003  |               
|                                                                                  |                                                                                 |                |         |               

For
the 16 and 40 weeks ended October 9, 2004, employee and director stock options to purchase 4,241,250 shares of Common stock were not included in the computation of
diluted earnings per share, because they were anti-dilutive.

27

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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Alderwoods Group, Inc. ("Alderwoods Group" and, together with its sudsidiaries unless the context otherwise requires, the "Company") is the second largest
operator of funeral homes and cemeteries in North America based on total revenue and number of locations. As of October 9, 2004, the Company operated 683 funeral homes,
110 cemeteries and 61 combination funeral homes and cemeteries throughout North America. As of October 4, 2003, the Company operated 737 funeral homes,
161 cemeteries and 60 combination funeral homes and cemeteries throughout North America and 39 funeral homes in the United Kingdom.

The
Company's funeral operations encompass making funeral and cremation arrangements on an at-need or pre-need basis. The Company's funeral operations offer a
full range of funeral services, including the collection of remains, registration of death, professional embalming, use of funeral home facilities, sale of caskets and other merchandise and
transportation to a place of worship, funeral chapel, cemetery or crematorium. The Company's funeral operations generally experience higher volumes in the winter months, primarily due to higher
incidents of deaths due to illnesses brought on by cold weather.

The
Company's cemetery operations assist families in making burial arrangements and offer a complete line of cemetery products (including a selection of burial spaces, burial vaults,
lawn crypts, caskets, memorials, niches and mausoleum crypts), the opening and closing of graves and cremation services.

The
Company operates several insurance subsidiaries licensed in a total of 35 states. These insurance subsidiaries sell a variety of insurance products, primarily for the funding of
pre-need funerals.

Critical Accounting Policies

Accounting policies that the Company believes are both most important to the portrayal of the Company's financial condition and results, and require management's
most difficult, subjective or complex judgments are described under Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Alderwoods
Group's Annual Report on Form 10-K for the 53 weeks ended January 3, 2004, as filed with the U.S. Securities and Exchange Commission ("SEC").

Basis of Presentation

The Company's accounting information contained in this Quarterly Report on Form 10-Q is presented on the basis of United States
generally accepted accounting principles ("GAAP"). This discussion and analysis of financial condition and results of operations of the Company are based upon and should be read in conjunction with
the Company's interim consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q (including the notes thereto).

Results of Operations

Detailed below are the operating results of the Company for the 16 and 40 weeks ended October 9, 2004 and October 4, 2003. The operating
results are expressed in dollar amounts as well as relevant percentages, presented as a percentage of revenue.

The
following provides a detailed discussion of continuing operations, which consist of those business operations the Company owned and operated both for the entire current and prior
fiscal quarters of fiscal 2004 and that the Company plans to retain, and those business operations that have been opened during either the current or prior fiscal quarters of fiscal 2004 and that the
Company plans to retain. Discontinued operations consist of those business operations that have been sold or closed during either the current or prior fiscal quarters and the business operations that
are currently being offered for sale.

29

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The
operations of the Company comprise three business segments: funeral homes, cemeteries and insurance. Additional segment information is provided in Note 10 of the Company's
interim consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

16 Weeks Ended October 9, 2004 Compared to 16 Weeks Ended October 4, 2003

|                                                       |                                | 16 Weeks Ended |      
|------------------------------------------------------ | ------------------------------ | -------------- | -----
|
|
|Revenue                                                |                                |                |      
|                                                       | Funeral                        |                | $    
|                                                       | Cemetery                       |                |      
|                                                       | Insurance                      |                |      
|                                                       |                                |                |      
|                                                       |                                | Total          |      
|                                                       |                                |                |      
|Gross margin                                           |                                |                |      
|                                                       | Funeral                        |                | $    
|                                                       | Cemetery                       |                |      
|                                                       | Insurance                      |                |      
|                                                       |                                |                |      
|                                                       |                                | Total          |      
|                                                       |                                |                |      
|Expenses                                               |                                |                |      
|                                                       | General and administrative     |                |      
|                                                       | Provision for asset impairment |                |      
|                                                       |                                |                |      
|Income from operations                                 |                                |                | 17.8 
|Interest on long-term debt and refinancing costs       |                                |                | 50.1 
|Other expenses (income), net                           |                                |                | (0.1 
|                                                       |                                |                |      
|Loss before income taxes                               |                                |                | (32.2
|Income taxes                                           |                                |                | (6.2 
|                                                       |                                |                |      
|Loss from continuing operations                        |                                |                | (26.0
|Income (loss) from discontinued operations, net of tax |                                |                | 12.6 
|                                                       |                                |                |      
|Net loss                                               |                                | $              | (13.4
|                                                       |                                |                |      

Other
information for the 16 weeks ended October 9, 2004, and 16 weeks ended October 4, 2003, is summarized in the following table.

|Continuing Operations:                            |  | October 9, 2004 |        | October 4, 2003 |   | Increase (decrease) | 
|------------------------------------------------- |  | --------------- | ------ | --------------- | - | ------------------- | 
|
|FuneralOther Information                         |  |                 |        |                 |   |                     | 
|Number of funeral services performed              |  |                 | 34,074 |                 |   | 35,645              | 
|Average revenue per funeral service               |  | $               | 4,020  |                 | $ | 3,893               | 
|Pre-need funeral contracts written (in millions)  |  | $               | 52.9   |                 | $ | 51.4                | 
|Pre-need funeral conversion (percentages)         |  |                 | 26     |                 |   | 27                  | 
|CemeteryOther Information                        |  |                 |        |                 |   |                     | 
|Pre-need cemetery contracts written (in millions) |  | $               | 26.3   |                 | $ | 23.7                | 
|Number of cemetery interments                     |  |                 | 13,411 |                 |   | 13,917              | 

30

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Continuing Operations

As there have been no material acquisitions or construction of new locations in 2004 and 2003, results from continuing operations reflect those of "same site"
locations.

Consolidated
revenue of $212.0 million for the 16 weeks ended October 9, 2004, increased by $6.3 million, or 3.1%, compared to the corresponding period in
2003. The decrease in the funeral revenue was offset by increases in cemetery and insurance revenues. Consolidated gross margin as a percentage of revenue decreased to 15.6% for the 16 weeks
ended October 9, 2004, from 16.9% for the corresponding period in 2003, primarily due to the decrease in funeral gross margin.

Funeral
revenue of $137.0 million for the 16 weeks ended October 9, 2004, decreased by $1.8 million, compared to $138.8 million for the corresponding
period in 2003, primarily as a result of a decrease of 1,571, or 4.4%, in the number of funeral services performed, partially offset by an increase of $127, or 3.2%, in average revenue per funeral
service performed. The increase in average revenue per funeral service performed was achieved through adjusting the pricing and mix of merchandise and services offered to customer families that were
designed both to meet customer family needs and to increase average revenues.

The
number of cremation services performed as a percentage of total services performed increased to 36% for the 16 weeks ended October 9, 2004, compared to 34% for the
corresponding period in 2003. The Company believes that the increase in the number of cremation services performed is due to the increasing customer preference for cremation services, as well as the
Company's efforts to offer customer families a larger variety of cremation services and products. The number of cremation services performed may impact funeral revenue, as the average revenue per
cremation service is typically lower than the average revenue for a traditional funeral service.

Funeral
gross margin as a percentage of revenue decreased to 18.8% for the 16 weeks ended October 9, 2004, compared to 21.9% for the corresponding period in 2003. The
decrease in gross margin was primarily due to the decrease in funeral revenue, and increases in wages, benefits, and operating expenses. Due to the fixed nature of funeral costs over the short term,
the Company believes that decreases in funeral revenue will not result in a corresponding decrease in funeral costs and will negatively impact funeral gross margins.

Pre-need
funeral contracts written for the 16 weeks ended October 9, 2004, were $52.9 million, compared to $51.4 million for the corresponding
period in 2003. The Company is continuing its program to increase pre-need sales. For the 16 weeks ended October 9, 2004, 26% of funeral volume was derived from backlog,
compared to 27% for the corresponding period in 2003. The Company manages the cash impact of its pre-need funeral sales program primarily by offsetting direct costs, including commissions
paid to counselors, with either general agency commissions received from third party and related insurance companies or amounts not required to be
trusted. The Company believes that pre-need funeral sales are important, because over time, they build the foundation for future funeral revenue and generate positive cash flow when the
funeral service is performed.

Cemetery
revenue of $49.0 million for the 16 weeks ended October 9, 2004, was $2.3 million, or 4.9%, higher than cemetery revenue for the corresponding period
in 2003, primarily due to higher at-need service and merchandise revenue and recognition of pre-need merchandise.

Cemetery
gross margin as a percentage of revenue increased to 11.9% for the 16 weeks ended October 9, 2004, compared to 8.9% for the corresponding period in 2003, primarily
due to increasing revenue at existing locations, while minimizing fixed cost increases.

Pre-need
cemetery contracts written for the 16 weeks ended October 9, 2004, were $26.3 million, compared to $23.7 million for the corresponding
period in 2003. The increase in pre-need cemetery contracts written was primarily due to the increase in pre-need space sales. For the 16 weeks ended

31

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October 9,
2004, 68% of interments were at-need and 32% were pre-need fulfillments. Pre-need cemetery sales may initially decrease cash flows if the amount
of cash initially collected is insufficient to cover the amount required to be trusted, sales commissions, and other direct costs paid out. However, this cash flow impact is not significant, as the
Company sets minimum down payments, maximum terms and sales commission rates to maximize cash flow. The Company believes that pre-need cemetery sales are important, because over time, they
generate positive cash flow and build the foundation for future cemetery revenue.

Insurance
revenue for the 16 weeks ended October 9, 2004, increased $5.8 million, or 28.8%, compared to the corresponding period in 2003, primarily due to increases
in premiums of $4.6 million, realized net investment gains of $0.7 million, and net investment income of $0.5 million. Insurance premium revenue is up in 2004 primarily due to the
impact of the Company's subsidiary, Rose Hills, beginning to sell the Company's insurance products. Insurance premium revenue is dependent on the level of pre-need funeral contracts written over time
that are funded by the Company's insurance subsidiary. Insurance production, which represents the insurance segment's participation in the Company's pre-need funeral contracts for the
16 weeks ended October 9, 2004, was $36.5 million compared to $27.4 million for corresponding period in 2003. Insurance gross margin as a percentage of revenue increased to
6.1% for the 16 weeks ended October 9, 2004, compared to 1.2% for the corresponding period in 2003, primarily due to the revenue increase being at a rate higher than that of the cost
increase. The Company expects the insurance gross margin percentage to grow modestly over the near term.

Interest
expense on long-term debt for the 16 weeks ended October 9, 2004, was $50.1 million, an increase of $22.4 million compared to the
corresponding period in 2003. The effect of lower effective interest rates and debt repayments made by the Company during 2003 and the 40 weeks ended October 9, 2004, were more than
offset by costs associated primarily with the Company's refinancing of long-term debt that occurred during the 16 weeks ended October 9, 2004, as detailed in the
following table.

|                                                                                                                                                |  | 16 Weeks Ended
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|
|
|Tender premium on the repurchase of the 12.25% Senior unsecured notes due in 2009                                                               |  | $             
|Unamortized deferred finance costs expensed relating to the $325.0 million senior secured facility (the "Credit Agreement") that was refinanced |  |               
|Unamortized deferred finance costs expensed relating to the subordinated bridge loan due in 2005 that was fully repaid                          |  |               
|Refinancing fees and costs on the Credit Agreement that was refinanced                                                                          |  |               
|Tender premium on the repurchase of the 9.5% Senior subordinated notes due in 2004                                                              |  |               
|Unamortized discount expensed relating to the 9.5% Senior subordinated notes due in 2004 that was fully repaid                                  |  |               
|Fees and costs for early termination of the Company's previous credit facility entered into on January 2, 2002                                  |  |               
|Interest on long-term debt                                                                                                                      |  |               
|                                                                                                                                                |  |               
|Total interest on long-term debt and refinancing costs                                                                                          |  | $             
|                                                                                                                                                |  |               

As
a result of the debt reduction and lower rates of interest on the Company's remaining debt, the Company expects interest expense in 2004, excluding the effects of the tender premium,
unamortized deferred finance costs, and refinancing fees and costs, to decline compared to 2003. The Company expects the applicable Senior secured term loan B interest rate to
decrease from LIBOR, plus 2.75% to LIBOR,

32

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plus
2.50%, as a result of the Company filing its compliance certificate for the quarter ended October 9, 2004, with a consolidated leverage ratio below a specified threshold.

General
and administrative expenses for the Company for the 16 weeks ended October 9, 2004, were $14.9 million, or 7.0% of consolidated revenue, compared to
$13.3 million, or 6.4% of consolidated revenue for the corresponding period in 2003. The bonus accrual for the 16 weeks ended October 9, 2004, was $1.6 million lower than
the corresponding period last year. However, during the 16 weeks ended October 4, 2003, general and administrative expenses were reduced by $3.1 million as a result of net
interest income received from a tax refund in connection with the audit of the predecessor company's 1993 through 1998 federal income tax returns.

Income
tax benefit for the 16 weeks ended October 9, 2004, was $6.2 million compared to $0.2 million for the corresponding period in 2003. The effective rate
of tax was 19.2% for the 16 weeks ended October 9, 2004, compared to 2.5% for the 16 weeks ended October 4, 2003. The tax effects of the costs associated with the Company's
refinancing of long-term debt that occurred during the 16 weeks ended October 9, 2004, have been recognized to the extent that the tax benefits were used during the period. A
valuation allowance has been established against the deferred tax asset associated with the net operating loss created by the refinancing costs that were not utilized during the period. The effective
tax rate varied from the statutory tax rate for the 16 weeks ended October 9, 2004, primarily because of the increase in the valuation allowance for which realization of the associated
deferred tax benefit was not considered more likely than not. In addition, losses incurred in certain jurisdictions may
not offset the tax expense in profitable jurisdictions. The Company's effective tax rate for the 16 weeks ended October 4, 2003, varied from the statutory tax rate, primarily because the
losses incurred in certain jurisdictions may not offset the tax expense in profitable jurisdictions and there are differences between foreign and United States income tax rates. Future income
and losses may require the Company to record a change in the valuation allowance of tax assets that were taken into account in determining the net amount of liability for deferred income taxes
recorded on its balance sheet at October 9, 2004. If this occurs, any resulting increase in the valuation allowance would generally be treated as an additional income tax expense in the period
in which it arises, while any resulting decrease reflecting realization of the benefits of tax assets that had a corresponding valuation allowance established on January 2, 2002, would be
treated as a reduction of goodwill established on January 2, 2002, with any excess over the value assigned to such goodwill recognized as a capital transaction.

In
accordance with the Financial Accounting Standards Board's ("FASB") Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
("FAS 142"), the Company undertook its annual goodwill impairment review during the 16 weeks ended October 9, 2004. Goodwill impairment is deemed to exist, and must then be
further assessed, if a reporting unit's carrying amount exceeds its estimated fair value. The Company's reporting units are funeral, cemetery and insurance, which are consistent with the Company's
operating segments. All of the Company's goodwill is recorded in the funeral reporting unit. As a result of the Company's annual goodwill impairment review, there was no indication of goodwill
impairment, as the estimated fair value of the funeral reporting unit exceeded its carrying amount as at October 9, 2004.

Discontinued Operations

Over the previous two fiscal years, the Company engaged in a strategic market rationalization assessment to dispose of cemetery and funeral operating locations
that did not fit into the Company's market or business strategies, as well as under-performing locations and excess cemetery land. The Company believes that the identification of business operations
for disposal is substantially complete. The Company will now focus on selling the business operations identified for disposal and, on a smaller scale and over time, continue to assess the Company's
portfolio of funeral and cemetery locations to ensure they continue to fit in the Company's strategy. Once a property is added to the disposal list, the Company expects to receive a firm purchase
commitment within one year. Certain of the Company's funeral and

33

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cemetery
operating locations have not been sold after being added to the disposal list for more than one year. However, the Company continues to include these locations in discontinued operations of
assets held for sale. The Company has entered into sale agreements for many of the locations, but is awaiting regulatory approval. Sale agreements for other locations were terminated prior to closing
and the Company is negotiating agreements with other potential buyers. Any remaining locations are not significant. The Company expects all of the discontinued locations will be sold by the end of the
Company's 2004 fiscal year.

During
the 16 weeks ended October 9, 2004, the Company reduced its estimated expected proceeds on the assets held for sale based upon recently received bids. As a result,
the Company record a long-lived asset impairment provision of $0.7 million within discontinued operations for the 16 weeks ended October 9, 2004.

The
Company has classified all the locations identified for disposal as assets held for sale in the consolidated balance sheets and recorded any related operating results,
long-lived asset impairment provisions, and gains or losses recorded on disposition as income from discontinued operations. Depreciation and amortization is not recorded once an asset has
been identified as held for sale. The Company has also reclassified the prior fiscal periods to reflect any comparative amounts on a similar basis. All discontinued operations financial information
presented under the insurance segment relate to Security Plan Life Insurance Company.

During
the 16 weeks ended October 9, 2004, the Company closed 11 funeral locations and sold 21 funeral and 20 cemetery locations for gross proceeds of
$15.5 million.

34

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40 Weeks Ended October 9, 2004 Compared to 40 Weeks Ended October 4, 2003 (Continued)

|                                                 |                                | 40 Weeks Ended |      
|------------------------------------------------ | ------------------------------ | -------------- | -----
|
|
|Revenue                                          |                                |                |      
|                                                 | Funeral                        |                | $    
|                                                 | Cemetery                       |                |      
|                                                 | Insurance                      |                |      
|                                                 |                                |                |      
|                                                 |                                | Total          |      
|                                                 |                                |                |      
|Gross margin                                     |                                |                |      
|                                                 | Funeral                        |                | $    
|                                                 | Cemetery                       |                |      
|                                                 | Insurance                      |                |      
|                                                 |                                |                |      
|                                                 |                                | Total          |      
|                                                 |                                |                |      
|Expenses                                         |                                |                |      
|                                                 | General and administrative     |                |      
|                                                 | Provision for asset impairment |                |      
|                                                 |                                |                |      
|Income from operations                           |                                |                | 60.0 
|Interest on long-term debt and refinancing costs |                                |                | 70.8 
|Other expenses (income), net                     |                                |                | 0.6  
|                                                 |                                |                |      
|Loss before income taxes                         |                                |                | (11.4
|Income taxes                                     |                                |                | 1.6  
|                                                 |                                |                |      
|Net income (loss) from continuing operations     |                                |                | (13.0
|Loss from discontinued operations, net of tax    |                                |                | (2.0 
|                                                 |                                |                |      
|Net income (loss)                                |                                | $              | (15.0
|                                                 |                                |                |      

Other
information for the 40 weeks ended October 9, 2004, and 40 weeks ended October 4, 2003, is summarized in the following table.

|Continuing Operations:                            |  | October 9, 2004 |        | October 9, 2003 |   | Increase (decrease) | 
|------------------------------------------------- |  | --------------- | ------ | --------------- | - | ------------------- | 
|
|FuneralOther Information                         |  |                 |        |                 |   |                     | 
|Number of funeral services performed              |  |                 | 91,274 |                 |   | 94,209              | 
|Average revenue per funeral service               |  | $               | 4,019  |                 | $ | 3,915               | 
|Pre-need funeral contracts written (in millions)  |  | $               | 137.6  |                 | $ | 126.4               | 
|Pre-need funeral conversion (percentages)         |  |                 | 26     |                 |   | 26                  | 
|CemeteryOther Information                        |  |                 |        |                 |   |                     | 
|Pre-need cemetery contracts written (in millions) |  | $               | 65.5   |                 | $ | 61.4                | 
|Number of cemetery interments                     |  |                 | 36,005 |                 |   | 35,953              | 

Consolidated
revenue of $552.8 million for the 40 weeks ended October 9, 2004, increased by $16.0 million, or 3.0%, compared to $536.8 million for the
corresponding period in 2003, primarily as a result of the increase in cemetery and insurance revenue. Consolidated gross margin as a percentage of

35

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revenue
decreased to 17.6% for the 40 weeks ended October 9, 2004, from 18.6% for the corresponding period in 2003, primarily due to the decrease in funeral gross margin.

Funeral
revenue of $366.8 million for the 40 weeks ended October 9, 2004, decreased by $2.1 million, or 0.5%, compared to $368.9 million for the
corresponding period in 2003, primarily as a result of a decrease of 2,935, or 3.1%, in the number of funeral services performed, partially offset by an increase of $104, or 2.7%, in average revenue
per funeral service performed. The increase in average revenue per funeral service performed was achieved through adjusting the pricing and mix of merchandise and services offered to customer families
that were designed both to meet customer family needs and to increase average revenues.

The
number of cremation services performed as a percentage of total services performed increased to 35% for the 40 weeks ended October 9, 2004, compared to 34% for the
corresponding period in 2003. The Company believes that the increase in the number of cremation services performed is due to the increasing customer family preference for cremation services, as well
as the Company's efforts to offer customer families a larger variety of cremation services and products. The number of cremation services performed may impact funeral revenue, as the average revenue
per cremation service is typically lower than the average revenue for traditional funeral services.

Funeral
gross margin as a percentage of revenue decreased slightly to 21.2% for the 40 weeks ended October 9, 2004, compared to 22.6% for the corresponding period in 2003.
The decrease in gross margin was primarily due to the decrease in funeral revenue and increases in cost of goods sold, wages, and facilities costs, partially offset by decreases in benefits, and
selling expenses. Due to the fixed nature of funeral costs over the short term, the Company believes that decreases in funeral revenue will not result in a corresponding decrease in funeral costs and
will negatively impact funeral gross margins.

Pre-need
funeral contracts written for the 40 weeks ended October 9, 2004, were $137.6 million, compared to $126.4 million for the corresponding
period in 2003. The Company is continuing its program to increase pre-need sales. For the 40 weeks ended October 9, 2004, and the corresponding period in 2003, 26% of funeral
volume was derived from backlog. The Company manages the cash impact of its pre-need funeral sales program primarily by offsetting direct costs, including commissions paid to counselors,
with either general agency commissions received from third party and related insurance companies or amounts not required to be trusted. The Company believes that pre-need funeral sales are
important, because over time, they build the foundation for future funeral revenue and generate positive cash flow when the funeral service is performed.

Cemetery
revenue of $123.9 million for the 40 weeks ended October 9, 2004, was $2.2 million, or 1.7%, higher than cemetery revenue for the corresponding
period in 2003. The increase in at-need service revenue during the 40 weeks ended October 9, 2004, compared to the corresponding period in 2003, was partially offset by a
decrease in other revenue. Other revenue for the 40 weeks ended October 9, 2004, decreased because the Company revised its estimates of accrued perpetual care liabilities and recorded a
one-time $3.9 million reversal of accrued perpetual care liabilities that increased other revenue for the 40 weeks ended October 4, 2003. The one-time
$3.9 million reversal was necessary, because in 2001, in response to a state regulator inquiry, the Company determined that it had not properly calculated the amount to be trusted for endowment
care on the sale of plots. Endowment care is recorded as a reduction in cemetery revenue, as amounts trusted are never available to the Company in the future. To properly recalculate the appropriate
perpetual care liability, a significant number of individual contracts across several states needed to be reviewed, and the perpetual care liability recalculated against the balance already paid in
order to determine the amount of the Company's additional liability. The Company prepared its best estimate of the perpetual care liability based on a sample of contracts from each state in which the
problem existed and in 2001, the Company accrued an estimate for the perpetual care liability of additional required funding of $6.9 million, with the offset adjusting cemetery revenue. In
2003, the

36

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Company
completed its review and calculation of the required additional funding and adjusted the perpetual care liability accordingly.

Cemetery
gross margin as a percentage of revenue increased to 13.1% for the 40 weeks ended October 9, 2004, compared to 12.5% for the corresponding period in 2003,
primarily as a result of the increase in cemetery revenue, partially offset by increases in advertising and promotion, facilities, and selling expenses.

Pre-need
cemetery contracts written for the 40 weeks ended October 9, 2004, were $65.5 million, compared to $61.4 million for the corresponding
period in 2003. The increase in pre-need cemetery contracts written was primarily due to the increase in pre-need space sales. For the 40 weeks ended October 9, 2004, 67% of interments
were at-need and 33% were pre-need fulfillments. Pre-need cemetery sales may initially decrease cash flows if the amount of cash initially collected is insufficient
to cover the amount required to be trusted, sales commissions, and other direct costs paid out. However, this cash flow impact is not significant, as the Company sets minimum down payments, maximum
terms and sales commission rates to maximize cash flow. The Company believes that pre-need cemetery sales are important, because over time, they generate positive cash flow and build the
foundation for future cemetery revenue.

Insurance
revenue for the 40 weeks ended October 9, 2004, increased $15.9 million, or 34.4%, compared to the corresponding period in 2003, primarily due to increases
in premiums of $13.3 million, net investment income of $1.4 million, and realized net investment gains of $1.2 million. Insurance premium revenue is up in 2004 primarily due to
the impact of the Company's subsidiary, Rose Hills, beginning to sell the Company's insurance products. Insurance premiums are dependent on insurance production, as increases in insurance production
generate increased insurance premiums over time. Insurance
production, which represents the insurance segment's participation in the Company's pre-need funeral contracts for the 40 weeks ended October 9, 2004, was
$90.1 million compared to $66.3 million for corresponding period in 2003. Insurance gross margin as a percentage of revenue increased to 4.8% for the 40 weeks ended
October 9, 2004, compared to 2.9% for the corresponding period in 2003, primarily due to the revenue increase being at a rate higher than that of the cost increase. The Company expects the
insurance gross margin percentage to grow modestly over the near term.

Interest
expense on long-term debt for the 40 weeks ended October 9, 2004, was $70.8 million, an increase of $5.8 million compared to the
corresponding period in 2003. The effect of lower effective interest rates and debt repayments made by the Company during 2003 and the 40 weeks ended October 9,

37

---



2004,
were more than offset by costs associated primarily with the Company's refinancing of long-term debt that occurred during the 40 weeks ended October 9, 2004, as
detailed in the following table.

|                                                                                                                             |  | 40 Weeks Ended
|---------------------------------------------------------------------------------------------------------------------------- |  | --------------
|
|
|Tender premium on the repurchase of the 12.25% Senior unsecured notes due in 2009                                            |  | $             
|Unamortized deferred finance costs expensed relating to the Credit Agreement that was refinanced                             |  |               
|Unamortized deferred finance costs expensed relating to the subordinated bridge loan due in 2005 that was fully repaid       |  |               
|Refinancing fees and costs on the Credit Agreement that was refinanced                                                       |  |               
|Unamortized premium credited to interest expense on 12.25% Convertible subordinated notes due in 2012 that was fully retired |  |               
|Tender premium on the repurchase of the 9.5% Senior subordinated notes due in 2004                                           |  |               
|Unamortized discount expensed relating to the 9.5% Senior subordinated notes due in 2004 that was fully repaid               |  |               
|Fees and costs for early termination of the Company's previous credit facility entered into on January 2, 2002               |  |               
|Interest on long-term debt                                                                                                   |  |               
|                                                                                                                             |  |               
|Total interest on long-term debt and refinancing costs                                                                       |  | $             
|                                                                                                                             |  |               

As
a result of the debt reduction and lower rates of interest on the Company's remaining debt, the Company expects interest expense in 2004, excluding the effects of the tender premium,
unamortized deferred finance costs, and refinancing fees and costs, to decline compared to 2003.

General
and administrative expenses for the Company for the 40 weeks ended October 9, 2004, were $36.2 million, or 6.5% of consolidated revenue, compared to
$32.4 million, or 6.0% of consolidated revenue for the corresponding period in 2003. During the 40 weeks ended October 4, 2003, general and administrative expenses were reduced by
a $5.0 million reversal of accrued legal expense, which resulted from a settlement by the Company of an automobile accident suit. In 2000, the suit was filed against the Company claiming both
compensation and punitive damages, as a result of the automobile accident. The Company's assessment indicated its insurance did not cover punitive damages and as such, the Company accrued an estimated
liability for probable punitive damages. In 2003, the Company and its insurance company settled with the plaintiffs for amounts within the Company's insurance coverage,
which included no punitive damages. In addition, during the 40 weeks ended October 4, 2003, general and administrative expenses were reduced by $3.1 million as a result of net
interest income received from a tax refund in connection with the audit of the predecessor company's 1993 through 1998 federal income tax returns.

Income
tax expense for the 40 weeks ended October 9, 2004, was $1.6 million compared to income tax benefit of $8.1 million for the corresponding period in
2003. The effective rate of tax was 14.0% for the 40 weeks ended October 9, 2004, compared to the effective tax benefit rate of 355.8% for the 40 weeks ended October 4,
2003. The effective tax rate varied from the statutory rate for the 40 weeks ended October 9, 2004, primarily because of the increase in the valuation allowance for which realization of
the associated deferred tax benefit was not considered more likely than not. In addition, losses incurred in certain jurisdictions did not offset the tax expenses in profitable jurisdictions, which
were partially offset by the favorable settlement of income tax audits of $0.7 million. For the 40 weeks ended October 4, 2003, the effective income tax rate varied from the
statutory rate, primarily because of a $9.7 million favorable settlement of a federal income tax audit. Future income and losses may require the Company to record a change in the valuation
allowance of tax assets that were taken into account in determining the net amount

38

---



of
liability for deferred income taxes recorded on its balance sheet at October 9, 2004. If this occurs, any resulting increase in the valuation allowance would generally be treated as an
additional income tax expense in the period in which it arises, while any resulting decrease reflecting realization of the benefits of tax assets that had a corresponding valuation allowance
established on January 2, 2002, would be treated as a reduction of goodwill established on January 2, 2002, with any excess over the value assigned to such goodwill recognized as a
capital transaction.

In
accordance with FAS 142, the Company undertook its annual goodwill impairment review during the 16 weeks ended October 9, 2004. Goodwill impairment is deemed to
exist, and must then be further assessed, if a reporting unit's carrying amount exceeds its estimated fair value. The Company's reporting units are funeral, cemetery and insurance, which are
consistent with the Company's operating segments. All of the Company's goodwill is recorded in the funeral reporting unit. As a result of the Company's annual goodwill impairment review, there was no
indication of goodwill impairment, as the estimated fair value of the funeral reporting unit exceeded its carrying amount as at October 9, 2004.

At
December 31, 2001, the Company had accrued $57.1 million of reorganization costs related to costs incurred during the predecessor company's reorganization, as well as
costs incurred in connection with the actual emergence and various related activities. As of October 9, 2004, the balance of $12.2 million of reorganization costs, primarily consisting
of accruals for a trustee fee dispute and legal fee reimbursements, has been included in accounts payable and accrued liabilities.

Discontinued Operations

Over the previous two fiscal years, the Company engaged in a strategic market rationalization assessment to dispose of cemetery and funeral operating locations
that did not fit into the Company's market or business strategies, as well as under-performing locations and excess cemetery land. The Company believes that the identification of business operations
for disposal is substantially complete. The Company will now focus on selling the business operations identified for disposal and, on a smaller scale and over time, continue to assess the Company's
portfolio of funeral and cemetery locations to ensure they continue to fit in the Company's strategy. Once a property is added to the disposal list, the Company expects to receive a firm purchase
commitment within one year. Certain of the Company's funeral and cemetery operating locations have not been sold after being added to the disposal list for more than one year. However, the Company
continues to include these locations in discontinued operations of assets held for sale. The Company has entered into sale agreements for many of the locations, but is awaiting regulatory approval.
Sale agreements for other locations were terminated prior to closing and the Company is negotiating agreements with other potential buyers. Any remaining locations are not significant. The Company
expects all of the discontinued locations will be sold by the end of the Company's 2004 fiscal year.

During
the 12 weeks ended June 14, 2003, the Company identified Security Plan Life Insurance Company, its wholly-owned home service insurance company, as a
non-strategic asset as it did not support the Company's pre-need funeral sales efforts. The Company's continuing insurance operations include Mayflower National Life Insurance
Company and National Capital Life Insurance Company, its wholly-owned pre-need life insurance companies. On June 17, 2004, the Company announced the signing of an agreement by its subsidiary
Mayflower National Life Insurance Company to sell all the outstanding shares of Security Plan Life Insurance Company for $85.0 million. The sale concluded on October 1, 2004. The Company
recorded a pre-tax gain on the sale of $16.0 million.

During
the 12 weeks ended March 27, 2004, the Company reduced its estimated proceeds on the group of assets held for sale and as a result recorded an $11.3 million
long-lived asset impairment provision. Prior to the second quarter of the 2004 fiscal year, the Company expected certain locations to sell as two distinct groups. Group A included 23 locations while
Group B consisted of 93 locations. The Company had a commitment from a single purchaser to purchase all of Group A, and had interest shown

39

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by
six different groups in bidding on all of Group B. The impairment reviews done for each of Group A and Group B prior to the second quarter of the 2004 fiscal year aggregated the carrying values of
the locations within each group to compare against the group's estimated fair value. In the second quarter of the 2004 fiscal year, the initial purchaser of Group A declined to purchase some of the
locations in Group A. In addition, the bids received on Group B were significantly below the Company's expectations, and the Company determined that the locations would generate higher proceeds if
sold in smaller groups or as individual locations.

The
impairment review done in second quarter of the 2004 fiscal year looked at either individual locations or aggregated locations into different groups than used previously for the
impairment review. Expected proceeds were estimated for each location or new groups of aggregated locations based on current purchase commitments, offers or comparable transactions. The aggregate
expected proceeds for all locations held for sale did not change significantly from that used in the previous impairment review. However, the impairment review of each location or new groups of
aggregated locations resulted in proceeds being higher or lower than the relevant carrying values.

As
a result, the Company was required to record a long-lived asset impairment provision of $11.5 million within discontinued operations for the 12 weeks ended
June 19, 2004. Provided that the properties are ultimately sold for estimated proceeds, accumulated unrealized gains of approximately $11.4 million will be included in income upon
disposition. Accordingly, the Company has recorded an aggregate $23.3 million long-lived asset impairment provision within discontinued operations for the 40 weeks ended
October 9, 2004.

As
at October 9, 2004, the Company had 41 funeral, 34 cemetery and five combination locations for disposal.

The
Company has classified all the locations identified for disposal as assets held for sale in the consolidated balance sheets and recorded any related operating results,
long-lived asset impairment provisions, and gains or losses recorded on disposition as income from discontinued operations. Depreciation and amortization is not recorded once an asset has
been identified as held for sale. The Company has also reclassified the prior fiscal periods to reflect any comparative amounts on a similar basis. All discontinued operations financial information
presented under the insurance segment relate to Security Plan Life Insurance Company.

During
the 40 weeks ended October 9, 2004, the Company closed 19 funeral locations and sold 27 funeral and 39 cemetery locations for gross proceeds of
$18.5 million.

Accounting change and recent accounting standards

Consolidation of trusts

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities," which was revised in December 2003
("FIN No. 46R"). FIN No. 46R clarifies the application of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to enterprises that have a
variable interest in variable interest entities, and is effective no later than the end of the first reporting period that ends after March 15, 2004.

The
Company elected to adopt FIN No. 46R at the beginning of its 2004 fiscal year on January 4, 2004. The adoption of FIN No. 46R resulted in the
consolidation of the funeral and cemetery merchandise and service, and perpetual care trusts in the Company's consolidated balance sheet, but did not change the legal relationships among the funeral
trusts, cemetery trusts, perpetual care trusts, the Company, and its holders of pre-need contracts. The Company does not consolidate certain funeral trusts for which the Company does not absorb
a majority of their expected losses and, therefore, is not considered a primary beneficiary of these funeral trusts under FIN No. 46R. The adoption of FIN No. 46R has not
materially

40

---



impacted
the Company's net income or its consolidated statement of cash flows, however other impacts include:





41

---





As
a result of the consolidation of the funeral and cemetery merchandise and service trusts, and perpetual care trusts, the Company recorded the following as at January 4,
2004:

|                                       |                                                            | (unaudited) |  
|-------------------------------------- | ---------------------------------------------------------- | ----------- | -
|Trust assets and liabilities recorded: |                                                            |             |  
|                                       | Funeral trust investments                                  |             | $
|                                       | Cemetery merchandise and service trust investments         |             |  
|                                       | Cemetery perpetual care trust investments                  |             |  
|                                       | Non-controlling interest in funeral and cemetery trusts    |             |  
|                                       | Non-controlling interest in perpetual care trusts          |             |  
|                                       | Deferred income tax assets                                 |             |  
|                                       | Deferred income tax liabilities                            |             |  
|                                       | Assets held for sale                                       |             |  
|                                       | Liabilities associated with assets held for sale           |             |  
|Amounts eliminated:                    |                                                            |             |  
|                                       | Amounts receivable from funeral trusts, net of allowances  |             |  
|                                       | Amounts receivable from cemetery trusts, net of allowances |             |  
|                                       | Deferred pre-need funeral contract revenue                 |             |  
|                                       | Deferred pre-need cemetery contract revenue                |             |  

Creditors
of the consolidated trusts have no recourse to the general credit of the Company, except as provided under contracts executed by the Company or its subsidiaries.

The
Company has changed its accounting policy on accounting for insurance funded pre-need funeral contracts as of January 4, 2004, as the Company has concluded that
its insurance funded pre-need funeral contracts are not assets and liabilities as defined by Statement of Financial Accounting Concepts No. 6, "Elements in Financial Statements."
Accordingly, the Company has retroactively removed from its consolidated balance sheet amounts relating to insurance funded pre-need funeral contracts previously included in
pre-need funeral contracts with an equal and offsetting amount in deferred pre-need funeral contract revenue. The removal of insurance funded pre-need funeral
contracts did not have an impact on the Company's results of operations, consolidated stockholders' equity, or cash flows. Set forth below is the effect of this removal on total assets and liabilities
for the Company as of January 3, 2004, December 28, 2002, and December 31, 2001.

|                                                                       |  | Alderwoods Group |          
|---------------------------------------------------------------------- |  | ---------------- | ---------
|
|
|Total assets, previously stated                                        |  | $                | 3,115,437
|Removal of amounts receivable from third-party insurance companies     |  |                  | (662,434 
|                                                                       |  |                  |          
|Total assets, restated                                                 |  | $                | 2,453,003
|                                                                       |  |                  |          
|Total liabilities, previously stated                                   |  | $                | 2,570,544
|Removal of amounts from deferred pre-need funeral and cemetery revenue |  |                  | (662,434 
|                                                                       |  |                  |          
|Total liabilities, restated                                            |  | $                | 1,908,110
|                                                                       |  |                  |          

42

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In March 2004, the FASB reached consensus on the guidance provided by Emerging Issues Task Force Issue 03-1 ("EITF 03-1"),
"The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments." The guidance is applicable to debt and equity securities that are within the scope
of the FASB Statement of Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities." EITF 03-1 specifies that an impairment
would be considered other-than-temporary unless (a) the investor has the ability and intent to hold an investment for a reasonable period of time sufficient for the
recovery of the fair value up to (or beyond) the cost of the investment and (b) evidence indicating the cost of the investment is recoverable within a reasonable period of time outweighs
evidence to the contrary. EITF 03-1 was scheduled to be effective for reporting periods ending after June 15, 2004. The measurement and recognition provisions relating to
debt and equity securities have been delayed until the FASB issues additional guidance. The Company adopted the disclosure provisions of EITF 03-1 during the fiscal year ended
January 3, 2004. The adoption of the measurement and recognition provisions is not expected to have a material impact on the consolidated financial statements, result of operations or liquidity
of the Company.

Pre-need Funeral and Cemetery Backlog for Continuing Operations

The Company's backlog represents pre-need funeral and cemetery arrangements with customer families. These arrangements are subject to trust or insurance funding
requirements. The activities in the Company's funeral backlog, excluding the effects of unrealized gains and losses on trust investments, were as follows:

|                                |                                                                                    | 16 Weeks Ended |           | 40 Weeks Ended |  
|------------------------------- | ---------------------------------------------------------------------------------- | -------------- | --------- | -------------- | -
|
|
|Funeral backlog:                |                                                                                    |                |           |                |  
|                                | Beginning balance                                                                  |                | $         | 1,255,364      |  
|                                | Sales, net of cancellations                                                        |                |           | 43,626         |  
|                                | Maturities                                                                         |                |           | (40,251        | )
|                                | Net increase in insurance benefits and earnings realized on funeral trust balances |                |           | 6,374          |  
|                                | Change in cancellation reserve                                                     |                |           | (10,175        | )
|                                | Other                                                                              |                |           | 102            |  
|                                |                                                                                    |                |           |                |  
|                                | Ending balance                                                                     |                | $         | 1,255,040      |  
|                                |                                                                                    |                |           |                |  
|Trust funded                    |                                                                                    | $              | 363,546   |                | $
|Third party insurance companies |                                                                                    |                | 642,373   |                |  
|Subsidiary insurance companies  |                                                                                    |                | 249,121   |                |  
|                                |                                                                                    |                |           |                |  
|                                |                                                                                    | $              | 1,255,040 |                | $
|                                |                                                                                    |                |           |                |  

43

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The activities in the Company's cemetery backlog, excluding the effects of unrealized gains and losses on trust investments, were as follows:

|                  |                                              | 16 Weeks Ended |   | 40 Weeks Ended |  
|----------------- | -------------------------------------------- | -------------- | - | -------------- | -
|
|
|Cemetery backlog: |                                              |                |   |                |  
|                  | Beginning balance                            |                | $ | 263,077        |  
|                  | Sales, net of cancellations                  |                |   | 24,100         |  
|                  | Maturities                                   |                |   | (26,082        | )
|                  | Earnings realized on cemetery trust balances |                |   | 461            |  
|                  | Change in cancellation reserve               |                |   | (247           | )
|                  | Other                                        |                |   |               |  
|                  |                                              |                |   |                |  
|                  | Ending balance                               |                | $ | 261,309        |  
|                  |                                              |                |   |                |  

Liquidity and Capital Resources

Cash Flows

The Company derives the majority of its cash from at-need funeral and cemetery revenue. Cash flow is also impacted by the funeral and cemetery
pre-need activities. Pre-need funeral and cemetery activities are discussed in detail in Item 1 "Business" in Alderwoods Group's Annual Report on Form 10-K for
the 53 weeks ended January 3, 2004, as filed with the SEC, and Notes 3 and 4 to the Company's interim consolidated financial statements included in Item 1 of
Part I of this Quarterly Report on Form 10-Q.

Net
cash from continuing operating activities was $35.9 million for the 16 weeks ended October 9, 2004, compared to $23.4 million for the corresponding period
in 2003. The increase is primarily due to the increase of $13.2 million in withdrawals of excess funds from funeral and cemetery trusts.

Net
cash from continuing operating activities was $72.3 million for the 40 weeks ended October 9, 2004, compared to $98.9 million for the corresponding period
in 2003. The decrease is primarily due to decrease of $5.9 million in withdrawals of excess funds from funeral and cemetery trusts and the increase in payments of accrued liabilities. In
addition, for the 40 weeks ended October 9, 2003, there was a $7.5 million cash receipt of a legal claim settlement.

The
Company's insurance subsidiaries are subject to certain state regulations that restrict distributions, loans and advances from such subsidiaries to the Company and its other
subsidiaries. Dividends are only distributable after regulatory approval is obtained. The cash inflows from operations of the insurance subsidiaries are primarily generated from insurance premiums,
all of which are invested in insurance invested assets.

Net
cash used in continuing investing activities was $46.2 million for the 16 weeks ended October 9, 2004, compared to $15.6 million for the corresponding
period in 2003, primarily due to the increase of $20.5 million in net purchase of insurance invested assets. The Company has entered into an agreement to purchase a building to replace an
administration office that is currently leased. The total capital expenditure for this building during 2004, including renovation costs, is expected to be $4.0 million, which will increase
annual depreciation expense by approximately $0.2 million and reduce annual lease expense by approximately $0.5 million.

Net
cash used in continuing investing activities was $56.6 million for the 40 weeks ended October 9, 2004, compared to $27.8 million for the
corresponding period in 2003, primarily due to the increase of $22.8 million in net purchase of insurance invested assets.

44

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Net
cash used in continuing financing activities was $128.3 million for the 16 weeks ended October 9, 2004, compared to $32.3 million for the
corresponding period in 2003. The increase was primarily due to the higher net repayment of debt during 2004.

Net
cash used in continuing financing activities was $156.9 million for the 40 weeks ended October 9, 2004, compared to $98.6 million for the
corresponding period in 2003. The increase was primarily due to the higher net repayment of debt during 2004.

The
net increase in cash from discontinued operations was $100.6 million for the 16 weeks ended October 9, 2004, due primarily to the sale of Security Plan Life
Insurance Company for $85.0 million.

The
net increase in cash from discontinued operations was $109.9 million for the 40 weeks ended October 9, 2004, due primarily to the sale of Security Plan Life
Insurance Company for $85.0 million.

The
Company completed the sale of Security Plan Life Insurance Company on October 1, 2004, for gross proceeds of $85.0 million. The Company recorded a pre-tax
gain on the sale of
$16.0 million, and after payment of applicable taxes and expenses, and recapitalization of Mayflower National Life Insurance Company, realized net proceeds of $65.0 million, which the
Company has utilized to further reduce long-term debt.

The
Company expects to complete the sale of its funeral and cemetery locations held for sale in 2004, with the majority of expected proceeds of approximately $21.4 million used to
further reduce long-term debt. As of October 9, 2004, the carrying value of the funeral and cemetery assets to be disposed of were approximately $9.9 million. Actual amounts
could significantly differ from these estimates, as the assets held for sale and proceeds may change as a result of further negotiations with potential buyers.

As
of October 9, 2004, the Company's cash balance was $10.2 million and the amount available under the Credit Agreement's $75.0 million revolving credit facility was
$75.0 million, less $10.0 million in outstanding letters of credit. As of October 9, 2004, the Company's debt repayment obligation over the next 12 months is
$4.6 million and aggregates $297.4 million over the next five years. The Company believes that the Revolving Credit Facility (as defined below), together with existing cash, cash flow
from operations and expected cash proceeds from the sale of discontinued operations, will be sufficient to meet the Company's anticipated capital expenditures, working capital requirements and debt
repayment obligations in both the near and intermediate terms.

Long-Term Indebtedness

The change in the Company's carrying amounts of long-term indebtedness is as follows:

|Issue                                                 |                  | Long-Term Indebtedness Carrying Value January 3, 2004 |       | Net increase
(decrease) |   | Long-Term Indebtedness Carrying Value October 9, 2004
|----------------------------------------------------- | ---------------- | ----------------------------------------------------- | ----- | ----------------------- | - | -----------------------------------------------------
|
|Senior secured Term Loan B due in 2008 (a)            |                  | $                                                     | 245.9 |                         | $ | 36.0                                                 
|7.75% Senior unsecured notes due in 2012 (b)          |                  |                                                       |      |                         |   | 200.0                                                
|12.25% Senior unsecured notes due in 2009 (c)         |                  |                                                       | 330.0 |                         |   | (325.5                                               
|12.25% Convertible subordinated notes due in 2012 (d) |                  |                                                       | 31.9  |                         |   | (31.9                                                
|Promissory notes and capitalized obligations (e)      |                  |                                                       | 23.1  |                         |   | (10.4                                                
|                                                      |                  |                                                       |       |                         |   |                                                      
|                                                      | Carrying amounts |                                                       | $     | 630.9                   |   | $                                                    
|                                                      |                  |                                                       |       |                         |   |                                                      

---

45

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The
Credit Agreement, the Eight-Year Senior Unsecured Notes, and the Seven-Year Unsecured Notes are guaranteed by substantially all of the Company's wholly-owned
U.S. subsidiaries, other than the Company's insurance subsidiaries and certain other excluded subsidiaries. Alderwoods Group, Inc., the parent company, has no independent assets or
operations, and the guarantees of its guarantor subsidiaries are full and unconditional, and joint and several.

Financial
covenants under the Credit Agreement require the Company to maintain a minimum interest coverage ratio and fixed charge coverage ratio, and not to exceed a maximum leverage
ratio. As of October 9, 2004, the Company met all of the financial covenants required by the Credit Agreement.

Pursuant
to the indenture governing the Eight-Year Senior Unsecured Notes, the Company has entered into a registration rights agreement (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement, the Company is required, on or prior to May 16, 2005, to file an exchange offer registration statement in an appropriate form under the Securities
Act of 1933 with the U.S. Securities and Exchange Commission. Upon the effectiveness of the exchange offer registration statement, the Company will offer holders of the Eight-Year
Senior Unsecured Notes the opportunity to exchange their notes for notes with substantially identical terms covered by the exchange offer registration statement. In the event (i) the Company
fails to timely file an appropriate registration statement, (ii) the registration statement is not timely declared effective, (iii) the Company fails to timely consummate the

46

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exchange
offer, or (iv) the registration statement is declared effective, but thereafter ceases to be effective or usable during periods specified in the Registration Rights Agreement (each of
(i) through (iv), a "Registration Default"), then the Company will be subject to liquidated damages within the first 90-day period immediately following the Registration Default, of
0.25% per annum of the outstanding principal amount of the Eight-Year Senior Unsecured Notes. The amount of liquidated damages will increase by an additional 0.25% per annum with respect
to each subsequent 90-day period until the Registration Default has been cured, up to a maximum of 1.00% per annum.

Contractual Obligations and Commercial Commitments

The following table details the Company's contractual obligations of continuing and discontinued operations as of October 9, 2004. Significant changes to
long-term debt are discussed above under "Long-Term Indebtedness."

|                                                     |  |   |         | Payments Due by Period
|---------------------------------------------------- |  | - | ------- | ----------------------
|
|
|Long-term debt (a)                                   |  | $ | 486,405 |                       
|Promissory notes and capitalized obligations (a) (b) |  |   | 12,852  |                       
|Operating leases (c)                                 |  |   | 27,609  |                       
|Purchase obligations (d)                             |  |   | 264     |                       
|                                                     |  |   |         |                       
|Total                                                |  | $ | 527,130 |                       
|                                                     |  |   |         |                       

---

In
addition to the operating leases noted in the table above, as at October 9, 2004, the Company leased approximately 1,250 vehicles under a master operating lease
agreement, which has a minimum lease term of 12 months. The Company's practice is to continue these leases on a month-to-month basis after the expiry of the minimum
lease term. Lease payments for these vehicles are projected to be $7.4 million over the next 12 months.

The
Company issues purchase orders for the supply of goods and services for its operations. As of October 9, 2004, there were no significant or unusual purchase orders
outstanding. The Company entered into agreements with certain suppliers of funeral and cemetery merchandise, and office supplies to obtain volume discounts. However, none of these agreements have
committed purchase quantities or prices.

47

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The
following table details the Company's commercial commitments as of October 9, 2004.

|                                   |  |   |        | Amount of Commitment Expiration Per Period
|---------------------------------- |  | - | ------ | ------------------------------------------
|
|
|Lines of credit (a)                |  | $ |       |                                           
|Standby letters of credit (b)      |  |   | 10,018 |                                           
|Surety obligations (c)             |  |   | 2,403  |                                           
|                                   |  |   |        |                                           
|Total contractual cash obligations |  | $ | 12,421 |                                           
|                                   |  |   |        |                                           

---

At
October 9, 2004, the aggregate fair value of the Company's forward foreign currency exchange contracts and foreign currency option contracts was an asset of
$1.3 million. There has been no material change in the Company's forward foreign currency exchange contract and foreign currency option
commitments, which are described under Item 7A. " Quantitative and Qualitative Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for
the 53 weeks ended January 3, 2004, as filed with the SEC.

Off-Balance Sheet Arrangements

Off-balance sheet arrangements as of October 9, 2004, consist of operating leases noted above under "Contractual Obligations and Commercial Commitments."

Other Information

EBITDA from Continuing Operations

The Company's earnings from continuing operations before interest, taxes, depreciation and amortization, and provision for goodwill impairment and provision for
asset impairment ("EBITDA") are presented in the table below and reconciled to the Company's net income (loss) from continuing operations. The Company considers EBITDA to be an important supplemental
indicator of operating performance. The Company believes that EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of the operating performance of
companies with high yield debt, and the vast majority of companies with high yield debt present EBITDA when reporting their results. The Company believes EBITDA facilitates operating performance
comparisons from period to period and company to company by backing out potential differences caused by variations in capital structures (affecting relative interest expense), tax positions (such as
the impact on periods or companies of changes in effective tax rates or net operating losses), and the age and book depreciation of facilities and equipment (affecting relative depreciation expense).
It is also one basis, subject to certain modifications, on which compliance with certain of the financial covenants under the amended credit agreement is determined and some payments under certain of
the Company's compensation plans are calculated. EBITDA is not a term that has specific meaning in accordance with GAAP and may be calculated differently by other companies. EBITDA is not a
measurement of the Company's financial performance under GAAP and should not be considered in isolation, as an alternative to net income, operating income

48

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or
any other performance measures derived in accordance with GAAP, or otherwise as a measure of a company's profitability, or as an alternative to cash flows from operating activities or otherwise as
a measure of liquidity.

|                                                 |  | 16 Weeks Ended |       | 40 Weeks Ended |  
|------------------------------------------------ |  | -------------- | ----- | -------------- | -
|
|
|EBITDA from continuing operations:               |  |                |       |                |  
|Net income (loss) from continuing operations     |  | $              | (26.0 | )              | $
|Income taxes                                     |  |                | (6.2  | )              |  
|Interest on long-term debt and refinancing costs |  |                | 50.1  |                |  
|Depreciation and amortization                    |  |                | 13.0  |                |  
|Provision for asset impairment                   |  |                | 0.4   |                |  
|                                                 |  |                |       |                |  
|EBITDA from continuing operations                |  | $              | 31.3  |                | $
|                                                 |  |                |       |                |  

Restrictions

The Credit Agreement and the indentures governing the Eight-Year Senior Unsecured Notes and the Seven-Year Unsecured Notes restrict the Company's ability to
engage in asset sales. The Credit Agreement and indenture governing the Eight-Year Senior Unsecured Notes prohibit dispositions of assets unless the assets disposed of fulfill the requirements of
specified exceptions. The indenture governing the Eight-Year Senior Unsecured Notes excepts, among other exceptions, assets with a fair market value less than $5.0 million. One specified
exception contained in the Credit Agreement is dispositions of any of a group of identified "discontinued assets;" another is dispositions of assets not exceeding $35.0 million book value in
the aggregate over the life of the Credit Agreement, provided that (i) the consideration received is at least equal to fair market value and (ii) not less than 75% of the consideration
is paid in cash or cash equivalents. Within 270 days of the receipt of net proceeds from any such asset sale, the Company has the ability to apply such net proceeds at its option
(or as otherwise required) to invest in non-current operating assets (or enter into agreements for such investment which agreements are consummated within 360 days of such receipt
of asset sale proceeds). Up to $10.0 million of such net proceeds in any fiscal year (but not in excess of $35.0 million in the aggregate over the term
of the Credit Agreement) may be applied to make capital expenditures. To the extent the Company receives net proceeds in excess of additional specified thresholds and such excess is not applied to
invest in non-current operating assets or make capital expenditures as described in the two immediately preceding sentences, the Company must make mandatory repayments under the Credit Agreement and,
after all indebtedness under the Credit Agreement has been repaid, offer to purchase the Eight-Year Senior Unsecured Notes at a purchase price equal to 100.0% of the stated principal amount, plus
accrued and unpaid interest and Liquidated Damages (as defined in the indenture governing the Eight-Year Senior Unsecured Notes), if any.

Covenants
in the Credit Agreement prohibit the payment of cash dividends and restrict, and under specified circumstances prohibit, the payment of dividends by Alderwoods Group. In
addition, covenants in the indenture governing the Eight-Year Senior Unsecured Notes restrict, and under specified circumstances prohibit, the payment of non-cash dividends by Alderwoods Group. The
Company is not expecting to pay any dividends on the Common Stock in the foreseeable future.

The
Company's insurance subsidiaries are subject to certain state regulations that restrict distributions, loans and advances from such subsidiaries to the Company and its other
subsidiaries. The cash flow used in operations of the insurance subsidiaries for the 16 and 40 weeks ended October 9, 2004, was approximately $45.7 million and
$62.2 million, respectively, primarily due to a $65.0 million distribution to the Company following the consummation of the sale of Security Plan Life Insurance Company.

49

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Continuing and Discontinued Locations

The Company's number of continuing and discontinued locations by country, state and province as of October 9, 2004, and the overall totals as of October 9,
2004, and January 3, 2004, are summarized in the table below.

|                                     |                  | Number of Continuing
Operations Locations |    | Number of Discontinued
Operations Locations |    |    |   |    |    |   
|------------------------------------ | ---------------- | ----------------------------------------- | -- | ------------------------------------------- | -- | -- | - | -- | -- | --
|
|
|
|Canada                               |                  |                                           |    |                                             |    |    |   |    |    |   
|                                     | British Columbia |                                           | 17 |                                             |   |    | 1 |    | 2  |   
|                                     | Alberta          |                                           | 11 |                                             |   |    |  |    |   |   
|                                     | Saskatchewan     |                                           | 23 |                                             |   |    |  |    |   |   
|                                     | Manitoba         |                                           | 3  |                                             | 1  |    | 2 |    |   |   
|                                     | Ontario          |                                           | 22 |                                             |   |    |  |    |   |   
|                                     | Quebec           |                                           | 17 |                                             |   |    |  |    |   |   
|                                     | Nova Scotia      |                                           | 11 |                                             |   |    |  |    | 3  |   
|                                     |                  |                                           |    |                                             |    |    |   |    |    |   
|Total Canadian                       |                  | 104                                       |    | 1                                           |    | 3  |   | 5  |    | 2 
|United States                        |                  |                                           |    |                                             |    |    |   |    |    |   
|                                     | Alabama          |                                           | 8  |                                             |   |    | 1 |    | 1  |   
|                                     | Alaska           |                                           | 3  |                                             |   |    |  |    |   |   
|                                     | Arizona          |                                           | 5  |                                             |   |    | 1 |    |   |   
|                                     | Arkansas         |                                           | 3  |                                             |   |    |  |    |   |   
|                                     | California       |                                           | 46 |                                             | 2  |    | 7 |    |   |   
|                                     | Colorado         |                                           | 3  |                                             | 1  |    | 1 |    | 1  |   
|                                     | Connecticut      |                                           | 3  |                                             |   |    |  |    |   |   
|                                     | Florida          |                                           | 32 |                                             | 5  |    | 8 |    | 13 |   
|                                     | Georgia          |                                           | 25 |                                             | 6  |    | 5 |    |   |   
|                                     | Idaho            |                                           | 4  |                                             | 1  |    |  |    |   |   
|                                     | Illinois         |                                           | 8  |                                             | 16 |    | 3 |    | 4  |   
|                                     | Indiana          |                                           | 17 |                                             | 5  |    |  |    |   |   
|                                     | Kansas           |                                           | 7  |                                             |   |    |  |    | 2  |   
|                                     | Kentucky         |                                           | 1  |                                             |   |    |  |    |   |   
|                                     | Louisiana        |                                           | 22 |                                             | 2  |    |  |    |   |   
|                                     | Maryland         |                                           | 2  |                                             |   |    |  |    |   |   
|                                     | Massachusetts    |                                           | 13 |                                             |   |    |  |    |   |   
|                                     | Michigan         |                                           | 12 |                                             |   |    |  |    | 2  |   
|                                     | Minnesota        |                                           | 9  |                                             | 1  |    | 1 |    |   |   
|                                     | Mississippi      |                                           | 22 |                                             | 1  |    | 2 |    | 1  |   
|                                     | Montana          |                                           | 4  |                                             |   |    |  |    |   |   
|                                     | Nevada           |                                           | 2  |                                             |   |    | 1 |    |   |   
|                                     | New Hampshire    |                                           | 4  |                                             |   |    |  |    |   |   
|                                     | New Mexico       |                                           | 5  |                                             |   |    |  |    | 2  |   
|                                     | New York         |                                           | 38 |                                             | 1  |    |  |    |   |   
|                                     | North Carolina   |                                           | 26 |                                             | 9  |    | 2 |    | 2  |   
|                                     | Ohio             |                                           | 17 |                                             | 4  |    | 1 |    |   |   
|                                     | Oklahoma         |                                           | 18 |                                             | 1  |    | 1 |    | 1  |   
|                                     | Oregon           |                                           | 18 |                                             | 1  |    | 3 |    |   |   
|                                     | Pennsylvania     |                                           | 6  |                                             |   |    |  |    |   |   
|                                     | Rhode Island     |                                           | 4  |                                             |   |    |  |    | 2  |   
|                                     | South Carolina   |                                           | 6  |                                             | 5  |    | 2 |    |   |   
|                                     | Tennessee        |                                           | 33 |                                             | 2  |    | 5 |    | 1  |   
|                                     | Texas            |                                           | 60 |                                             | 4  |    | 4 |    | 4  |   
|                                     | Virginia         |                                           | 22 |                                             |   |    |  |    |   |   
|                                     | Washington       |                                           | 24 |                                             | 3  |    | 3 |    |   |   
|                                     | West Virginia    |                                           | 3  |                                             |   |    |  |    |   |   
|                                     | Wisconsin        |                                           |   |                                             |   |    |  |    |   |   
|                                     | Puerto Rico      |                                           | 3  |                                             | 5  |    | 2 |    |   |   
|                                     |                  |                                           |    |                                             |    |    |   |    |    |   
|Total United States                  |                  | 538                                       |    | 75                                          |    | 53 |   | 36 |    | 32
|                                     |                  |                                           |    |                                             |    |    |   |    |    |   
|Overall total, as of October 9, 2004 |                  | 642                                       |    | 76                                          |    | 56 |   | 41 |    | 34
|                                     |                  |                                           |    |                                             |    |    |   |    |    |   
|Overall total, as of January 3, 2004 |                  | 666                                       |    | 78                                          |    | 56 |   | 64 |    | 72
|                                     |                  |                                           |    |                                             |    |    |   |    |    |   

50

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information regarding the Company's exposure to certain market risks, see Item 7A. "Quantitative and Qualitative Disclosures About
Market Risk" in the Company's Annual Report on Form 10-K for the 53 weeks ended January 3, 2004, as filed with the SEC. As of October 9, 2004, there were
no material changes in such matters disclosed in the Form 10-K.

ITEM 4.    CONTROLS AND PROCEDURES

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it
files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. As of October 9, 2004, an
evaluation was carried out, under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the
effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective.

There
have not been any changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) promulgated by the
SEC under the Securities Exchange Act of 1934) during the Company's most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q, 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, and any financial guidance
provided in this Quarterly Report on Form 10-Q, 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,
although not all forward-looking statements contain such identifying words. These forward-looking statements are made subject to certain risks and uncertainties that could cause actual results to
differ materially from those stated. Risks and uncertainties that could cause or contribute to such differences include, without limitation, those discussed elsewhere in this Quarterly Report on
Form 10-Q and particularly below under "Risk Factors" and above under "Management's Discussion and Analysis of Financial Condition and Results of Operations."

The
information appearing in this Quarterly Report on Form 10-Q is accurate only as of the date hereof, as the Company's business, financial condition, results of
operations or prospects may have changed after that date. Except as required by law, 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. All subsequent written and oral forward-looking statements attributable to the Company and
persons acting on its behalf are qualified in their entirety by the cautionary statements contained in this section and elsewhere in this Quarterly Report on Form 10-Q.

Risk Factors

In addition to other information in this Quarterly Report on Form 10-Q, the following important factors, among others, could cause future
results to differ materially from estimates, predictions or projections.

51

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Risks Related to the Company's Debt

The Company's significant level of debt and interest payment obligations may restrict future operations and impair the Company's ability
to meet debt obligations.

The
significant level of debt and demands on the Company's cash resources could have material consequences to the Company's business, including, but not limited to:



Despite the Company's significant level of debt, the Company may still be able to incur more debt, which could intensify the risks described above.

The
Company may be able to incur significant amounts of debt in the future, subject to compliance with its existing financing arrangements. Although the Company's Credit Agreement and
the indenture governing the Eight-Year Senior Unsecured Notes contain restrictions on the incurrence of additional debt, debt incurred in compliance with these restrictions could be
significant. If new debt is added to the Company's and its subsidiaries' current debt level, the related risks that the Company faces would be magnified.

The Company may not be able to generate sufficient cash to service all of its debt.

The
Company's ability to make payments on and to refinance its debt depends on its ability to generate cash in the future, which will be affected by the death rate and general economic,
financial, competitive, legislative, regulatory and other factors beyond the Company's control. The Company cannot assure that its business will generate sufficient cash flows from operations or that
future borrowings will be available to it under its Credit Agreement in amounts sufficient to enable it to service its debt at maturity or otherwise, or to fund its other liquidity needs.

If
the Company is unable to meet its debt obligations or to fund its other liquidity needs, the Company may need to restructure or refinance its debt. The Company's ability to refinance
its debt or obtain additional financing will depend on:



As
a result, it may be difficult for the Company to obtain financing on terms that are acceptable to it, or at all. Without this financing, the Company could be forced to sell assets
under unfavorable circumstances to make up for any shortfall in its payment obligations. The terms of the Company's Credit Agreement and the indentures governing the Eight-Year Senior
Unsecured Notes and the Seven-Year

52

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Unsecured
Notes limit the Company's ability to sell assets and also restrict the use of proceeds from such a sale. Moreover, substantially all of the Company's assets have been pledged to secure
repayment of its debt under the Credit Agreement. In addition, the Company may not be able to sell assets quickly enough or for sufficient amounts to enable it to meet its obligations.

Restrictive covenants in the Company's Credit Agreement and the indentures governing the Eight-Year Senior Unsecured Notes and the Seven-Year Unsecured Notes may
prevent it from pursuing business activities that could otherwise improve its results of operations.

The
terms of the Company's Credit Agreement and the indentures governing the Eight-Year Senior Unsecured Notes and the Seven-Year Unsecured Notes limit its ability and the
ability of its subsidiaries to, among other things:



The
Company's Credit Agreement also requires it to maintain financial ratios. Complying with these restrictive covenants and financial ratios, as well as those that may be contained in
any future debt agreements, may impair the Company's ability to finance its future operations or capital needs or to take advantage of other favorable business opportunities. The Company's ability to
comply with these restrictive covenants and financial ratios will depend on its future performance, which may be affected by events beyond its control. The Company's failure to comply with any of
these covenants or restrictions when they apply will result in a default under the particular debt instrument, which could permit acceleration of the debt under that instrument and, in some cases, the
acceleration of debt under other instruments that contain cross-default or cross-acceleration provisions. In an event of default, or in the event of a cross-default or cross-acceleration, the Company
may not have sufficient funds available to make the required payments under its debt. If the Company is unable to repay amounts owed under the terms of the Credit Agreement, the lenders thereunder may
be entitled to sell most or substantially all of the Company's assets and the assets of many of its subsidiaries to satisfy its obligations under the Credit Agreement.

Risks Related to the Company

The Company operates in a highly competitive industry.

The North American funeral and cemetery industry primarily consists of small family-owned businesses. The death care industry in the United States is made up of
approximately 22,000 funeral homes and 10,500 cemeteries. The Company believes the four largest public operators of funeral homes and cemeteries in the United States are Service Corporation
International, Alderwoods Group, Stewart Enterprises, Inc., and Carriage Services, Inc. The Company believes the four largest public death care companies collectively generate
approximately 20% of death care revenues in the United States. The Company's competition in the markets in which it operates generally arise from one or more of the above public operators in addition
to independent operators of funeral homes and cemeteries for at-need and pre-need business. The market share of a single funeral home or cemetery in any community is a function
of the name, reputation and location of that funeral home or cemetery although competitive pricing, professional service and well-maintained locations are also important. Gains in market
share within a

53

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community
are usually realized over a number of years, although losses in market share may appear in a shorter time frame.

To
compete successfully, the Company's funeral services and cemeteries must maintain good reputations and high professional standards in the industry, as well as offer attractive
products and services at competitive prices. In addition, the Company must market itself in such a manner as to distinguish it from its competitors. The Company has historically experienced price
competition from independent funeral home and cemetery operators, and from monument dealers, casket retailers, low-cost funeral providers and other non-traditional providers of
services or products. The intense competition the Company faces may force it to reduce prices and thereby its profit margins to retain or recapture its market share. If the Company is unable to
successfully compete, its financial condition, results of operations and cash flows could be materially and adversely affected.

The Company's investments held in trusts are invested in securities, the value of which is affected by financial market conditions that are beyond its
control.

Cemetery
revenue is impacted by perpetual care trust net realized investment income, which the Company recognizes to the extent of allowed reimbursement from the trust when it performs
cemetery maintenance services. The Company recognizes trust income on funeral and cemetery merchandise and service trust investments when the underlying pre-need funeral and cemetery
contract obligations are fulfilled. The level of trust income is largely dependent on yields on the investments made with trust funds, which are subject to financial market conditions and other
factors that are beyond the Company's control. Trust income is also affected by the mix of fixed income and equity securities the Company chooses to maintain in the funds, and the Company may not
choose the optimal mix for any particular market condition. If earnings from trust funds decline, the Company
would likely experience a decline in future revenue and cash flow. In addition, if the trust funds experienced significant investment losses, there would likely be insufficient funds in the trusts to
cover the costs of delivering services and merchandise or to maintain cemeteries in the future. The Company would have to cover any such shortfalls with cash flows from operations, which could
adversely affect its ability to service debt.

The level of pre-need sales and the terms of the Company's pre-need contracts may adversely impact its results of operations and cash
flows.

The
Company recently made significant changes to its pre-need sales force and the terms of the commissions paid to its sales force. The Company cannot assure that the changes
it has made will not result in a decline in its pre-need sales or that the Company will continue to be successful in recruiting and retaining qualified sales people. In addition, depending
on the terms of the contract, pre-need sales have the potential to have an initial negative impact on cash flows because of the commission paid on the sale and the portion of sales
proceeds required to be placed into trust or escrow. The Company's commission structure emphasizes contracts with positive cash flows; however, the Company cannot assure that in the future it will not
enter into pre-need sales that have a negative impact on cash flows, which could impair its ability to service debt. A weakening economy that causes customer families to have less
discretionary income could cause a decline in pre-need sales. Declines in pre-need cemetery property sales would reduce current revenue, and declines in other
pre-need sales would reduce the Company's pre-need backlog and future revenue and could reduce future market share.

The Company's ability to dispose of certain identified properties and operations at prices consistent with its expectations depends on several factors, many of which are beyond
its control. Any changes in expected sales prices or basis of these properties and operations could result in impairment charges or could adversely affect the Company's ability to sell these
businesses at prices it is willing to accept.

The
Company is currently pursuing the sale of funeral homes and cemeteries designated as held for sale in North America, because these properties and operations are either marginal or do
not fit within its long-term strategic growth plans. The Company believes that the closing or sale of those businesses will enable its management to focus on its most productive operations
where its operating initiatives may bring

54

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about
the greatest benefits. The Company cannot assure that it will be able to dispose of these properties and operations or that buyers will accept its terms, nor can the Company give any assurance
that the selling prices of these properties and operations will not be materially different from its expectations. Any variance between the anticipated and actual sale prices or changes in the basis
of these businesses could result in the Company taking an impairment charge or loss or gain on actual sale.

Increasing insurance benefits related to pre-need services funded through life insurance or annuity contracts may not cover future increases in the cost of
providing a price guaranteed funeral service.

The
Company sells price guaranteed pre-need funeral services at prices prevailing when the agreements are signed. There is no guarantee that the insurance payout or the
annuity contract payout will cover future increases in the cost of providing a price guaranteed funeral service, which could have an effect on the Company's profit margins.

Fluctuations in the value of the Canadian dollar could result in currency exchange losses.

A
significant portion of the Company's corporate and administrative expenses are payable in Canadian dollars, while most of the Company's revenue is generated in U.S. dollars and
the Company reports its financial statements in U.S. dollars. Therefore, a strengthening of the Canadian dollar relative to the U.S. dollar will adversely affect the Company's results of
operations. Any hedging activities the Company undertakes may not be successful in mitigating all of this risk.

The Company's effective income tax rate may vary.

The
Company expects that its effective income tax rate for 2004 may vary significantly from the statutory tax rate because (1) income tax benefits may be offset by an increase in
the valuation allowance due to the uncertainty regarding the ability to utilize the benefits in the future, (2) the losses incurred in certain jurisdictions may not offset the tax expense in
profitable jurisdictions, (3) there are differences between foreign and United States income tax rates and (4) many tax years are subject to audit by different tax jurisdictions,
which audits may result in additional taxes payable.

Volatility is possible.

In
January 2002, the Company's Common Stock and Warrants commenced trading on The NASDAQ Stock Market, Inc. Due to the limited trading history of the Company's Common Stock
and Warrants, there can be no assurance as to the degree of price volatility in the market for the Common Stock and Warrants. The market price of the Common Stock and Warrants may be subject to
significant fluctuations in response to numerous factors, including variations in the Company's annual or quarterly financial results or those of its competitors, changes by financial analysts in
their estimates of the future earnings of the Company, conditions in the economy in general or in the funeral industry in particular or unfavorable publicity. Additionally, there can be no assurance
that the market value of the Common Stock will exceed the exercise price of the Warrants at any time prior to their expiration.

Dividends are not anticipated; payment of dividends is subject to restriction.

The
Company is not expecting to pay any dividends on its Common Stock in the foreseeable future. Certain institutional investors may only invest in dividend-paying equity securities or
may operate under other restrictions that may prohibit or limit their ability to invest in the Company's Common Stock. In addition, covenants in the Credit Agreement prohibit the payment of cash
dividends and restrict, and under certain circumstances prohibit, the payment of other dividends by the Company. In addition, covenants in the indenture governing the Eight-Year Senior
Unsecured Notes restrict, and under certain circumstances prohibit, the payment of dividends by the Company.

Certain provisions in the Company's charter documents have anti-takeover effects.

Certain
provisions of the certificate of incorporation and bylaws of the Company, as well as the General Corporation Law of the State of Delaware, may have the effect of delaying,
deferring or preventing a change in control of the Company. Such provisions, including those providing for the possible

55

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issuance
of preferred stock of the Company without stockholder approval, regulating the nomination of directors and eliminating stockholder action by written consent may make it more difficult for
other persons, without the approval of the Company's board of directors, to make a tender offer or otherwise acquire substantial amounts of the Company's Common stock or to launch other takeover
attempts that a stockholder might consider to be in such stockholder's best interest.

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on the
Company's financial condition, results of operations, and market price of the Company's Common Stock.

The
Company is in the process of documenting and testing its internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which
requires management assessments of the effectiveness of the Company's internal controls over financial reporting as of the end of its fiscal year (January 1, 2005) and a report by the Company's
independent auditors addressing management's assessments and the effectiveness of the internal controls as of that date. During the course of the Company's testing, the Company may identify
deficiences and weaknesses, which the Company may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. If
management is unable to conclude that the Company's internal controls are effective at year end or the Company's auditors are unable to give a favorable report on management's assessment, this could
have a material adverse effect on the Company's access to capital and the market price of the Company's Common Stock.

Risks Related to the Company's Industry

Declines in the number of deaths in the Company's markets can cause a decrease in revenues. Changes in the number of deaths are not predictable from market to market or over
the short term.

Declines
in the number of deaths could cause at-need sales of funeral and cemetery services, property and merchandise to decline, which could decrease revenues. Although the
United States Bureau of the Census estimates that the number of deaths in the United States will increase through 2010, longer lifespans could reduce the rate of deaths. Changes in the
number of deaths can vary among local markets and from quarter to quarter, and variations in the number of deaths in the Company's markets or from quarter to quarter are not predictable.

The growth in the rate of cremations in North America may result in decreased revenue and gross margin.

There
is an increasing trend in North America toward cremation. According to the Cremation Association of North America, approximately 28% of all deaths in 2002 in the
United States were followed by cremation. This figure has grown at approximately 1% annually since 1997 and is projected to continue to grow at a comparable rate over the next three to five
years. Compared to traditional funeral services, cremations have historically generated higher gross profit percentages but lower overall revenues. A substantial increase in the rate of cremations
performed by the Company could have a material adverse effect on its financial condition, results of operations and cash flows.

The funeral home and cemetery industry is highly regulated.

The
Company's operations are subject to regulation, supervision and licensing under numerous federal, state, provincial and local laws, ordinances and regulations, including extensive
regulations concerning trust funds, pre-need sales of funeral and cemetery products and services, environmental matters and various other aspects of the business. The impact of such
regulations varies depending on the location of funeral homes and cemeteries. Violations of applicable laws could result in fines or other sanctions to the Company.

From
time to time, federal, state, provincial and local regulatory agencies have considered and may enact additional legislation or regulations that could affect the Company by
increasing costs and decreasing cash flows. For example, additional legislation or regulations requiring more liberal refund and

56

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cancellation
policies for pre-need sales of products and services or prohibiting door-to-door or telephone solicitation of potential customer families could
adversely impact sales, resulting in lower revenue. Similarly, additional legislation or regulations increasing trust requirements could reduce the amount of cash available to the Company for other
purposes. Additional legislation or regulations prohibiting the common ownership of funeral homes and cemeteries in the same market could adversely impact both sales and costs and expenses in the
affected markets. If adopted in the states or provinces in which the Company operates, additional legislation or regulations such as these could have a material adverse effect on the Company's
financial condition, results of operations and cash flows.

Funeral and cemetery businesses have high fixed costs.

The
Company incurs many of the costs of operating and maintaining facilities, land and equipment regardless of the number of funeral services or internments performed. Because the
Company cannot necessarily decrease these costs when it experiences lower sales volumes, a decline in sales may cause margins, profits and cash flows to decline at a greater rate than a decline in
revenue.

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PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For information regarding the Company's legal proceedings, see Note 7 to the Company's interim consolidated financial statements included in
Part I of this Quarterly Report on Form 10-Q, which Note 7 is incorporated herein by reference.

58

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ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                                                                                      
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                                                                                                  
|2.1            |  | Fourth Amended Joint Plan of Reorganization of Loewen Group International, Inc., Its Parent Corporation and Certain of Their Debtor Subsidiaries (incorporated by reference to Exhibit 99.1 to the
Form 8-K of The Loewen Group Inc., SEC File No. 1-12163, filed September 10, 2001)                                                                                            
|2.2            |  | Modification to the Fourth Amended Joint Plan of Reorganization of Loewen Group International, Inc., Its Parent Corporation and Certain of Their Debtor Subsidiaries (incorporated by reference to Exhibit 2.2
to the Form 8-K of The Loewen Group Inc., SEC File No. 1-12163, filed December 11, 2001)                                                                          
|2.3            |  | Second Modification to the Fourth Amended Joint Plan of Reorganization of Loewen Group International, Inc., Its Parent Corporation and Certain of Their Debtor Subsidiaries (incorporated by reference to
Exhibit 2.3 to the Form 8-K of The Loewen Group Inc., SEC File No. 1-12163, filed December 11, 2001)                                                                   
|2.4            |  | Order Approving Modification of Fourth Amended Joint Plan of Reorganization of Loewen Group International, Inc., Its Parent Corporation and Certain of Their Debtor Subsidiaries and Compromise and Settlement of Claims
Filed by Thomas Hardy (incorporated by reference to Exhibit 2.4 to the Form 8-K of The Loewen Group Inc., SEC File No. 1-12163, filed December 11, 2001)
|2.5            |  | Findings of Fact, Conclusions of Law and Order Confirming Amended Joint Plan of Reorganization of Loewen Group International, Inc., Its Parent Corporation and Certain of Their Debtor Subsidiaries, As Modified, dated
December 5, 2001 (incorporated by reference to Exhibit 2.5 to the Form 8-K of The Loewen Group Inc., SEC File No. 1-12163, filed December 11, 2001)      
|2.6            |  | Final Order dated December 7, 2001 (incorporated by reference to Exhibit 2.6 to the Form 8-K of The Loewen Group Inc., SEC File No. 1-12163, filed December 11, 2001)                                                                                                                                                                                                            
|2.7            |  | Stock Purchase Agreement dated as of June 17, 2004, by and between Citizens Insurance Company of America and Mayflower National Life Insurance Company (incorporated by reference to Exhibit 2.7 to the Form 10-Q of
Alderwoods Group, Inc., SEC File No. 000-33277, filed July 26, 2004)                                                                                        
|3.1            |  | Certificate of Incorporation of Alderwoods Group, Inc. (incorporated by reference to Exhibit 3.1 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 28,
2002)                                                                                                                                                                                       
|3.2            |  | Bylaws of Alderwoods Group, Inc. (incorporated by reference to Exhibit 3.2 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 28, 2002)                                                                                                                                                                                                             
|4.1            |  | Form of Stock Certificate for Common Stock (incorporated by reference to Exhibit 4.1 to the Form 10-K of Loewen Group International, Inc., SEC File No. 000-33277, filed December 17,
2001)                                                                                                                                                                                      
|4.2            |  | Equity Registration Rights Agreement among Alderwoods Group, Inc. and certain holders of Common Stock. (incorporated by reference to Exhibit 4.2 to the Form 10-K of Alderwoods Group, Inc., SEC
File No. 000-33277, filed March 28, 2002)                                                                                                                                       
|4.3            |  | Warrant Agreement (incorporated by reference to Exhibit 4.3 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 28, 2002)                                                                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                                                                                                  

59

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|4.4   |  | Form of Warrant Certificate (incorporated by reference to Exhibit A to Exhibit 4.3 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed on March 28, 2002)                                                                                                                                                                                                                                                      
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.5   |  | Waiver of Registration Rights dated June 27, 2002, by and between Alderwoods Group, Inc., and Angelo, Gordon & Co. (incorporated by reference to Exhibit 4.6 to the Form 10-Q of Alderwoods Group, Inc., SEC
file No. 000-33277, filed July 24, 2002)                                                                                                                                                                                
|4.6   |  | Waiver of Registration Rights dated June 27, 2002, by and between Alderwoods Group, Inc. and Franklin Mutual Advisors, LLC (incorporated by reference to Exhibit 4.7 to the Form 10-Q of
Alderwoods Group, Inc., SEC File No. 000-33277, filed July 24, 2002)                                                                                                                                                                        
|4.7   |  | Waiver of Registration Rights dated June 27, 2002, by and between Alderwoods Group, Inc. and GSCP Recovery, Inc. and GSC Recovery II, L.P. (incorporated by reference to Exhibit 4.8 to the
Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed July 24, 2002)                                                                                                                                                        
|4.8   |  | Waiver of Registration Rights dated June 27, 2002, by and between Alderwoods Group, Inc. and Oaktree Capital Management, LLC (incorporated by reference to Exhibit 4.9 to the Form 10-Q of
Alderwoods Group, Inc., SEC File No. 000-33277, filed July 24, 2002)                                                                                                                                                                      
|4.9   |  | Indenture governing the 73/4% Senior Unsecured Notes due 2012**                                                                                                                                                                                                                                                                                                                                                                      
|4.10  |  | Indenture governing the 121/4% Senior Notes due 2009 (incorporated by reference to Exhibit 10.3 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed
March 28, 2002)                                                                                                                                                                                                                                            
|4.11  |  | First Supplemental Indenture dated as of August 4, 2004, to the Indenture governing the 121/4% Senior Notes due 2009**                                                                                                                                                                                                                                                                                                               
|10.1  |  | Subordinated Bridge Loan Agreement dated January 23, 2004, among Alderwoods Group, Inc., Banc of America Bridge LLC, as administrative agent and initial bridge lender and the other bridge lenders party
hereto and Bank of America Securities LLC, as sole lead arranger and sole book manager (incorporated by reference to Exhibit 10.1 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed
March 16, 2004)
|10.2  |  | Credit Agreement dated September 17, 2003, among Alderwoods Group, Inc., Bank of America, N.A., as administrative agent, swing line lender, L/C Issuer and the other lenders party hereto (incorporated by
reference to Exhibit 10.1 to the Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed November 12, 2003)                                                                                                    
|10.3  |  | Amendment No. 1 dated January 23, 2004, to the Credit Agreement among Alderwoods Group, Inc., Bank of America, N.A. as administrative agent, swing line lender, L/C Issuer and the other lenders party
hereto (incorporated by reference to Exhibit 10.3 to Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 16, 2004)                                                                                       
|10.4  |  | Amendment No. 2 dated August 19, 2004, to the Credit Agreement among Alderwoods Group, Inc., Bank of America, N.A. as administrative agent, owing line lender, L/C Issuer and other lenders party
hereto**                                                                                                                                                                                                                           
|*10.5 |  | Employment Agreement dated January 2, 2004, by and between Alderwoods Group, Inc. and Kenneth A. Sloan (incorporated by reference to Exhibit 10.6 to Form 10-K of Alderwoods Group, Inc.,
SEC File No. 000-33277, filed March 16, 2004)                                                                                                                                                                                              
|*10.6 |  | Employment Agreement dated January 23, 2003, by and between Alderwoods Group, Inc. and Ellen Neeman (incorporated by reference to Exhibit 10.7 to Form 10-K of Alderwoods Group, Inc.,
SEC File No. 000-33277, filed March 16, 2004)                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      

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|*10.7  |  | Employment Agreement dated January 23, 2003, by and between Alderwoods Group, Inc. and Cameron R.W. Duff (incorporated by reference to Exhibit 10.8 to Form 10-K of Alderwoods Group, Inc.,
SEC File No. 000-33277, filed March 16, 2004)                                                        
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.8  |  | Employment Agreement dated January 2, 2004, by and between Alderwoods Group, Inc. and Ross S. Caradonna (incorporated by reference to Exhibit 10.9 to Form 10-K of Alderwoods Group, Inc.,
SEC File No. 000-33277, filed March 16, 2004)                                                         
|*10.9  |  | Employment Agreement dated January 23, 2003, by and between Alderwoods Group, Inc. and Richard J. Scully (incorporated by reference to Exhibit 10.35 to Form 10-Q of Alderwoods Group, Inc., SEC
File No. 000-33277, filed May 1, 2003)                                                          
|*10.10 |  | Amended and Restated Employment Agreement dated May 1, 2003, by and between Alderwoods Group, Inc. and John S. Lacey (incorporated by reference to Exhibit 10.36 to Form 10-Q of Alderwoods Group,
 Inc., SEC File No. 000-33277, filed July 24, 2003)                                           
|*10.11 |  | Amendment No. 1 dated March 16, 2004, to the Amended and Restated Employment Agreement dated May 1, 2003, by and between Alderwoods Group, Inc. and John S. Lacey (incorporated by reference to
Exhibit 10.12 to Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed May 10, 2004)
|*10.12 |  | Amended and Restated Employment Agreement dated May 1, 2003, by and between Alderwoods Group, Inc. and Paul A. Houston (incorporated by reference to Exhibit 10.37 to Form 10-Q of Alderwoods Group,
 Inc., SEC File No. 000-33277, filed July 24, 2003)                                         
|*10.13 |  | Alderwoods Group, Inc. 2002 Equity Incentive Plan (incorporated by reference to Exhibit 10.27 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 28,
2002)                                                                                                          
|*10.14 |  | Director Compensation Plan (incorporated by reference to Exhibit 10.28 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 28, 2002)                                                                                                                                 
|*10.15 |  | Alderwoods Group Canada Inc. 2003-2005 Executive Strategic Incentive Plan (incorporated by reference to Exhibit 10.40 to Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed
July 24, 2003)                                                                                       
|31.1   |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**                                                                                                                                                                                             
|31.2   |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**                                                                                                                                                                                             
|32.1   |  | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**                                                                                                                                                                

---

*      Indicates
management contract or compensatory plan or arrangement.

**    Filed
herewith.

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(b)   Reports on Form 8-K

The following Current Reports on Form 8-K were furnished or filed by Alderwoods Group during the third quarter of fiscal 2004:

|Date Furnished or Filed                       |  | Item Number                                                                                                                           |  | Description                                                                                                                                                                                                                                                                                                                                                
|--------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                              |  |                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                            
|Filed July 23, 2004 (dated July 22, 2004)     |  | Item 5. Other Events and Required FD Disclosure and Item 7. Financial Statements, Pro Forma Financial Information and Exhibits        |  | Press release announcing Alderwoods Group, Inc.'s intention to offer up to $200 million of its senior notes in a transaction exempt from the registration requirements of the Securities Act of 1933.                                                                                                                                                      
|Filed July 23, 2004 (dated July 22, 2004)     |  | Item 5. Other Events and Required FD Disclosure and Item 7. Financial Statements, Pro Forma Financial Information and Exhibits        |  | Press release announcing that Alderwoods Group, Inc. has commenced a cash tender offer and consent solicitation for any and all of its outstanding 12.75% Senior notes due 2009.                                                                                                                                                                           
|Furnished July 26, 2004 (dated July 26, 2004) |  | Item 7. Financial Statements, Pro Forma Financial Information and Exhibits and Item 12. Results of Operations and Financial Condition |  | Press release announcing Alderwoods Group, Inc.'s second quarter unaudited financial results, for the 12 weeks ended June 19, 2004.                                                                                                                                                                                                                        
|Furnished July 28, 2004 (dated July 28, 2004) |  | Item 7. Financial Statements, Pro Forma Financial Information and Exhibits and Item 9. Regulation FD Disclosure                       |  | In connection with proposed financings, Alderwoods Group, Inc. first disclosed certain information regarding the Company on July 28, 2004.                                                                                                                                                                                                                 
|Furnished July 28, 2004 (dated July 28, 2004) |  | Item 5. Other Events and Required FD Disclosure and Item 7. Financial Statements, Pro Forma Financial Information and Exhibits        |  | Letter dated July 21, 2004, from Service Corporation International, Alderwoods Group, Inc., Stewart Enterprises, Inc., and Carriage Services, Inc. to Mr. Donald T. Nicolaisen, Chief Accountant of
the Securities and Exchange Commission, regarding the Company's conclusions on the application of FIN 46R to the Company's statutorily required trusts.
|Filed August 5, 2004 (dated August 4, 2004)   |  | Item 5. Other Events and Required FD Disclosure and Item 7. Financial Statements, Pro Forma Financial Information and Exhibits        |  | Press release announcing the receipt of tenders and related consents from holders of the Company's 12.25% Senior notes due 2009 sufficient to amend the indenture governing such notes.                                                                                                                                                                    
|                                              |  |                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                            

62

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|Filed August 5, 2004 (dated August 5, 2004)       |  | Item 5. Other Events and Required FD Disclosure and Item 7. Financial Statements, Pro Forma Financial Information and Exhibits |  | Press release announcing the consideration to be paid in connection with the Company's tender offer and consent solicitation for the Company's 12.25% Senior notes due 2009.                                                                                                  
|------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Filed August 19, 2004 (dated August 18, 2004)     |  | Item 5. Other Events and Required FD Disclosure and Item 7. Financial Statements, Pro Forma Financial Information and Exhibits |  | Press release announcing that Alderwoods Group, Inc. has extended the expiration date of its cash tender offer for any and all of its outstanding 12.75% Senior notes due 2009.                                                                                               
|Filed August 19, 2004 (dated August 19, 2004)     |  | Item 5. Other Events and Required FD Disclosure and Item 7. Financial Statements, Pro Forma Financial Information and Exhibits |  | Press release announcing that the Company has closed the offering of its $200 million 7.75% Senior notes due 2012 and that it has completed its debt refinancing.                                                                                                             
|Filed August 19, 2004 (dated August 19, 2004)     |  | Item 5. Other Events and Required FD Disclosure and Item 7. Financial Statements, Pro Forma Financial Information and Exhibits |  | Press release announcing the final results of the Company's cash tender offer and consent solicitation for any and all of its outstanding 12.75% Senior notes due 2009.                                                                                                       
|Furnished October 6, 2004 (dated October 1, 2004) |  | Item 2.01. Completion of Acquisition or Disposition of Assets and Item 9.01. Financial Statements and Exhibits                 |  | Press release announcing the conclusion of the sale by the Company's wholly owned subsidiary, Mayflower Life Insurance Company, of all of the outstanding capital stock of Security Plan Life Insurance Company, and
pro forma financial statements giving effect to the sale.

63

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|                         |  | ALDERWOODS GROUP, INC.
|------------------------ |  | ----------------------
|Dated: November 18, 2004 |  | By:                   

64

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INDEX TO EXHIBITS

|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                                                                                      
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                                                                                                  
|2.1            |  | Fourth Amended Joint Plan of Reorganization of Loewen Group International, Inc., Its Parent Corporation and Certain of Their Debtor Subsidiaries (incorporated by reference to Exhibit 99.1 to the
Form 8-K of The Loewen Group Inc., SEC File No. 1-12163, filed September 10, 2001)                                                                                            
|2.2            |  | Modification to the Fourth Amended Joint Plan of Reorganization of Loewen Group International, Inc., Its Parent Corporation and Certain of Their Debtor Subsidiaries (incorporated by reference to Exhibit 2.2
to the Form 8-K of The Loewen Group Inc., SEC File No. 1-12163, filed December 11, 2001)                                                                          
|2.3            |  | Second Modification to the Fourth Amended Joint Plan of Reorganization of Loewen Group International, Inc., Its Parent Corporation and Certain of Their Debtor Subsidiaries (incorporated by reference to
Exhibit 2.3 to the Form 8-K of The Loewen Group Inc., SEC File No. 1-12163, filed December 11, 2001)                                                                   
|2.4            |  | Order Approving Modification of Fourth Amended Joint Plan of Reorganization of Loewen Group International, Inc., Its Parent Corporation and Certain of Their Debtor Subsidiaries and Compromise and Settlement of Claims
Filed by Thomas Hardy (incorporated by reference to Exhibit 2.4 to the Form 8-K of The Loewen Group Inc., SEC File No. 1-12163, filed December 11, 2001)
|2.5            |  | Findings of Fact, Conclusions of Law and Order Confirming Amended Joint Plan of Reorganization of Loewen Group International, Inc., Its Parent Corporation and Certain of Their Debtor Subsidiaries, As Modified, dated
December 5, 2001 (incorporated by reference to Exhibit 2.5 to the Form 8-K of The Loewen Group Inc., SEC File No. 1-12163, filed December 11, 2001)      
|2.6            |  | Final Order dated December 7, 2001 (incorporated by reference to Exhibit 2.6 to the Form 8-K of The Loewen Group Inc., SEC File No. 1-12163, filed December 11, 2001)                                                                                                                                                                                                            
|2.7            |  | Stock Purchase Agreement dated as of June 17, 2004, by and between Citizens Insurance Company of America and Mayflower National Life Insurance Company (incorporated by reference to Exhibit 2.7 to the
Form 10-Q of Alderwoods Group, Inc. SEC File No. 000-33277, filed July 26, 2004)                                                                                         
|3.1            |  | Certificate of Incorporation of Alderwoods Group, Inc. (incorporated by reference to Exhibit 3.1 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 28,
2002)                                                                                                                                                                                       
|3.2            |  | Bylaws of Alderwoods Group, Inc. (incorporated by reference to Exhibit 3.2 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 28, 2002)                                                                                                                                                                                                             
|4.1            |  | Form of Stock Certificate for Common Stock (incorporated by reference to Exhibit 4.1 to the Form 10-K of Loewen Group International, Inc., SEC File No. 000-33277, filed December 17,
2001)                                                                                                                                                                                      
|4.2            |  | Equity Registration Rights Agreement among Alderwoods Group, Inc. and certain holders of Common Stock. (incorporated by reference to Exhibit 4.2 to the Form 10-K of Alderwoods Group, Inc., SEC
File No. 000-33277, filed March 28, 2002)                                                                                                                                       
|4.3            |  | Warrant Agreement (incorporated by reference to Exhibit 4.3 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 28, 2002)                                                                                                                                                                                                                            
|4.4            |  | Form of Warrant Certificate (incorporated by reference to Exhibit A to Exhibit 4.3 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed on March 28, 2002)                                                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                  

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|4.5  |  | Waiver of Registration Rights dated June 27, 2002, by and between Alderwoods Group, Inc., and Angelo, Gordon & Co. (incorporated by reference to Exhibit 4.6 to the Form 10-Q of Alderwoods Group, Inc.
SEC File No. 000-33277, filed July 24, 2002)                                                                                                                                                                                  
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.6  |  | Waiver of Registration Rights dated June 27, 2002, by and between Alderwoods Group, Inc. and Franklin Mutual Advisors, LLC (incorporated by reference to Exhibit 4.7 to the Form 10-Q of
Alderwoods Group, Inc., SEC File No. 000-33277, filed July 24, 2002)                                                                                                                                                                         
|4.7  |  | Waiver of Registration Rights dated June 27, 2002, by and between Alderwoods Group, Inc. and GSCP Recovery, Inc. and GSC Recovery II, L.P. (incorporated by reference to Exhibit 4.8 to the
Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed July 24, 2002)                                                                                                                                                         
|4.8  |  | Waiver of Registration Rights dated June 27, 2002, by and between Alderwoods Group, Inc. and Oaktree Capital Management, LLC (incorporated by reference to Exhibit 4.9 to the Form 10-Q of
Alderwoods Group, Inc., SEC File No. 000-33277, filed July 24, 2002)                                                                                                                                                                       
|4.9  |  | Indenture governing the 73/4% Senior Unsecured Notes due 2012                                                                                                                                                                                                                                                                                                                                                                         
|4.10 |  | Indenture governing the 121/4% Senior Notes due 2009 (incorporated by reference to Exhibit 10.3 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed
March 28, 2002)                                                                                                                                                                                                                                             
|4.11 |  | First Supplemental Indenture dated as of August 4, 2004, to the Indenture governing the 121/4% Senior Notes due 2009                                                                                                                                                                                                                                                                                                                  
|10.1 |  | Subordinated Bridge Loan Agreement dated January 23, 2004, among Alderwoods Group, Inc., Banc of America Bridge LLC, as administrative agent and initial bridge lender and the other bridge lenders party
hereto and Bank of America Securities LLC, as sole lead arranger and sole book manager (incorporated by reference to Exhibit 10.1 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 16,
 2004)
|10.2 |  | Credit Agreement dated September 17, 2003, among Alderwoods Group, Inc., Bank of America, N.A., as administrative agent, swing line lender, L/C Issuer and the other lenders party hereto (incorporated by
reference to Exhibit 10.1 to the Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed November 12, 2003)                                                                                                     
|10.3 |  | Amendment No. 1 dated January 23, 2004, to the Credit Agreement among Alderwoods Group, Inc., Bank of America, N.A. as administrative agent, swing line lender, L/C Issuer and the other lenders party
hereto (incorporated by reference to Exhibit 10.3 to Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 16, 2004)                                                                                        
|10.4 |  | Amendment No. 2 dated August 19, 2004, to the Credit Agreement among Alderwoods Group, Inc., Bank of America, N.A. as administrative agent, swing line lender, L/C Issuer and other lenders party
hereto                                                                                                                                                                                                                              
|10.5 |  | Employment Agreement dated January 2, 2004, by and between Alderwoods Group, Inc. and Kenneth A. Sloan (incorporated by reference to Exhibit 10.6 to the Form 10-K of Alderwoods Group, Inc., SEC
File No. 000-33277, filed March 16, 2004)                                                                                                                                                                                           
|10.6 |  | Employment Agreement dated January 23, 2003, by and between Alderwoods Group, Inc. and Ellen Neeman (incorporated by reference to Exhibit 10.7 to the Form 10-K of Alderwoods Group, Inc., SEC File
No. 000-33277, filed March 16, 2004)                                                                                                                                                                                              
|10.7 |  | Employment Agreement dated January 23, 2003, by and between Alderwoods Group, Inc. and Cameron R.W. Duff (incorporated by reference to Exhibit 10.8 to the Form 10-K of Alderwoods Group, Inc., SEC
File No. 000-33277, filed March 16, 2004)                                                                                                                                                                                         
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       

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|10.8  |  | Employment Agreement dated January 2, 2004, by and between Alderwoods Group, Inc. and Ross S. Caradonna (incorporated by reference to Exhibit 10.9 to the Form 10-K of Alderwoods Group, Inc., SEC
File No. 000-33277, filed March 16, 2004)                                                     
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.9  |  | Employment Agreement dated January 23, 2003, by and between Alderwoods Group, Inc. and Richard J. Scully (incorporated by reference to Exhibit 10.35 to Form 10-Q of Alderwoods Group, Inc., SEC
File No. 000-33277, filed May 1, 2003)                                                          
|10.10 |  | Amended and Restated Employment Agreement dated May 1, 2003, by and between Alderwoods Group, Inc. and John S. Lacey (incorporated by reference to Exhibit 10.36 to Form 10-Q of Alderwoods Group,
 Inc., SEC File No. 000-33277, filed July 24, 2003)                                           
|10.11 |  | Amendment No. 1 dated March 16, 2004, to the Amended and Restated Employment Agreement dated May 1, 2003, by and between Alderwoods Group, Inc. and John S. Lacey (incorporated by reference to
Exhibit 10.12 to Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed May 10, 2004)
|10.12 |  | Amended and Restated Employment Agreement dated May 1, 2003, by and between Alderwoods Group, Inc. and Paul A. Houston (incorporated by reference to Exhibit 10.37 to Form 10-Q of Alderwoods Group,
 Inc., SEC File No. 000-33277, filed July 24, 2003)                                         
|10.13 |  | Alderwoods Group, Inc. 2002 Equity Incentive Plan (incorporated by reference to Exhibit 10.27 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 28,
2002)                                                                                                          
|10.14 |  | Director Compensation Plan (incorporated by reference to Exhibit 10.28 to the Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 28, 2002)                                                                                                                                 
|10.15 |  | Alderwoods Group Canada Inc. 2003-2005 Executive Strategic Incentive Plan (incorporated by reference to Exhibit 10.40 to Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed
July 24, 2003)                                                                                       
|31.1  |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                               
|31.2  |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                               
|32.1  |  | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                  

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Exhibit 31.1

CERTIFICATION

I, Paul A. Houston, certify that:

|Dated: November 18, 2004 |  |  | /s/PAUL A. HOUSTONPaul A. Houston President, Chief Executive Officer and Director
(Principal Executive Officer)
|------------------------ |  |  | ---------------------------------------------------------------------------------------------------------------

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Exhibit 31.2

CERTIFICATION

I, Kenneth A. Sloan, certify that:

|Dated: November 18, 2004 |  |  | /s/KENNETH A. SLOANKenneth A. Sloan Executive Vice President, Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
|------------------------ |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

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Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,  AS ADOPTED PURSUANT TO SECTION 906 OF  THE SARBANES-OXLEY ACT OF 2002

In
connection with the Quarterly Report of Alderwoods Group, Inc. (the "Company") on Form 10-Q for the sixteen weeks ended October 9, 2004, as
filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge:

Dated:
November 18, 2004.

| |  | /s/PAUL A. HOUSTONPaul A. Houston
President, Chief Executive Officer and Director
(Principal Executive Officer)    
| |  | -------------------------------------------------------------------------------------------------------------------
| |  | /s/KENNETH A. SLOANKenneth A. Sloan
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)

The
foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.

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