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 8, 2005
|- | ----------------------------------------------------------------------------------------------------------------------------------------------
|  | 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 ý    No o

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No ý

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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 ý    No o

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APPLICABLE ONLY TO CORPORATE ISSUERS

At
November 5, 2005, there were 40,457,125 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 8, 2005 and January 1, 2005                                   |  | 1   
|           |  |                                             |  | CONSOLIDATED STATEMENTS OF OPERATIONS
for the 16 and 40 Weeks Ended October 8, 2005 and October 9, 2004 |  | 2   
|           |  |                                             |  | CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the 40 Weeks Ended October 8, 2005                  |  | 3   
|           |  |                                             |  | CONSOLIDATED STATEMENTS OF CASH FLOWS
for the 16 and 40 Weeks Ended October 8, 2005 and October 9, 2004 |  | 4   
|           |  |                                             |  | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS                                                  |  | 5   
|           |  | Item 2.                                     |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                   |  | 33  
|           |  | Item 3.                                     |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                              |  | 52  
|           |  | Item 4.                                     |  | CONTROLS AND PROCEDURES                                                                                 |  | 52  
|           |  | FORWARD-LOOKING STATEMENTS AND RISK FACTORS |  | 53                                                                                                     
|Part II.   |  | OTHER INFORMATION                          
|           |  | Item 1.                                     |  | LEGAL PROCEEDINGS                                                                                       |  | 60  
|           |  | Item 5.                                     |  | OTHER INFORMATION                                                                                       |  | 60  
|           |  | Item 6.                                     |  | EXHIBITS                                                                                                |  | 60  
|SIGNATURES |  | 65                                         

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 8, 2005 |           | January 1, 2005 |  
|------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | --------------- | --------- | --------------- | -
|
|ASSETS                                                  |                                                                                                                                |                 |           |                 |  
|Current assets                                          |                                                                                                                                |                 |           |                 |  
|                                                        | Cash and cash equivalents                                                                                                      |                 | $         | 6,333           |  
|                                                        | Receivables, net of allowances                                                                                                 |                 |           | 59,318          |  
|                                                        | Inventories                                                                                                                    |                 |           | 15,972          |  
|                                                        | Other                                                                                                                          |                 |           | 10,530          |  
|                                                        | Assets held for sale                                                                                                           |                 |           |                |  
|                                                        |                                                                                                                                |                 |           |                 |  
|                                                        |                                                                                                                                |                 | 92,153    |                 |  
|Pre-need funeral receivables and trust investments      |                                                                                                                                |                 | 334,504   |                 |  
|Pre-need cemetery receivables and trust investments     |                                                                                                                                |                 | 304,202   |                 |  
|Cemetery property                                       |                                                                                                                                |                 | 115,732   |                 |  
|Property and equipment                                  |                                                                                                                                |                 | 541,047   |                 |  
|Insurance invested assets                               |                                                                                                                                |                 | 284,044   |                 |  
|Deferred income tax assets                              |                                                                                                                                |                 | 11,086    |                 |  
|Goodwill                                                |                                                                                                                                |                 | 321,101   |                 |  
|Cemetery perpetual care trust investments               |                                                                                                                                |                 | 245,327   |                 |  
|Other assets                                            |                                                                                                                                |                 | 42,372    |                 |  
|                                                        |                                                                                                                                |                 |           |                 |  
|                                                        |                                                                                                                                | $               | 2,291,568 |                 | $
|                                                        |                                                                                                                                |                 |           |                 |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                    |                                                                                                                                |                 |           |                 |  
|Current liabilities                                     |                                                                                                                                |                 |           |                 |  
|                                                        | Accounts payable and accrued liabilities                                                                                       |                 | $         | 120,057         |  
|                                                        | Current maturities of long-term debt                                                                                           |                 |           | 2,490           |  
|                                                        | Liabilities associated with assets held for sale                                                                               |                 |           |                |  
|                                                        |                                                                                                                                |                 |           |                 |  
|                                                        |                                                                                                                                |                 | 122,547   |                 |  
|Long-term debt                                          |                                                                                                                                |                 | 384,296   |                 |  
|Deferred pre-need funeral and cemetery contract revenue |                                                                                                                                |                 | 97,494    |                 |  
|Non-controlling interest in funeral and cemetery trusts |                                                                                                                                |                 | 544,650   |                 |  
|Insurance policy liabilities                            |                                                                                                                                |                 | 255,198   |                 |  
|Deferred income tax liabilities                         |                                                                                                                                |                 | 31,830    |                 |  
|Other liabilities                                       |                                                                                                                                |                 | 21,143    |                 |  
|                                                        |                                                                                                                                |                 |           |                 |  
|                                                        |                                                                                                                                |                 | 1,457,158 |                 |  
|                                                        |                                                                                                                                |                 |           |                 |  
|Non-controlling interest in perpetual care trusts       |                                                                                                                                |                 | 245,569   |                 |  
|Stockholders' equity                                    |                                                                                                                                |                 |           |                 |  
|                                                        | Common stock, $0.01 par value, 100,000,000 shares authorized, 40,456,409 issued and outstanding (January 1, 2005  40,017,454) |                 |           | 405             |  
|                                                        | Capital in excess of par value                                                                                                 |                 |           | 743,131         |  
|                                                        | Accumulated deficit                                                                                                            |                 |           | (181,469        | )
|                                                        | Accumulated other comprehensive income                                                                                         |                 |           | 26,774          |  
|                                                        |                                                                                                                                |                 |           |                 |  
|                                                        |                                                                                                                                |                 | 588,841   |                 |  
|                                                        |                                                                                                                                |                 |           |                 |  
|                                                        |                                                                                                                                | $               | 2,291,568 |                 | $
|                                                        |                                                                                                                                |                 |           |                 |  

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                                             |                | $       | 133,158        |  
|                                                                  | Cemetery                                            |                |         | 52,519         |  
|                                                                  | Insurance                                           |                |         | 29,105         |  
|                                                                  |                                                     |                |         |                |  
|                                                                  |                                                     |                | 214,782 |                |  
|                                                                  |                                                     |                |         |                |  
|Costs and expenses                                                |                                                     |                |         |                |  
|                                                                  | Funeral                                             |                |         | 116,927        |  
|                                                                  | Cemetery                                            |                |         | 47,202         |  
|                                                                  | Insurance                                           |                |         | 27,752         |  
|                                                                  |                                                     |                |         |                |  
|                                                                  |                                                     |                | 191,881 |                |  
|                                                                  |                                                     |                |         |                |  
|                                                                  |                                                     |                | 22,901  |                |  
|General and administrative expenses                               |                                                     |                | 19,192  |                |  
|Provision for asset impairment                                    |                                                     |                | 254     |                |  
|                                                                  |                                                     |                |         |                |  
|                                                                  |                                                     |                | 19,446  |                |  
|                                                                  |                                                     |                |         |                |  
|Income from operations                                            |                                                     |                | 3,455   |                |  
|Interest on long-term debt (Note 3)                               |                                                     |                | 8,967   |                |  
|Other expense (income), net                                       |                                                     |                | (68     | )              |  
|                                                                  |                                                     |                |         |                |  
|Income (loss) before income taxes                                 |                                                     |                | (5,444  | )              |  
|Income tax expense (recovery)                                     |                                                     |                | (12,349 | )              |  
|                                                                  |                                                     |                |         |                |  
|Net income (loss) from continuing operations                      |                                                     |                | 6,905   |                |  
|Discontinued operations (Note 10)                                 |                                                     |                |         |                |  
|                                                                  | Income (loss) from discontinued operations          |                |         |               |  
|                                                                  | Income taxes                                        |                |         |               |  
|                                                                  |                                                     |                |         |                |  
|Net income (loss) from discontinued operations                    |                                                     |                |        |                |  
|                                                                  |                                                     |                |         |                |  
|Net income (loss)                                                 |                                                     | $              | 6,905   |                | $
|                                                                  |                                                     |                |         |                |  
|Basic earnings per Common share:                                  |                                                     |                |         |                |  
|                                                                  | Net income (loss) from continuing operations        |                | $       | 0.17           |  
|                                                                  | Net income (loss) from discontinued operations      |                |         |               |  
|                                                                  |                                                     |                |         |                |  
|                                                                  | Net income (loss)                                   |                | $       | 0.17           |  
|                                                                  |                                                     |                |         |                |  
|Diluted earnings per Common share:                                |                                                     |                |         |                |  
|                                                                  | Net income (loss) from continuing operations        |                | $       | 0.16           |  
|                                                                  | Net income (loss) loss from discontinued operations |                |         |               |  
|                                                                  |                                                     |                |         |                |  
|                                                                  | Net income (loss)                                   |                | $       | 0.16           |  
|                                                                  |                                                     |                |         |                |  
|Basic weighted average number of shares outstanding (thousands)   |                                                     |                | 40,456  |                |  
|                                                                  |                                                     |                |         |                |  
|Diluted weighted average number of shares outstanding (thousands) |                                                     |                | 42,051  |                |  
|                                                                  |                                                     |                |         |                |  

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 1, 2005 |                                              | 40,017,454                                                                |                                                                                                                                        | $                      | 400 |                                | $ | 740,210             |       | $                                      | (213,588 | )      | $
|Comprehensive income:      |                                              |                                                                           |                                                                                                                                        |                        |     |                                |   |                     |       |                                        |          |        |  
|                           | Net income                                   |                                                                           |                                                                                                                                        |                        |     |                                |   |                     |       |                                        |          | 32,119 |  
|                           | Other comprehensive income (loss):           |                                                                           |                                                                                                                                        |                        |     |                                |   |                     |       |                                        |          |        |  
|                           |                                              | Foreign currency translation adjustment, net of income taxes of $nil      |                                                                                                                                        |                        |     |                                |   |                     |       |                                        |          |        |  
|                           |                                              | Unrealized loss on insurance invested assets, net of income taxes of $683 |                                                                                                                                        |                        |     |                                |   |                     |       |                                        |          |        |  
|                           |                                              |                                                                           | Less: reclassification adjustments for realized gains on insurance invested assets included in net income, net of income taxes of $153 |                        |     |                                |   |                     |       |                                        |          |        |  
|                           |                                              | Unrealized loss on derivatives, net of income taxes of $nil               |                                                                                                                                        |                        |     |                                |   |                     |       |                                        |          |        |  
|                           |                                              |                                                                           | Less: reclassification adjustments for realized gains on derivatives included in net income, net of income taxes of $nil               |                        |     |                                |   |                     |       |                                        |          |        |  
|                           |                                              |                                                                           |                                                                                                                                        |                        |     |                                |   |                     |       |                                        |          |        |  
|Comprehensive income       |                                              |                                                                           |                                                                                                                                        |                        |     |                                |   |                     |       |                                        |          |        |  
|Stock based compensation   |                                              |                                                                           |                                                                                                                                        |                        |     |                                |   | 43                  |       |                                        |          |        |  
|Common stock issued:       |                                              |                                                                           |                                                                                                                                        |                        |     |                                |   |                     |       |                                        |          |        |  
|                           | Stock issued as compensation in lieu of cash |                                                                           | 7,705                                                                                                                                  |                        |     |                               |   |                     | 106   |                                        |          |        |  
|                           | Stock issued under equity incentive plan     |                                                                           | 431,250                                                                                                                                |                        |     | 5                              |   |                     | 2,772 |                                        |          |        |  
|                           |                                              |                                                                           |                                                                                                                                        |                        |     |                                |   |                     |       |                                        |          |        |  
|Balance at October 8, 2005 |                                              | 40,456,409                                                                |                                                                                                                                        | $                      | 405 |                                | $ | 743,131             |       | $                                      | (181,469 | )      | $
|                           |                                              |                                                                           |                                                                                                                                        |                        |     |                                |   |                     |       |                                        |          |        |  

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)                                                   |                                     | $       | 6,905          |       
|                                                       | Income (loss) from discontinued operations, net of tax              |                                     |         |               |       
|                                                       | Items not affecting cash                                            |                                     |         |                |       
|                                                       |                                                                     | Depreciation and amortization       |         |                | 13,778
|                                                       |                                                                     | Amortization of debt issue costs    |         |                | 915   
|                                                       |                                                                     | Insurance policy benefit reserves   |         |                | 15,957
|                                                       |                                                                     | Provision for asset impairment      |         |                | 254   
|                                                       |                                                                     | Gain on disposal of business assets |         |                | (165  
|                                                       |                                                                     | Deferred income taxes               |         |                | (1,699
|                                                       | Premium on long-term debt repurchase                                |                                     |         |               |       
|                                                       | Other, including net changes in other non-cash balances             |                                     |         | 9,903          |       
|                                                       |                                                                     |                                     |         |                |       
|Net cash provided by continuing operations             |                                                                     |                                     | 45,848  |                |       
|Net cash provided by (used in) discontinued operations |                                                                     |                                     |        |                |       
|                                                       |                                                                     |                                     |         |                |       
|                                                       |                                                                     |                                     | 45,848  |                |       
|                                                       |                                                                     |                                     |         |                |       
|Investing                                              |                                                                     |                                     |         |                |       
|                                                       | Proceeds on disposition of business assets                          |                                     |         | 3,757          |       
|                                                       | Purchase of property and equipment                                  |                                     |         | (15,507        | )     
|                                                       | Purchase of insurance invested assets                               |                                     |         | (24,794        | )     
|                                                       | Proceeds on disposition and maturities of insurance invested assets |                                     |         | 6,702          |       
|                                                       |                                                                     |                                     |         |                |       
|                                                       | Net cash used in continuing operations                              |                                     |         | (29,842        | )     
|                                                       | Net cash provided by discontinued operations                        |                                     |         |               |       
|                                                       |                                                                     |                                     |         |                |       
|                                                       |                                                                     |                                     | (29,842 | )              |       
|                                                       |                                                                     |                                     |         |                |       
|Financing                                              |                                                                     |                                     |         |                |       
|                                                       | Increase in long-term debt                                          |                                     |         | 47             |       
|                                                       | Repayment of long-term debt                                         |                                     |         | (23,111        | )     
|                                                       | Issuance of Common stock                                            |                                     |         | 1,401          |       
|                                                       |                                                                     |                                     |         |                |       
|                                                       | Net cash used in continuing operations                              |                                     |         | (21,663        | )     
|                                                       | Net cash used in discontinued operations                            |                                     |         |               |       
|                                                       |                                                                     |                                     |         |                |       
|                                                       |                                                                     |                                     | (21,663 | )              |       
|                                                       |                                                                     |                                     |         |                |       
|Decrease in cash and cash equivalents                  |                                                                     |                                     | (5,657  | )              |       
|Cash and cash equivalents, beginning of period         |                                                                     |                                     | 11,990  |                |       
|                                                       |                                                                     |                                     |         |                |       
|Cash and cash equivalents, end of period               |                                                                     | $                                   | 6,333   |                | $     
|                                                       |                                                                     |                                     |         |                |       

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 of October 8, 2005, the Company operated
613 funeral homes, 72 cemeteries and 60 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, mausoleum crypts and other merchandise), 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 Alderwoods Group, its subsidiaries 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, and several pooled investment funds created for such trusts in which the Company has a variable interest and is the
primary beneficiary.

All
significant inter-entity 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 8, 2005, and for the 16 and 40 weeks ended October 8, 2005, and October 9, 2004. 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 52 weeks ended
January 1, 2005, 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 and
expenses during the reporting period. As a result, actual amounts could significantly differ from those estimates.

Stock based compensation plans

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS No. 123") and 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 (i) the current market price of the underlying stock exceeds the exercise price, and
(ii) the number of shares upon exercise can be determined. Any compensation expense recorded is charged against operations over the service period, which generally matches the option vesting
period.

For
option grants under the 2002 Equity Plan, no stock-based compensation expense was recorded in the 40 weeks ended October 8, 2005 and October 9, 2004, as all
options granted under this plan had an exercise price equal to or greater than the market value of the underlying common stock on the grant date.

In
April of 2005, the Company's shareholders approved the 2005 Equity Incentive Plan that permits the grant of options, with or without tandem appreciation rights, and restricted Common
stock units. A total of 1,800,000 shares are reserved for grant under the plan.

For
the 16 weeks ended October 8, 2005, the Company granted 1,011,000 (of which 6,500 options have been cancelled as of October 8, 2005) options with tandem
appreciation rights. The tandem appreciation rights entitle the employee to exchange the employee's option right for a number of shares equal in value to the appreciated value of the options. The
exchange of the option for the tandem appreciation right requires an immediate exercise of the tandem appreciation right and will cause the immediate termination of the related option right. An
exchange of an option right for a tandem appreciation right may only be made when the relevant option is otherwise exercisable. In applying the intrinsic value-based method, the Company recorded
stock-based employee compensation cost of $43,000 because, although the options granted had an exercise price equal to or greater than the market value of the underlying Common stock on the grant
date, the number of shares to be issued upon exercise of the option is not determinable as it may be dependent upon the exchange of the option for a tandem appreciation right.

6

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The
following table illustrates the effect on net income and net income 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                                                                       |                      | $              | 6,905 |                | $
|Total stock-based employee compensation expense determined under fair value-based method, net of tax |                      |                | (873  | )              |  
|                                                                                                     |                      |                |       |                |  
|Pro forma net income (loss)                                                                          |                      | $              | 6,032 |                | $
|                                                                                                     |                      |                |       |                |  
|Net income (loss) per Common share:                                                                  |                      |                |       |                |  
|                                                                                                     | Basic, as reported   |                | $     | 0.17           |  
|                                                                                                     | Basic, pro forma     |                |       | 0.15           |  
|                                                                                                     | Diluted, as reported |                |       | 0.16           |  
|                                                                                                     | Diluted, pro forma   |                |       | 0.14           |  

For
the 16 weeks ended October 8, 2005, the Company granted 242,200 (of which 5,400 shares have been cancelled as of October 8, 2005) shares of restricted
Common stock to employees. The restricted Common stock does not vest for the first three years after grant. Thereafter, the restricted Common stock vests in years 3 to 10 based
upon the share price of the Company's common stock. After three years of service, the restricted Common stock units vest 70% at a $17 share price, and an additional 15% at a $17.50 share price
and the final 15% at an $18 share price. Once granted, the restricted Common stock is included in total shares outstanding but is not included in the weighted average number of common shares
outstanding in each period used to calculate basic earnings per share until the shares vest.

The
2005-2007 Executive Strategic Incentive Plan, approved by the Board of Directors on July 21, 2005, is a performance based compensation plan designed to motivate
and reward the senior management team for achieving shareholder value objectives. The plan provides cash awards to the senior executives based on the Company's stock reaching a threshold target price
of $17.00 in December 2007. The amount of the cash award increases the more the stock price exceeds the $17.00 threshold target price. Achieving a stock price of $17.00 results in an aggregate
cash award of $5.6 million. Achieving a stock price of $18.00 results in an aggregate cash award of $8.0 million. The aggregate cash award increases by $1.6 million for every
$1.00 in stock appreciation beyond $18.00.

No
compensation expense was recorded in the 16 weeks ended October 8, 2005 for the restricted Common stock and Executive Strategic Incentive Plan. Beginning in the first
fiscal quarter of 2006, the Company will adopt Statement of Financial Accounting Standards No. 123R ("FAS 123R") which will be
applicable to the restricted Common stock and Executive Strategic Incentive Plan. The Company is in the process of evaluating the expected impact FAS 123R will have on stock based compensation.

Employee Stock Purchase Plan

In April 2005, the Company's shareholders approved the adoption of a compensatory employee stock purchase plan to provide for the purchase on the open market, to
a maximum of 1,100,000 shares of Common stock of the Company. Eligible employees may authorize payroll deductions of up to 5% of their

7

---



regular
base salary to purchase shares of Common stock of the Company on the open market on a monthly basis. The Company will make a cash contribution to purchase shares of common stock of the Company
as additional compensation to each participant equal to 50% of the employee's contribution for that month. For the 16 weeks ended October 8, 2005, a total of 16,620 shares were purchased
and distributed to employees at an average price of $16.60 per share and compensation expense of $90,000 was incurred.

Comparability

Certain comparative amounts have been reclassified to conform to the presentation adopted in the current year, including, among other things, the reclassification
of assets held for sale as discontinued operations.

Recent accounting standards

In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123R, "Share-Based
Payment" ("FAS No. 123R"). FAS No. 123R requires companies to recognize compensation expense in an amount equal to the fair value of the share-based payment (including
share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans) issued to employees. FAS No. 123R applies to all
transactions involving issuance of equity by a company in exchange for goods and services, including employee services. FAS No. 123R is effective in the first interim or annual reporting
period of the first fiscal year beginning on or after June 15, 2005. The Company will adopt FAS No. 123R in the first fiscal quarter of its 2006 fiscal year and expects to use the
modified prospective application method, which results in no restatement of the Company's previously issued annual consolidated financial statements. The Company
is in the process of evaluating the expected effect of FAS No. 123R using the modified prospective application method on the consolidated financial position, results of operations and
cash flows of the Company.

In
November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, "Inventory Costs  an amendment of ARB
No. 43, Chapter 4" ("FAS No. 151"). FAS No. 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials
(spoilage) should be recognized as current-period charges and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities.
FAS No. 151 is effective for fiscal years beginning after June 15, 2005. The Company does not expect the adoption of FAS No. 151 to have a material impact on
its consolidated financial position, results of operations or cash flows.

In
December 2004, the FASB issued Statement of Financial Accounting Standards No. 153, "Exchange of Non-monetary
Assets  an amendment of APB Opinion No. 29, Accounting for Non-monetary Transactions" ("FAS No. 153"). The amendments made by
FAS No. 153 are based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments
eliminate the narrow exception for non-monetary exchanges of similar productive assets and replace it with a broader exception for exchanges of non-monetary assets that do not
have commercial substance. FAS No. 153 is to be applied prospectively and is effective for non-monetary asset exchanges occurring in fiscal periods beginning after
June 15, 2005. The Company elected to adopt FAS No. 153 on January 1, 2005. The adoption of FAS No. 153 had no material impact on the Company's consolidated
financial position, results of operations or cash flows.

8

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NOTE 3.    LONG-TERM DEBT

Long-term debt consists of the following:

|                                                                                                             |  | October 8, 2005 |         | January 1, 2005
|------------------------------------------------------------------------------------------------------------ |  | --------------- | ------- | ---------------
|Revolving credit facility (a)                                                                                |  | $               |        |                
|Senior secured term loan B due in 2009 (a)(b)                                                                |  |                 | 178,523 |                
|7.75% Senior unsecured notes due in 2012 (c)                                                                 |  |                 | 200,000 |                
|12.25% Senior unsecured notes due in 2009 (d)                                                                |  |                 |        |                
|Promissory notes and capitalized obligations, certain of which are secured by assets of certain subsidiaries |  |                 | 8,263   |                
|                                                                                                             |  |                 |         |                
|                                                                                                             |  |                 | 386,786 |                
|Less, current maturities of long-term debt                                                                   |  |                 | 2,490   |                
|                                                                                                             |  |                 |         |                
|                                                                                                             |  | $               | 384,296 |                
|                                                                                                             |  |                 |         |                

---



9

---





Year

Percentage2008

103.8752009

101.9382010 and thereafter

100.000




10

---





The
Credit Agreement and the Eight-Year Senior 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, Alderwoods Group is required to make an offer to purchase the then-outstanding Eight-Year Senior Unsecured Notes at a
price equal to 101% of their stated principal amount, plus accrued and unpaid interest to the applicable repurchase date and Liquidated Damages, if any.

The
Credit Agreement and the indenture governing the Eight-Year Senior 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 $40,000,000 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 and the indenture governing the Eight-Year Senior Unsecured Notes restrict, and under specified circumstances prohibit, the payment of
dividends by the Company.

In
connection with the issuance of the Eight-Year Senior Unsecured Notes, the Company entered into a registration rights agreement, pursuant to which the Company was
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 SEC. On May 12, 2005, the Company
filed the exchange offer registration statement with the SEC. The registration statement was subsequently declared effective by the SEC on June 7, 2005. On June 8, 2005, the Company
commenced an exchange offer (the "Exchange Offer") pursuant to which holders of the Eight-Year Senior Unsecured Notes were given the opportunity to exchange their outstanding notes
for new notes with substantially identical terms covered by the exchange offer registration statement. The Company consummated the Exchange Offer on July 18, 2005.

11

---



NOTE 4.    LEGAL CONTINGENCIES

Funeral Consumers Alliance, Inc. et al v. Alderwoods Group, Inc. et al;was recently transferred
to the United States District Court for the Southern District of Texas, Case No. CV3394. To date, six separate class action lawsuits, including,Francis H. Rocha v.
Alderwoods Group, Inc. et al, Marcia Berger v. Alderwoods Group, Inc. et al, Maria Magsarili and Tony Magsarili v. Alderwoods Group, Inc. et al, Caren Speizer
v. Alderwoods Group, Inc. et al, Frank Moroz v. Alderwoods Group, Inc. et al, and Pioneer Valley Casket Co. v. Alderwoods Group, Inc.et al ("Funeral Consumer Cases") have been consolidated into this case. It is anticipated thatRalph Fancher et al v. Alderwoods Group, Inc.
et al(described in greater detail below) will be consolidated if it is re-filed in the United States District Court for the Southern District of
Texas.

The
Funeral Consumer Cases are purported class actions on behalf of casket consumers throughout the United States. The suits name as defendants the Company and four other public
companies involved in the funeral or casket industry. The plaintiffs allege that defendants violated federal and state antitrust laws by engaging in anticompetitive practices with respect to the sale
and pricing of caskets. The consolidated antitrust lawsuits seek injunctions, unspecified amounts of monetary damages, and treble damages. Since the litigation is in its preliminary stages, the
Company cannot quantify its ultimate liability, if any, for the payment of damages. The Company believes the plaintiff's claims are without merit and intends to vigorously defend itself in these
actions.

Ralph Fancher et al v. Alderwoods Group, Inc. et al;In the United States District Court, Eastern
District of Tennessee at Greenville; Case No. 2:05CV145. This lawsuit, filed and served on the Company in May 2005, was voluntarily dismissed by plaintiffs and then re-filed
in and again dismissed
from the United States District Court for the Northern District of California. It is anticipated that plaintiffs will re-file a second time in the United States
District Court for the Southern District of Texas, but they have yet to do so. This lawsuit makes claims similar to those made in the Funeral Consumer Cases, again purporting to allege a national
class action and seeking essentially duplicative relief. The Company believes the plaintiffs' claims are without merit and intends to vigorously defend itself in this action.

Richard Sanchez et al v. Alderwoods Group, Inc.et al; In the Superior Court of the State of California,
for the County of Los Angeles, Central District; Case No.BC328962. This lawsuit, filed in February 2005 and served on the Company in April 2005, seeks to certify a nationwide class on
behalf of all plaintiffs who purchased funeral goods and services from the Company. Plaintiffs allege that federal and California regulations and statutes required the Company to disclose its markups
on all items obtained from third parties in connection with funeral service contracts and that the failure to make certain disclosures of markups resulted in breach of contract and other legal claims.
Plaintiffs seek to recover an unspecified amount of monetary damages, attorneys' fees, costs and unspecified "injunctive and declaratory relief." The Company believes the plaintiffs' claims are
without merit and intends to vigorously defend itself in this action.

On
July 7, 2005, the FTC issued a letter advisory opinion regarding the lawful construction of the term "cash advance item" as used in the Funeral Rule. The FTC opined with regard
to a similar lawsuit in Texas state court: "The Commission believes that the court is incorrect in ruling that all goods or services purchased from a third-party vendor are cash advance items. This
interpretation sweeps far too broadly, potentially bringing within its scope every component good or service that comprises a funeral. This was not and is not the Commission's intention in the 'cash
advance' provisions of the Rule. In our opinion, the

12

---



term
'cash advance item' in the Rule applies only to those items that the funeral provider represents expressly to be 'cash advance items' or represents by implication to be procured on behalf of a
particular customer and provided to that customer at the same price the funeral provider paid for them." The FTC sets forth its analysis in the remainder of the letter.

We
have learned that a number of plaintiffs to these actions have filed a petition against the Federal Trade Commission in the District of Columbia Circuit Court asking the Court to
overturn the FTC's July 7, 2005 Advisory Opinion. Based on that filing, the Court in Sanchez has agreed to stay all California proceedings other than plaintiffs' filing an amended complaint.
Therefore, no discovery will commence until the Court so instructs or until the District of Columbia Circuit Court rules on the FTC's Advisory Opinion.

In
addition to the funeral and casket antitrust lawsuits, the Company has received a Civil Investigative Demand, dated August 4, 2005, from the Attorney General of Maryland on
behalf of itself and other undisclosed state attorneys general, who have commenced an investigation of alleged anticompetitive
practices in the funeral industry. The Company has also received similar Civil Investigative Demands from the Attorneys General of Florida and Connecticut.

The
ultimate outcome of the litigation matters described in this note four cannot be determined at this time. An adverse decision in one or more of such matters could have a material
adverse effect on the Company, its financial condition, results of operation and cash flows. The Company intends to aggressively defend the lawsuits.

In
addition, the Company is party to other legal proceedings in the ordinary course of business, and does not expect the outcome of these proceedings, individually or in the aggregate,
to have a material adverse effect on its financial position, results of operations or liquidity.

NOTE 5.    SUPPLEMENTARY STATEMENTS OF CASH FLOWS DISCLOSURE

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          |  | $              | 5,354
|                               |                                | Other          |  |                | 7,768
|                               | Inventories                    |                |  | 1,023          |      
|                               | Prepaid expenses               |                |  | (681           | )    
|                               | Cemetery property              |                |  | (2,960         | )    
|                               | Other assets                   |                |  | (2,552         | )    
|                               |                                |                |  |                |      

13

---



|Increase (decrease) in liabilities:          |                                                                            |                                                                                                                             |       |        |         |       |        |        |       |         |         |         |        
|-------------------------------------------- | -------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ----- | ------ | ------- | ----- | ------ | ------ | ----- | ------- | ------- | ------- | -------
|                                             | Accounts payable and accrued liabilities                                   |                                                                                                                             |       | (9,064 | )       |       | (4,832 | )      |       | (19,566 | )       |         | (24,273
|                                             | Net effect of pre-need receivables and deferred revenue                    |                                                                                                                             |       | 9,377  |         |       | 18,522 |        |       | 12,310  |         |         | 31,843 
|                                             | Other liabilities                                                          |                                                                                                                             |       | (17    | )       |       | (610   | )      |       | (2,909  | )       |         | 4,306  
|                                             | Insurance policy liabilities                                               |                                                                                                                             |       | 1,077  |         |       | 1,134  |        |       | 1,844   |         |         | 1,605  
|                                             | Other changes in non-cash balances                                         |                                                                                                                             |       | 578    |         |       | 3,256  |        |       | (2,945  | )       |         | (4,990 
|                                             |                                                                            |                                                                                                                             |       |        |         |       |        |        |      
|                                             |                                                                            | $                                                                                                                           | 9,903 |        | $       | 4,067 |        | $      | 3,054 |         | $       | (14,166 | )      
|                                             |                                                                            |                                                                                                                             |       |        |         |       |        |        |      
|Supplemental information:                    |                                                                            |                                                                                                                             |       |        |         |       |        |        |       |         |         |         |        
|                                             | Interest paid                                                              |                                                                                                                             | $     | 11,567 |         | $     | 21,050 |        | $     | 26,431  |         | $       | 43,499 
|                                             | Income taxes paid, net of refunds                                          |                                                                                                                             |       | 806    |         |       | 883    |        |       | 2,937   |         |         | 3,702  
|                                             | Bad debt expense                                                           |                                                                                                                             |       | 1,138  |         |       | 955    |        |       | 2,304   |         |         | 2,792  
|Non-cash investing and financing activities: |                                                                            |                                                                                                                             |       |        |         |       |        |        |       |         |         |         |        
|                                             | Stock issued in connection with the settlement of certain unsecured claims |                                                                                                                             | $     |       |         | $     |       |        | $     |        |         | $       | 31     
|                                             | Stock issued as compensation in lieu of cash                               |                                                                                                                             |       | 42     |         |       | 44     |        |       | 106     |         |         | 128    
|                                             | Stock based compensation                                                   |                                                                                                                             |       | 43     |         |       |       |        |       | 43      |         |         |       
|                                             | Restricted cash investing and financing activities:                        |                                                                                                                             |       |        |         |       |        |        |       |         |         |         |        
|                                             |                                                                            | Purchases of funeral, cemetery, and perpetual care trust investments                                                        |       |        | 145,441 |       |        | 28,980 |       |         | 501,874 |         |        
|                                             |                                                                            | Proceeds on disposition and maturities of funeral, cemetery, and perpetual care trust investments                           |       |        | 125,693 |       |        | 33,434 |       |         | 538,809 |         |        
|                                             |                                                                            | Increase in non-controlling interests in funeral, cemetery and perpetual care trusts                                        |       |        | 15,222  |       |        | 19,809 |       |         | 38,568  |         |        
|                                             |                                                                            | Decrease in non-controlling interests in funeral, cemetery and perpetual care trusts upon fulfillment of pre-need contracts |       |        | 28,760  |       |        | 19,996 |       |         | 65,171  |         |        

NOTE 6.    SUPPLEMENTARY FINANCIAL INFORMATION

A summary of certain balance sheet accounts is as follows:

|                                |                                 | October 8, 2005 |        | January 1, 2005 |  
|------------------------------- | ------------------------------- | --------------- | ------ | --------------- | -
|Receivables, net of allowances: |                                 |                 |        |                 |  
|                                | Customer receivables            |                 | $      | 53,473          |  
|                                | Allowance for doubtful accounts |                 |        | (10,558         | )
|                                | Other                           |                 |        | 16,403          |  
|                                |                                 |                 |        |                 |  
|                                |                                 | $               | 59,318 |                 | $
|                                |                                 |                 |        |                 |  
|                                |                                 |                 |        |                 |  

14

---



|Pre-need funeral receivables and trust investments:  |                                                    |   |         |          |   |         |        
|---------------------------------------------------- | -------------------------------------------------- | - | ------- | -------- | - | ------- | -------
|                                                     | Customer receivables                               |   | $       | 35,872   |   | $       | 37,146 
|                                                     | Allowance for contract cancellations and refunds   |   |         | (15,627  | ) |         | (17,287
|                                                     | Funeral trust investments                          |   |         | 284,678  |   |         | 288,928
|                                                     | Amounts receivable from funeral trusts             |   |         | 29,581   |   |         | 27,243 
|                                                     |                                                    |   |         |          |  
|                                                     |                                                    | $ | 334,504 |          | $ | 336,030 |        
|                                                     |                                                    |   |         |          |  
|Pre-need cemetery receivables and trust investments: |                                                    |   |         |          |   |         |        
|                                                     | Customer receivables                               |   | $       | 65,940   |   | $       | 64,130 
|                                                     | Unearned finance income                            |   |         | (6,025   | ) |         | (5,759 
|                                                     | Allowance for contract cancellations and refunds   |   |         | (16,951  | ) |         | (17,538
|                                                     | Cemetery merchandise and service trust investments |   |         | 261,238  |   |         | 270,821
|                                                     |                                                    |   |         |          |  
|                                                     |                                                    | $ | 304,202 |          | $ | 311,654 |        
|                                                     |                                                    |   |         |          |  
|Cemetery property:                                   |                                                    |   |         |          |   |         |        
|                                                     | Developed land and lawn crypts                     |   | $       | 37,729   |   | $       | 37,623 
|                                                     | Undeveloped land                                   |   |         | 30,747   |   |         | 30,685 
|                                                     | Mausoleums                                         |   |         | 47,256   |   |         | 50,734 
|                                                     |                                                    |   |         |          |  
|                                                     |                                                    | $ | 115,732 |          | $ | 119,042 |        
|                                                     |                                                    |   |         |          |  
|Property and equipment:                              |                                                    |   |         |          |   |         |        
|                                                     | Land                                               |   | $       | 162,329  |   | $       | 166,252
|                                                     | Buildings and improvements                         |   |         | 381,956  |   |         | 368,501
|                                                     | Automobiles                                        |   |         | 12,495   |   |         | 13,014 
|                                                     | Furniture, fixtures and equipment                  |   |         | 65,659   |   |         | 54,432 
|                                                     | Computer hardware and software                     |   |         | 27,305   |   |         | 23,310 
|                                                     | Accumulated depreciation and amortization          |   |         | (108,697 | ) |         | (85,254
|                                                     |                                                    |   |         |          |  
|                                                     |                                                    | $ | 541,047 |          | $ | 540,255 |        
|                                                     |                                                    |   |         |          |  
|Other assets:                                        |                                                    |   |         |          |   |         |        
|                                                     | Intangible assets                                  |   | $       | 18,107   |   | $       | 15,060 
|                                                     | Debt issue costs                                   |   |         | 8,709    |   |         | 10,339 
|                                                     | Notes receivable                                   |   |         | 3,078    |   |         | 2,696  
|                                                     | Other                                              |   |         | 12,478   |   |         | 8,987  
|                                                     |                                                    |   |         |          |  
|                                                     |                                                    | $ | 42,372  |          | $ | 37,082  |        
|                                                     |                                                    |   |         |          |  
|                                                     |                                                    |   |         |          |   |         |        

15

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|Accounts payable and accrued liabilities: |                          |   |         |        |   |         |       
|----------------------------------------- | ------------------------ | - | ------- | ------ | - | ------- | ------
|                                          | Trade payables           |   | $       | 19,394 |   | $       | 19,847
|                                          | Interest                 |   |         | 2,063  |   |         | 7,210 
|                                          | Accrued liabilities      |   |         | 18,758 |   |         | 32,423
|                                          | Accrued insurance        |   |         | 22,256 |   |         | 18,058
|                                          | Accrued taxes            |   |         | 37,829 |   |         | 44,785
|                                          | Other                    |   |         | 19,757 |   |         | 18,339
|                                          |                          |   |         |        |  
|                                          |                          | $ | 120,057 |        | $ | 140,662 |       
|                                          |                          |   |         |        |  
|Deferred pre-need contract revenue:       |                          |   |         |        |   |         |       
|                                          | Funeral                  |   | $       | 71,615 |   | $       | 69,098
|                                          | Cemetery                 |   |         | 25,879 |   |         | 13,873
|                                          |                          |   |         |        |  
|                                          |                          | $ | 97,494  |        | $ | 82,971  |       
|                                          |                          |   |         |        |  
|Other liabilities:                        |                          |   |         |        |   |         |       
|                                          | Perpetual care liability |   | $       | 7,689  |   | $       | 7,490 
|                                          | Other                    |   |         | 13,454 |   |         | 14,464
|                                          |                          |   |         |        |  
|                                          |                          | $ | 21,143  |        | $ | 21,954  |       
|                                          |                          |   |         |        |  

NOTE 7.    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 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 52 weeks ended January 1, 2005, as filed with the SEC.

The
Company sells primarily to external customers, though any inter-segment 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 8, 2005 |         | $ | 133,158  |  | $         | 52,519 |       | $ | 29,105      
|                                    | October 9, 2004 |         | $ | 135,797  |  | $         | 48,979 |       | $ | 25,994      
|Income from operations:             |                 |         |   |          |  |           |        |       |   |             
|                                    | October 8, 2005 |         | $ | 15,980   |  | $         | 5,314  |       | $ | 1,353       
|                                    | October 9, 2004 |         | $ | 24,854   |  | $         | 6,446  |       | $ | 1,595       
|Depreciation and amortization:      |                 |         |   |          |  |           |        |       |   |             
|                                    | October 8, 2005 |         | $ | 7,718    |  | $         | 4,597  |       | $ | 54          
|                                    | October 9, 2004 |         | $ | 7,373    |  | $         | 4,523  |       | $ | 51          

16

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|
|

|For the 40 Weeks Ended:             |                 | Funeral |   | Cemetery  |  | Insurance |         | Other |   | Consolidated
|----------------------------------- | --------------- | ------- | - | --------- |  | --------- | ------- | ----- | - | ------------
|Revenue earned from external sales: |                 |         |   |           |  |           |         |       |   |             
|                                    | October 8, 2005 |         | $ | 367,672   |  | $         | 134,737 |       | $ | 73,036      
|                                    | October 9, 2004 |         | $ | 364,044   |  | $         | 123,806 |       | $ | 62,104      
|Income from operations:             |                 |         |   |           |  |           |         |       |   |             
|                                    | October 8, 2005 |         | $ | 66,234    |  | $         | 19,065  |       | $ | 3,466       
|                                    | October 9, 2004 |         | $ | 75,857    |  | $         | 17,061  |       | $ | 2,981       
|Depreciation and amortization:      |                 |         |   |           |  |           |         |       |   |             
|                                    | October 8, 2005 |         | $ | 19,154    |  | $         | 11,852  |       | $ | 120         
|                                    | October 9, 2004 |         | $ | 18,292    |  | $         | 10,211  |       | $ | 125         
|Total assets at:                    |                 |         |   |           |  |           |         |       |   |             
|                                    | October 8, 2005 |         | $ | 1,112,540 |  | $         | 808,070 |       | $ | 315,000     
|                                    | January 1, 2005 |         | $ | 1,154,019 |  | $         | 878,349 |       | $ | 272,823     
|Goodwill at:                        |                 |         |   |           |  |           |         |       |   |             
|                                    | October 8, 2005 |         | $ | 321,101   |  | $         |        |       | $ |            
|                                    | January 1, 2005 |         | $ | 321,134   |  | $         |        |       | $ |            

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

|                                                                     |                                     | 16 Weeks Ended |        | 40 Weeks Ended |  
|-------------------------------------------------------------------- | ----------------------------------- | -------------- | ------ | -------------- | -
|
|Earnings from operations of funeral, cemetery and insurance segments |                                     | $              | 22,647 |                | $
|Other expenses of operations:                                        |                                     |                |        |                |  
|                                                                     | General and administrative expenses |                |        | (19,192        | )
|                                                                     |                                     |                |        |                |  
|Income from operations                                               |                                     | $              | 3,455  |                | $
|                                                                     |                                     |                |        |                |  

17

---





NOTE 8.    CONDENSED CONSOLIDATING GUARANTOR FINANCIAL INFORMATION

The following presents the condensed consolidating guarantor financial information as of October 8, 2005 and January 1, 2005 and for the
16 and 40 weeks ended October 8, 2005 and October 9, 2004 for the direct and indirect domestic subsidiaries of the Company that serve as guarantors of the 7.75% senior
unsecured notes due in 2012, and the Company's subsidiaries that do not serve as guarantors. Non-guarantor subsidiaries include the Canadian and Puerto Rican subsidiaries, insurance
subsidiaries and certain domestic subsidiaries that are prohibited by law from guaranteeing the 7.75% senior unsecured notes due in 2012.

Condensed Consolidating Balance Sheets (unaudited)

|                                     |                                                     | October 8, 2005                                                                                                    
|------------------------------------ | --------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------
|
|ASSETS                               |                                                     |                                                                                                                    
|                                     | Cash and cash equivalents                           |                                                                                                                    
|                                     | Other current assets                                |                                                                                                                    
|                                     | Pre-need funeral receivables and trust investments  |                                                                                                                    
|                                     | Pre-need cemetery receivables and trust investments |                                                                                                                    
|                                     | Cemetery property and property and equipment        |                                                                                                                    
|                                     | Insurance invested assets                           |                                                                                                                    
|                                     | Goodwill                                            |                                                                                                                    
|                                     | Investment in subsidiaries                          |                                                                                                                    
|                                     | Cemetery perpetual care trust investment            |                                                                                                                    
|                                     | Other assets                                        |                                                                                                                    
|                                     |                                                     |                                                                                                                    
|                                     |                                                     |                                                                                                                    
|                                     |                                                     |                                                                                                                    
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                     |                                                                                                                    
|                                     | Liabilities:                                        |                                                                                                                    
|                                     |                                                     | Current liabilities                                                                                                
|                                     |                                                     | Current maturities of long-term debt                                                                               
|                                     |                                                     | Intercompany, net of investments in and advances to affiliates                                                     
|                                     |                                                     | Long-term debt                                                                                                     
|                                     |                                                     | Deferred pre-need funeral and cemetery contract revenue and non-controlling interest in funeral and cemetery trusts
|                                     |                                                     | Insurance policy liabilities                                                                                       
|                                     |                                                     | Other liabilities                                                                                                  
|                                     | Non-controlling interest in perpetual care trusts   |                                                                                                                    
|                                     | Stockholders' equity                                |                                                                                                                    
|                                     |                                                     |                                                                                                                    
|                                     |                                                     |                                                                                                                    
|                                     |                                                     |                                                                                                                    

18

---



Condensed Consolidating Balance Sheets

|                                     |                                                     | January 1, 2005                                                                                                    
|------------------------------------ | --------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------
|
|ASSETS                               |                                                     |                                                                                                                    
|                                     | Cash and cash equivalents                           |                                                                                                                    
|                                     | Other current assets                                |                                                                                                                    
|                                     | Assets held for sale                                |                                                                                                                    
|                                     | Pre-need funeral receivables and trust investments  |                                                                                                                    
|                                     | Pre-need cemetery receivables and trust investments |                                                                                                                    
|                                     | Cemetery property and property and equipment        |                                                                                                                    
|                                     | Insurance invested assets                           |                                                                                                                    
|                                     | Goodwill                                            |                                                                                                                    
|                                     | Investment in subsidiaries                          |                                                                                                                    
|                                     | Cemetery perpetual care trust investment            |                                                                                                                    
|                                     | Other assets                                        |                                                                                                                    
|                                     |                                                     |                                                                                                                    
|                                     |                                                     |                                                                                                                    
|                                     |                                                     |                                                                                                                    
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                     |                                                                                                                    
|                                     | Liabilities:                                        |                                                                                                                    
|                                     |                                                     | Current liabilities                                                                                                
|                                     |                                                     | Current maturities of long-term debt                                                                               
|                                     |                                                     | Intercompany, net of investments in and advances to affiliates                                                     
|                                     |                                                     | Liabilities associated with assets held for sale                                                                   
|                                     |                                                     | Long-term debt                                                                                                     
|                                     |                                                     | Deferred pre-need funeral and cemetery contract revenue and non-controlling interest in funeral and cemetery trusts
|                                     |                                                     | Insurance policy liabilities                                                                                       
|                                     |                                                     | Other liabilities                                                                                                  
|                                     | Non-controlling interest in perpetual care trusts   |                                                                                                                    
|                                     | Stockholders' equity                                |                                                                                                                    
|                                     |                                                     |                                                                                                                    
|                                     |                                                     |                                                                                                                    
|                                     |                                                     |                                                                                                                    

19

---



Condensed Consolidating Statement of Operations (unaudited)

|                                             |                                         | 16 Weeks Ended October 8, 2005 |        
|-------------------------------------------- | --------------------------------------- | ------------------------------ | -------
|
|Revenues                                     |                                         | $                              |       
|Costs and expenses                           |                                         |                                |       
|General and administrative expenses          |                                         |                                |       
|Provision for asset impairment               |                                         |                                |       
|                                             |                                         |                                |        
|Income (loss) from operations                |                                         |                                |       
|Interest on long-term debt                   |                                         |                                | 8,841  
|Intercompany charges                         |                                         |                                | 6,803  
|Other expense (income), net                  |                                         |                                |       
|                                             |                                         |                                |        
|Income (loss) before income taxes            |                                         |                                | (15,644
|Income taxes                                 |                                         |                                | 663    
|                                             |                                         |                                |        
|Net income (loss) from continuing operations |                                         |                                | (16,307
|                                             |                                         |                                |        
|Equity in subsidiaries                       |                                         |                                | 23,212 
|Discontinued operations                      |                                         |                                |        
|                                             | Income from discontinued operations     |                                |        
|                                             | Income taxes                            |                                |        
|                                             |                                         |                                |        
|                                             | Net income from discontinued operations |                                |        
|                                             |                                         |                                |        
|Net income (loss)                            |                                         | $                              | 6,905  
|                                             |                                         |                                |        

20

---



Condensed Consolidating Statement of Operations (unaudited)

|                                             |                                                | 16 Weeks Ended October 9, 2004 |        
|-------------------------------------------- | ---------------------------------------------- | ------------------------------ | -------
|
|Revenues                                     |                                                | $                              |       
|Costs and expenses                           |                                                |                                |       
|General and administrative expenses          |                                                |                                |       
|Provision for asset impairment               |                                                |                                |       
|                                             |                                                |                                |        
|Income (loss) from operations                |                                                |                                |       
|Interest on long-term debt                   |                                                |                                | 46,356 
|Intercompany charges                         |                                                |                                | 5,673  
|Other expense (income), net                  |                                                |                                |       
|                                             |                                                |                                |        
|Income (loss) before income taxes            |                                                |                                | (52,029
|Income taxes                                 |                                                |                                | (1,833 
|                                             |                                                |                                |        
|Net income (loss) from continuing operations |                                                |                                | (50,196
|                                             |                                                |                                |        
|Equity in subsidiaries                       |                                                |                                | 36,817 
|Discontinued operations                      |                                                |                                |        
|                                             | Income (loss) from discontinued operations     |                                |        
|                                             | Income taxes                                   |                                |        
|                                             |                                                |                                |        
|                                             | Net income (loss) from discontinued operations |                                |        
|                                             |                                                |                                |        
|Net income (loss)                            |                                                | $                              | (13,379
|                                             |                                                |                                |        

21

---



Condensed Consolidating Statement of Operations (unaudited)

|                                             |                                            | 40 Weeks Ended October 8, 2005 |        
|-------------------------------------------- | ------------------------------------------ | ------------------------------ | -------
|
|Revenues                                     |                                            | $                              |       
|Costs and expenses                           |                                            |                                |       
|General and administrative expenses          |                                            |                                | (262   
|Provision for asset impairment               |                                            |                                |       
|                                             |                                            |                                |        
|Income (loss) from operations                |                                            |                                | 262    
|Interest on long-term debt                   |                                            |                                | 22,948 
|Intercompany charges                         |                                            |                                | 11,952 
|Other expense (income), net                  |                                            |                                |       
|                                             |                                            |                                |        
|Income (loss) before income taxes            |                                            |                                | (34,638
|Income taxes                                 |                                            |                                |       
|                                             |                                            |                                |        
|Net income (loss) from continuing operations |                                            |                                | (34,638
|                                             |                                            |                                |        
|Equity in subsidiaries                       |                                            |                                | 66,757 
|Discontinued operations                      |                                            |                                |        
|                                             | Income (loss) from discontinued operations |                                |        
|                                             | Income taxes                               |                                |        
|                                             |                                            |                                |        
|                                             | Net loss from discontinued operations      |                                |        
|                                             |                                            |                                |        
|Net income (loss)                            |                                            | $                              | 32,119 
|                                             |                                            |                                |        

22

---



Condensed Consolidating Statement of Operations (unaudited)

|                                             |                                                | 40 Weeks Ended October 9, 2004 |        
|-------------------------------------------- | ---------------------------------------------- | ------------------------------ | -------
|
|Revenues                                     |                                                | $                              |       
|Costs and expenses                           |                                                |                                |       
|General and administrative expenses          |                                                |                                | 2      
|Provision for asset impairment               |                                                |                                |       
|                                             |                                                |                                |        
|Income (loss) from operations                |                                                |                                | (2     
|Interest on long-term debt                   |                                                |                                | 66,204 
|Intercompany charges                         |                                                |                                | 9,280  
|Other expense (income), net                  |                                                |                                |       
|                                             |                                                |                                |        
|Income (loss) before income taxes            |                                                |                                | (75,486
|Income taxes                                 |                                                |                                |       
|                                             |                                                |                                |        
|Net income (loss) from continuing operations |                                                |                                | (75,486
|                                             |                                                |                                |        
|Equity in subsidiaries                       |                                                |                                | 60,468 
|Discontinued operations                      |                                                |                                |        
|                                             | Income (loss) from discontinued operations     |                                |        
|                                             | Income taxes                                   |                                |        
|                                             |                                                |                                |        
|                                             | Net income (loss) from discontinued operations |                                |        
|                                             |                                                |                                |        
|Net income (loss)                            |                                                | $                              | (15,018
|                                             |                                                |                                |        

23

---





Condensed Consolidating Statement of Cash Flows (unaudited)

|                                                                |  | 16 Weeks Ended October 8, 2005 |        
|--------------------------------------------------------------- |  | ------------------------------ | -------
|
|CASH PROVIDED BY (APPLIED TO)                                   |  |                                |        
|Cash flows from operating activities of continuing operations   |  | $                              | 20,783 
|Cash flows from operating activities of discontinued operations |  |                                |       
|Cash flows from investing activities of continuing operations   |  |                                |       
|Cash flows from investing activities of discontinued operations |  |                                |       
|Cash flows from financing activities of continuing operations   |  |                                | (20,783
|Cash flows from financing activities of discontinued operations |  |                                |       
|                                                                |  |                                |        
|Decrease in cash and cash equivalents                           |  |                                |       
|Cash and cash equivalents, beginning of period                  |  |                                |       
|                                                                |  |                                |        
|Cash and cash equivalents, end of period                        |  | $                              |       
|                                                                |  |                                |        

24

---



Condensed Consolidating Statement of Cash Flows (unaudited)

|                                                                |  | 16 Weeks Ended October 9, 2004 |         
|--------------------------------------------------------------- |  | ------------------------------ | --------
|
|CASH PROVIDED BY (APPLIED TO)                                   |  |                                |         
|Cash flows from operating activities of continuing operations   |  | $                              | 127,031 
|Cash flows from operating activities of discontinued operations |  |                                |        
|Cash flows from investing activities of continuing operations   |  |                                |        
|Cash flows from investing activities of discontinued operations |  |                                |        
|Cash flows from financing activities of continuing operations   |  |                                | (127,031
|Cash flows from financing activities of discontinued operations |  |                                |        
|                                                                |  |                                |         
|Decrease in cash and cash equivalents                           |  |                                |        
|Cash and cash equivalents, beginning of period                  |  |                                |        
|                                                                |  |                                |         
|Cash and cash equivalents, end of period                        |  | $                              |        
|                                                                |  |                                |         

25

---



Condensed Consolidating Statement of Cash Flows (unaudited)

|                                                                |  | 40 Weeks Ended October 8, 2005 |        
|--------------------------------------------------------------- |  | ------------------------------ | -------
|
|CASH PROVIDED BY (APPLIED TO)                                   |  |                                |        
|Cash flows from operating activities of continuing operations   |  | $                              | 70,317 
|Cash flows from operating activities of discontinued operations |  |                                |       
|Cash flows from investing activities of continuing operations   |  |                                |       
|Cash flows from investing activities of discontinued operations |  |                                |       
|Cash flows from financing activities of continuing operations   |  |                                | (70,317
|Cash flows from financing activities of discontinued operations |  |                                |       
|                                                                |  |                                |        
|Decrease in cash and cash equivalents                           |  |                                |       
|Cash and cash equivalents, beginning of period                  |  |                                |       
|                                                                |  |                                |        
|Cash and cash equivalents, end of period                        |  | $                              |       
|                                                                |  |                                |        

26

---



Condensed Consolidating Statement of Cash Flows (unaudited)

|                                                                |  | 40 Weeks Ended October 9, 2004 |         
|--------------------------------------------------------------- |  | ------------------------------ | --------
|
|CASH PROVIDED BY (APPLIED TO)                                   |  |                                |         
|Cash flows from operating activities of continuing operations   |  | $                              | 146,559 
|Cash flows from operating activities of discontinued operations |  |                                |        
|Cash flows from investing activities of continuing operations   |  |                                |        
|Cash flows from investing activities of discontinued operations |  |                                |        
|Cash flows from financing activities of continuing operations   |  |                                | (146,559
|Cash flows from financing activities of discontinued operations |  |                                |        
|                                                                |  |                                |         
|Decrease in cash and cash equivalents                           |  |                                |        
|Cash and cash equivalents, beginning of period                  |  |                                |        
|                                                                |  |                                |         
|Cash and cash equivalents, end of period                        |  | $                              |        
|                                                                |  |                                |         

NOTE 9.    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 costs to sell.

As
of October 8, 2005, in conjunction with the Company's ongoing assessment to ensure that each of the Company's properties fit into the Company's strategy, the Company held five
funeral homes for sale. The carrying amount of these locations was $704,000. The fair market values were determined by specific offers or bids, or estimates based on comparable recent sales
transactions. The Company has recorded a pre-tax long-lived asset impairment of $200,000 during the 12 weeks ended June 18, 2005 to record those assets available
for sale at the lower of carrying amount of fair market value less estimated costs to sell. For the 40 weeks ended October 8, 2005, these properties had funeral home revenues and costs
of $855,000 and $732,000 (October 9, 2004  $913,000 and $812,000), respectively.

The
assets of $1,575,000 (January 1, 2005  $1,855,000) and liabilities of $871,000 (January 1,
2005  $938,600) of these locations are classified according to their nature in the consolidated balance sheets and,

27

---



on
the basis of immateriality have not been identified separately as to assets held for sale and liabilities associated with assets held for sale in the balance sheet.

In
addition, for the 40 weeks ended October 8, 2005, the total revenues and costs of disposed funeral home locations which were not reclassified to discontinued operations
were $2,409,000 and $2,353,000 (October 9, 2004  $3,350,000 and $2,941,000), respectively.

The
asset impairment provisions include management estimates. As a result, actual results could differ significantly from these estimates.

NOTE 10.    DISCONTINUED OPERATIONS OF ASSETS HELD FOR SALE

Over the previous three fiscal years, the Company engaged in a substantial 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 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 into the Company's strategy (See Note 9).

As
of June 18, 2005, the Company had completed the strategic market rationalization program except for one cemetery which was classified back to continuing operations during the
12 weeks ended June 18, 2005.

28

---



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

|                                                                 |           | 16 Weeks Ended |   | 40 Weeks Ended |  
|---------------------------------------------------------------- | --------- | -------------- | - | -------------- | -
|
|Revenue                                                          |           |                |   |                |  
|                                                                 | Funeral   |                | $ |               |  
|                                                                 | Cemetery  |                |   |               |  
|                                                                 | Insurance |                |   |               |  
|                                                                 |           |                |   |                |  
|                                                                 |           | $              |  |                | $
|                                                                 |           |                |   |                |  
|Gross margin                                                     |           |                |   |                |  
|                                                                 | Funeral   |                | $ |               |  
|                                                                 | Cemetery  |                |   |               |  
|                                                                 | Insurance |                |   |               |  
|                                                                 |           |                |   |                |  
|                                                                 |           |                |  |                |  
|Provision for asset impairment                                   |           |                |  |                |  
|Other expense (income), net                                      |           |                |  |                |  
|                                                                 |           |                |   |                |  
|Income (loss) from discontinued operations                       |           |                |  |                |  
|Interest on long-term debt                                       |           |                |  |                |  
|                                                                 |           |                |   |                |  
|Income (loss) from discontinued operations, before tax           |           |                |  |                |  
|Income tax provision for discontinued operations                 |           |                |  |                |  
|                                                                 |           |                |   |                |  
|Net income (loss) from discontinued operations                   |           | $              |  |                | $
|                                                                 |           |                |   |                |  
|Depreciation included in gross margin of discontinued operations |           | $              |  |                | $
|                                                                 |           |                |   |                |  

29

---



Details
of assets held for sale at January 1, 2005, are as follows:

|                                                  |                                                         | Funeral |        | Cemetery |   | Total 
|------------------------------------------------- | ------------------------------------------------------- | ------- | ------ | -------- | - | ------
|Assets held for sale:                             |                                                         |         |        |          |   |       
|                                                  | Current assets                                          |         | $      | 2,141    |   | $     
|                                                  | Pre-need receivables and trust investments              |         |        | 21,818   |   |       
|                                                  | Cemetery property                                       |         |        |         |   |       
|                                                  | Property and equipment                                  |         |        | 11,110   |   |       
|                                                  | Other assets                                            |         |        | 209      |   |       
|                                                  |                                                         |         |        |          |   |       
|                                                  |                                                         | $       | 35,278 |          | $ | 46,778
|                                                  |                                                         |         |        |          |   |       
|Liabilities associated with assets held for sale: |                                                         |         |        |          |   |       
|                                                  | Current liabilities                                     |         | $      | 67       |   | $     
|                                                  | Deferred pre-need contract revenue                      |         |        | 1,971    |   |       
|                                                  | Non-controlling interest in funeral and cemetery trusts |         |        | 20,034   |   |       
|                                                  | Other liabilities                                       |         |        | 412      |   |       
|                                                  |                                                         |         |        |          |   |       
|                                                  |                                                         | $       | 22,484 |          | $ | 38,944
|                                                  |                                                         |         |        |          |   |       
|Non-controlling interest in perpetual care trusts |                                                         | $       |       |          | $ | 11,819
|                                                  |                                                         |         |        |          |   |       

NOTE 11.    INCOME PER SHARE

The basic and diluted income per share computations for net income were as follows:

|                                                                                  |                                                                                 | 16 Weeks Ended |        | 40 Weeks Ended |  
|--------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | -------------- | ------ | -------------- | -
|
|Income (numerator):                                                               |                                                                                 |                |        |                |  
|Net income (loss) attributable to Common stockholders                             |                                                                                 | $              | 6,905  |                | $
|                                                                                  |                                                                                 |                |        |                |  
|Shares (denominator):                                                             |                                                                                 |                |        |                |  
|                                                                                  | Basic weighted average number of shares of Common stock outstanding (thousands) |                |        | 40,456         |  
|                                                                                  | Effect of stock options assumed exercised (thousands)                           |                |        | 1,595          |  
|                                                                                  |                                                                                 |                |        |                |  
|Diluted weighted average number of shares of Common stock outstanding (thousands) |                                                                                 |                | 42,051 |                |  
|                                                                                  |                                                                                 |                |        |                |  

For
the 16 and 40 weeks ended October 8, 2005, 4,013,250 employee and director stock options were dilutive to earnings and are included in the computation of diluted
earnings per share. Employee and director stock options to purchase 1,034,500 shares of Common stock, warrants to purchase

30

---



2,992,000 shares
of Common stock and 236,800 shares of restricted Common stock were not included in the computation of diluted earnings per share, because they were
anti-dilutive.

NOTE 12.    EFFECT OF HURRICANE KATRINA

On August 29, 2005, Hurricane Katrina struck Louisiana and Mississippi. The Company operates 30 funeral homes, four cemeteries and a
limousine company in these heavily affected areas. The Company has experienced some damage at all of these locations. Repair work has begun at many of the locations. Of the 30 funeral homes,
seven experienced significant damage and are not expected to be in operation by the end of the year and are not included as same-site locations in the table below. All four cemeteries are in
operation. The New Orleans limousine company that had provided services both to the Company's funeral operations and other third-parties experienced significant damage to its fleet
of vehicles and will not be resuming operations.

The
Company is making every effort to use its existing operating facilities to provide services to customers normally served by one of the Company's closed locations.

The
Company's insurance subsidiary supporting the sale of funeral pre-need contracts is also headquartered in New Orleans and although forced to relocate temporarily
to Cincinnati, has resumed operations from New Orleans. The relocation has not significantly affected the Company's operating results.

Financial results

The Company's financial results for the 16 weeks ended October 8, 2005 and the 40 weeks ended October 8, 2005 included results from
operations for those locations affected by Hurricane Katrina as outlined in the following table:

|              |                                     | 16 Weeks Ended                                 |   | 40 Weeks Ended
|------------- | ----------------------------------- | ---------------------------------------------- | - | --------------
|
|Funeral Homes |                                     |                                                |   |               
|              | Revenue                             |                                                | $ | 7,301         
|              |                                     | Number of funeral services performed           |   |               
|              |                                     | Number of same-site funeral services performed |   |               
|              | Costs and expenses                  |                                                | $ | 7,622         
|              | Gross Margin                        |                                                | $ | (321          
|              | Pre-need funeral contracts written  |                                                | $ | 3,174         
|Cemeteries    |                                     |                                                |   |               
|              | Revenue                             |                                                | $ | 787           
|              |                                     | Number of cemetery interments                  |   |               
|              | Costs and expenses                  |                                                | $ | 900           
|              | Gross Margin                        |                                                | $ | (113          
|              | Pre-need cemetery contracts written |                                                | $ | 356           

31

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Insurance coverage and long-term asset gain or loss

The Company purchases insurance coverage for property damage, including damage from wind and flood, subject to separate limits, sub-limits and deductible amounts.
The Company, along with its insurance companies, is continuing to assess and estimate the extent of damages. Based on a preliminary review of the Company's insurance policy, the Company expects to
recover a substantial portion of the costs associated with the storm damage through insurance, including the capital costs of rebuilding. For those properties not in operation and requiring
rebuilding, insurance proceeds have not yet been fully estimated, and as a result, any estimated loss or gain for these properties cannot be determined. The net book value of buildings and contents
for those locations not in operation aggregates $7.4 million.

The
Company has recorded an expense of $3.0 million in the 16 weeks ended October 8, 2005, representing its expected deductible under its insurance policies and
other expenses not expected to be reimbursed under the insurance policy. Under its internal risk sharing practice the Company's aggregate costs are charged to all its operations, not just the
locations affected by Hurricane Katrina. The effect on funeral and cemetery costs for the 16 weeks ended October 8, 2005 was $2.2 and $0.8 million respectively.

The
Company is self-insured for physical damage to its owned and leased automobiles and charges the aggregate resulting costs to all of its operations. Hurricane Katrina
resulted in estimated damages across our vehicles aggregating $0.6 million. The effect of Hurricane Katrina vehicle damage on funeral and cemetery costs for the 16 weeks ended
October 8, 2005 was $0.5 and $0.1 million respectively.

The
Company has business interruption insurance that allows the recovery of operating costs and lost profits. The Company is preparing its analysis in support of a claim. Potential
proceeds from this claim cannot currently be reasonably estimated and therefore no receivable or recovery has been recorded as of October 8, 2005.

32

---



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

Overview

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 of October 8, 2005, the Company operated
613 funeral homes, 72 cemeteries and 60 combination funeral homes and cemeteries throughout North America. As of October 9, 2004, the Company operated 683 funeral
homes, 110 cemeteries and 61 combination funeral homes and cemeteries throughout North America.

Alderwoods
Group is a holding company owning, directly or indirectly, the capital stock of approximately 207 subsidiaries through which funeral, cemetery and insurance businesses
are operated.

The
Company provides services and products through three business segments:

Funeral Operations.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.

Cemetery Operations.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, mausoleum crypts and other merchandise), the opening and closing of graves and cremation services.

Insurance Operations.The Company operates an insurance subsidiary licensed in a total of 35 states. This insurance
subsidiary sells a variety of insurance products, primarily to fund pre-need funeral services.

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 52 weeks ended January 1, 2005, as filed with the U.S. Securities and Exchange Commission ("SEC").
There have been no changes to the Company's critical accounting policies in the 16 weeks ended October 8, 2005.

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 Part I of this Quarterly Report on Form 10-Q (including the notes thereto).

33

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Results of Operations

Detailed below are the operating results of the Company for the 16 and 40 weeks ended October 8, 2005 and October 9, 2004. 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 and that the Company plans to retain, and those business operations that have been opened during either the current or prior fiscal quarters and that the Company plans to retain.
Discontinued operations consist of those business operations that have been sold or closed during prior fiscal quarters. As of June 18, 2005, the Company had completed the sale of all the
locations classified as discontinued operations in its strategic market rationalization except for one cemetery which was classified back to continuing operations during the 12 weeks ended
June 18, 2005. The program was completed as of the end of the second quarter 2005.

The
operations of the Company comprise three business segments: funeral homes, cemeteries and insurance. Additional segment information is provided in Note 7 to the Company's
interim consolidated financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Hurricane Katrina

During the 16 weeks Ended October 8, 2005, some of the Company's operations were affected by Hurricane Katrina. The Company operates
30 funeral homes, four cemeteries and a limousine company in areas of Louisiana and Mississippi that were affected by the hurricane on August 29, 2005. The Company has experienced
some damage at all of these locations. Repair work has begun at many of the locations. Of the 30 funeral homes, seven experienced significant damage and are not expected to be in operation by
the end of the year. All four cemeteries are in operation. The New Orleans limousine company that had provided services both to the Company's funeral operations and other
third-parties experienced significant damage to its fleet of vehicles and will not be resuming operations.

The
Company purchases insurance coverage for property damage, including damage from wind and flood, subject to separate limits, sub-limits and deductible amounts. The Company, along with
its insurance companies, is continuing to assess and estimate the extent of damages. Based on a preliminary review of the Company's insurance policy, the Company expects to recover a substantial
portion of the costs associated with the storm damage through insurance, including the capital costs of rebuilding. For those properties not in operation and requiring rebuilding, insurance proceeds
have not yet been fully estimated, and as a result, any estimated loss or gain for these properties cannot be determined. The net book value of buildings and contents for those locations not in
operation aggregates $7.4 million.

The
Company has recorded an expense of $3.0 million in the 16 weeks ended October 8, 2005, representing its expected deductible under its insurance policies and
other expenses not expected to be reimbursed under the insurance policy. Under its internal risk sharing practice, the Company's aggregate costs are charged to all its operations, not just the
locations affected by Hurricane Katrina. The effect on funeral and cemetery costs for the 16 weeks ended October 8, 2005 was $2.2 and $0.8 million respectively.

The
Company is self-insured for physical damage to its owned and leased automobiles and charges the aggregate resulting costs to all of its operations. Hurricane Katrina
resulted in estimated damages across our vehicles aggregating $0.6 million. The effect of Hurricane Katrina vehicle damage on funeral and cemetery costs for the 16 weeks ended
October 8, 2005 was $0.5 and $0.1 million respectively.

The
Company has business interruption insurance that allows the recovery of operating costs and lost profits. The Company is preparing its analysis in support of a claim. Potential
proceeds from this claim cannot currently be reasonably estimated and therefore no receivable or recovery has been recorded as of October 8, 2005.

34

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Additional
information regarding Hurricane Katrina is provided in Note 12 to the Company's interim consolidated financial statements included in Item 1 of Part I of
this Quarterly Report on Form 10-Q.

16 Weeks Ended October 8, 2005 Compared to 16 Weeks Ended October 9, 2004

|                                                    |                                | 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                              |                                |                | 3,455  
|Interest on long-term debt and refinancing costs    |                                |                | 8,967  
|Other expense (income), net                         |                                |                | (68    
|                                                    |                                |                |        
|Income before income taxes                          |                                |                | (5,444 
|Income tax recovery                                 |                                |                | (12,349
|                                                    |                                |                |        
|Net income (loss) from continuing operations        |                                |                | 6,905  
|Net income from discontinued operations, net of tax |                                |                |       
|                                                    |                                |                |        
|Net income (loss)                                   |                                | $              | 6,905  
|                                                    |                                |                |        

35

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Other
information for the 16 weeks ended October 8, 2005, and 16 Weeks Ended October 9, 2004, is summarized in the following table:

|                                                  |                                                |   |        |        |   | Increase (decrease) |       
|------------------------------------------------- | ---------------------------------------------- | - | ------ | ------ | - | ------------------- | ------
|
|
|Funeral  Other Information                       |                                                |   |        |        |   |                     |       
|Number of funeral services performed              |                                                |   | 32,368 |        |   | 33,799              |       
|                                                  | Number of same site funeral services performed |   |        | 32,070 |   |                     | 32,980
|Average revenue per funeral service               |                                                | $ | 4,114  |        | $ | 4,018               |       
|                                                  | Same site average revenue per funeral service  |   | $      | 4,109  |   | $                   | 4,027 
|Pre-need funeral contracts written (in millions)  |                                                | $ | 59.7   |        | $ | 52.9                |       
|Pre-need funeral conversion (percentages)         |                                                |   | 27     |        |   | 26                  |       
|Cemetery  Other Information                      |                                                |   |        |        |   |                     |       
|Number of cemetery interments                     |                                                |   | 13,763 |        |   | 13,435              |       
|Pre-need cemetery contracts written (in millions) |                                                | $ | 28.9   |        | $ | 26.3                |       

Continuing Operations

Consolidated revenue of $214.8 million for the 16 weeks ended October 8, 2005, increased by $4.0 million, or 1.9%, compared to the
corresponding period in 2004, reflecting increases in the cemetery and insurance segments partially offset by a decrease in funeral revenue. Consolidated gross margin as a percentage of revenue
decreased to 10.7% for the 16 weeks ended October 8, 2005, from 15.5% for the corresponding period in 2004.

Funeral
revenue of $133.2 million for the 16 weeks ended October 8, 2005, decreased by $2.6 million, compared to $135.8 million for the corresponding
period in 2004, primarily as a result of a decrease in the number of funeral services performed partially offset by an increase of $96, or 2.4%, in average revenue per funeral service performed. The
number of funeral services performed during the 16 weeks ended October 8, 2005 decreased by 4.2% from the corresponding period in 2004. 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 designed to both meet customer family needs and to increase average
revenues.

Included
in the funeral revenue for the 16 weeks ended October 8, 2005 is $7.3 million from 1,570 funeral services performed in New Orleans, Louisiana and on
the Gulf Coast of Mississippi compared to $8.5 million of funeral revenue from 1,832 funeral services performed for the 16 weeks ended October 9, 2004. The Company's
funeral operations in these areas were significantly affected by Hurricane Katrina.

On
a same site basis, funeral revenue was $131.8 million for the 16 weeks ended October 8, 2005, a decrease of $1.0 million compared to $132.8 million
for the corresponding period in 2004, as a result of a decrease of 2.8% in the number of funeral services performed from the corresponding period in 2004 offset by an increase of $82, or 2.0%, in
average revenue per funeral service performed. If the locations affected by Hurricane Katrina were removed, the number of funeral services performed on a same site basis would have declined 2.5% from
the corresponding period in 2004.

The
number of cremation services performed as a percentage of total services performed increased to 36.7% for the 16 weeks ended October 8, 2005, compared to 35.9% for the
corresponding period in 2004, consistent with national trends. 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.

36

---



Funeral
gross margin as a percentage of revenue decreased to 12.2% for the 16 weeks ended October 8, 2005, compared to 18.6% for the corresponding period in 2004. The
decrease in gross margin was primarily due to (i) increased wages, training and advertising costs related to the Company's expanded field management structure and investment in programs
designed to build local brand awareness and generate growth in future services, (ii) a $2.7 million accrual for an expected insurance deductible and expenses not expected to be
reimbursed under the Company's insurance policy for damages at locations affected by Hurricane Katrina offset by $1.0 million of lower insurance costs compared to the prior year, and
(iii) a $1.3 million accrual for litigation claims during the 16 weeks ended October 8, 2005.

Pre-need
funeral contracts written for the 16 weeks ended October 8, 2005, were $59.7 million, compared to $52.9 million for the corresponding
period in 2004. The Company is continuing its program to increase pre-need sales. For the 16 weeks ended October 8, 2005, 27% of the funeral services performed were derived
from the pre-need backlog, an increase from 26% in the comparative period in 2004. 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. 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 $52.5 million for the 16 weeks ended October 8, 2005, was $3.5 million, or 7.2%, higher than cemetery revenue for the corresponding period
in 2004, primarily due to increased pre-need space sales of $2.1 million at the Company's Rose Hills subsidiary, combined with an overall increase in the number of cemetery
interments.

Cemetery
gross margin as a percentage of revenue decreased to 10.1% for the 16 weeks ended October 8, 2005, compared to 11.9% for the corresponding period in 2004,
primarily due to a $0.9 million accrual for an expected insurance deductible and expenses not expected to be reimbursed under the Company's insurance policy for damages at locations affected by
Hurricane Katrina and a $0.4 million accrual for litigation claims during the 16 weeks ended October 8, 2005.

Pre-need
cemetery contracts written for the 16 weeks ended October 8, 2005, were $28.9 million, compared to $26.3 million for the corresponding
period in 2004. The increase in pre-need cemetery contracts written was primarily due to higher sales of cemetery spaces at the Company's Rose Hills subsidiary. 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 initial net 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 8, 2005, increased $3.1 million, or 12.0%, compared to the corresponding period in 2004, primarily due to increases
in premiums of $2.9 million. 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 represents the insurance segment's participation in the Company's pre-need funeral contracts and for the 16 weeks ended October 8, 2005 was
$42.6 million compared to $35.1 million for the corresponding period in 2004. Insurance gross margin as a percentage of revenue decreased to 4.6% for the 16 weeks ended
October 8, 2005, compared to 6.1% for the corresponding period in 2004, due to a decrease in investment gains of $0.7 million compared to the 16 weeks ended October 9,
2004. The Company expects the insurance gross margin percentage to grow modestly over the near term.

General
and administrative expenses for the Company for the 16 weeks ended October 8, 2005, were $19.2 million, or 8.9% of consolidated revenue, compared to
$14.9 million, or 7.1% of consolidated revenue for the corresponding period in 2004. The increase of $4.3 million is primarily due to an increase

37

---



in
wages, consulting and audit expenses of $1.1 million related to Sarbanes-Oxley compliance, increased accrual for management incentive bonuses of $2.3 million and a $0.5 million
foreign exchange impact from Canadian dollar based support center costs.

In
accordance with FAS 142, the Company undertook its annual goodwill impairment review during the 16 weeks ended October 8, 2005. 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 reporting unit exceeded its carrying amount as of October 8, 2005.

Interest
expense on long-term debt for the 16 weeks ended October 8, 2005, was $9.0 million, reflecting the effect of principal repayments and lower
interest rates compared to interest expense, tender premium and refinancing costs in the corresponding period in 2004, as detailed in the following table:

|                                                                                                                       |  | 16 Weeks Ended |    
|---------------------------------------------------------------------------------------------------------------------- |  | -------------- | ---
|
|
|Interest on long-term debt                                                                                             |  | $              | 8.1
|Amortization of debt issue costs                                                                                       |  |                | 0.9
|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                                                 |  |                |   
|Allocation of interest to discontinued operations                                                                      |  |                |   
|                                                                                                                       |  |                |    
|Total interest on long-term debt and refinancing costs                                                                 |  | $              | 9.0
|                                                                                                                       |  |                |    

Income
tax recovery for the 16 weeks ended October 8, 2005 was $12.3 million compared to $6.2 million for the corresponding period in 2004. During the
16 weeks ended October 8, 2005, the Company recorded the non-cash resolution of an outstanding tax liability by reducing its tax expense by $12.6 million and also recorded an
adjustment to bring the year-to-date effective tax rate before the above benefit is approximately 45%. The Company's effective tax rate for the 16 weeks ended October 9, 2004 was 20.1%.
Future realizations of the benefits of the tax assets that had a corresponding valuation allowance established on January 2, 2002 will result in a reduction to goodwill established on
January 2, 2002. The effective tax rate also varied from the statutory tax rate for the 16 weeks ended October 8, 2005, because in certain jurisdictions, losses incurred may not
offset the tax expense in profitable jurisdictions.

At
December 31, 2001, the Company had accrued $57.1 million of reorganization costs related to costs incurred during it's predecessor's reorganization, as well as costs
incurred in connection with the actual emergence from reorganization proceedings and various related activities. As of October 8, 2005, the balance of $1.2 million of reorganization
costs, primarily consisting of an accrual for a legal fee reimbursement, has been included in accounts payable and accrued liabilities.

During
the 16 weeks ended October 8, 2005, the Company sold four funeral locations for gross proceeds of $1.8 million.

38

---



Discontinued Operations

Over the previous three 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 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.

As
of June 18, 2005, the Company completed the strategic market rationalization program except for one cemetery which was classified back to continuing operations during the
12 weeks ended June 18, 2005.

The
Company had classified all the locations identified in its strategic market rationalization program 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 within 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 relates to Security Plan Life Insurance Company.

40 Weeks Ended October 8, 2005 Compared to 40 Weeks Ended October 9, 2004

|                                                 |                                | 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                           |                                |                | 57,226
|Interest on long-term debt and refinancing costs |                                |                | 23,495
|Other expense (income), net                      |                                |                | (5,910
|                                                 |                                |                |       
|Income (loss) before income taxes                |                                |                | 39,641
|Income taxes                                     |                                |                | 5,844 
|                                                 |                                |                |       
|Net income (loss) from continuing operations     |                                |                | 33,797
|Loss from discontinued operations, net of tax    |                                |                | (1,678
|                                                 |                                |                |       
|Net income (loss)                                |                                | $              | 32,119
|                                                 |                                |                |       

39

---



Other
information for the 40 weeks ended October 8, 2005, and 40 weeks ended October 9, 2004, is summarized in the following table:

|                                                  |                                                |   |        |        |   | Increase (decrease) |       
|------------------------------------------------- | ---------------------------------------------- | - | ------ | ------ | - | ------------------- | ------
|
|Funeral  Other Information                       |                                                |   |        |        |   |                     |       
|Number of funeral services performed              |                                                |   | 89,103 |        |   | 90,599              |       
|                                                  | Number of same site funeral services performed |   |        | 87,162 |   |                     | 88,103
|Average revenue per funeral service               |                                                | $ | 4,126  |        | $ | 4,018               |       
|                                                  | Same site average revenue per funeral service  |   | $      | 4,137  |   | $                   | 4,032 
|Pre-need funeral contracts written (in millions)  |                                                | $ | 150.0  |        | $ | 137.3               |       
|Pre-need funeral conversion (percentages)         |                                                |   | 27     |        |   | 26                  |       
|Cemetery  Other Information                      |                                                |   |        |        |   |                     |       
|Number of cemetery interments                     |                                                |   | 36,264 |        |   | 36,058              |       
|Pre-need cemetery contracts written (in millions) |                                                | $ | 74.7   |        | $ | 65.5                |       

Continuing Operations

Consolidated revenue of $575.4 million for the 40 weeks ended October 8, 2005, increased by $25.5 million, or 4.6%, compared to the
corresponding period in 2004, reflecting increases in all business segment revenues. Consolidated gross margin as a percentage of revenue decreased to 15.2% for the 40 weeks ended
October 8, 2005, from 17.5% for the corresponding period in 2004.

Funeral
revenue of $367.7 million for the 40 weeks ended October 8, 2005, increased by $3.7 million, compared to $364.0 million for the corresponding
period in 2004, primarily as a result of an increase of $108, or 2.7%, in average revenue per funeral service performed, partially offset by a decrease in the number of funeral services performed. The
number of funeral services performed during the 40 weeks ended October 8, 2005 decreased by 1.7% from the corresponding period in 2004. 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 designed to both meet customer family needs and to increase average
revenues.

Included
in the funeral revenue for the 40 weeks ended October 8, 2005 is $21.7 million from 4,649 funeral services performed in New Orleans, Louisiana, and
on the Gulf Coast of Mississippi compared to $22.7 million of funeral revenue from 4,865 funeral services performed for the 40 weeks ended October 9, 2004. The Company's
funeral operations in these areas were affected significantly by Hurricane Katrina.

On
a same site basis funeral revenue was $360.6 million for the 40 weeks ended October 8, 2005, an increase of $5.4 million compared to $355.2 million
for the corresponding period in 2004, as a result of an increase of $105, or 2.6%, in average revenue per funeral service performed, offset by a decrease of 1.1% in the number of funeral services
performed from the corresponding period in 2004. If the locations affected by Hurricane Katrina were removed, the number of funeral services performed on a same site basis would have declined 1.2%
from the corresponding period in 2004 as the impacted locations were performing well prior to Hurricane Katrina.

The
number of cremation services performed as a percentage of total services performed increased to 36.4% for the 40 weeks ended October 8, 2005, compared to 35.3% for the
corresponding period in 2004, consistent with national trends. 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.

40

---



Funeral
gross margin as a percentage of revenue decreased to 18.0% for the 40 weeks ended October 8, 2005, compared to 21.2% for the corresponding period in 2004. The
decrease in gross margin was primarily due to (i) increased wages, training and advertising costs related to the Company's expanded field management structure and investment in programs
designed to build local brand awareness and generate growth in future services, (ii) a $2.7 million accrual for an expected insurance deductible and expenses not expected to be
reimbursed under the Company's insurance policy for damages at locations affected by Hurricane Katrina offset by $1.0 million of lower insurance costs compared to the prior year, and
(iii) a $1.3 million accrual for litigation claims during the 40 weeks ended October 8, 2005.

Pre-need
funeral contracts written for the 40 weeks ended October 8, 2005, were $150.0 million, compared to $137.3 million for the corresponding
period in 2004. The Company is continuing its program to increase pre-need sales. For the 40 weeks ended October 8, 2005, 27% of the funeral services performed were derived
from pre-need backlog, an increase from 26% in the comparative period in 2004. 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.
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 $134.7 million for the 40 weeks ended October 8, 2005, was $10.9 million, or 8.8%, higher than cemetery revenue for the corresponding
period in 2004, primarily due to increased space sales of $7.6 million at the Company's Rose Hills subsidiary, combined with an overall increase in the number of cemetary interments and a
reduction of $0.7 million in the allowance for cancellation of related customer receivables as a result of improving collection trends.

Cemetery
gross margin as a percentage of revenue decreased to 13.1% for the 40 weeks ended October 8, 2005, compared to 13.2% for the corresponding period in 2004. The
decrease in gross margin includes a $0.9 million accrual for an expected insurance deductible and expenses not expected to be reimbursed under the Company's insurance policy for damages at
locations affected by Hurricane Katrina and a $0.4 million accrual for litigation claims during the 40 weeks ended October 8, 2005.

Pre-need
cemetery contracts written for the 40 weeks ended October 8, 2005, were $74.7 million, compared to $65.5 million for the corresponding
period in 2004. The increase in pre-need cemetery contracts written was primarily due to higher sales of cemetery spaces at the Company's Rose Hills subsidiary. 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 initial 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 8, 2005, increased $10.9 million, or 17.6%, compared to the corresponding period in 2004, primarily due to increases
in premiums of $10.0 million. 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 represents the insurance segment's participation in the Company's pre-need funeral contracts and for the 40 weeks ended October 8, 2005 was
$105.3 million compared to $86.4 million for the corresponding period in 2004. Insurance gross margin as a percentage of revenue decreased to 4.7% for the 40 weeks ended
October 8, 2005, compared to 4.8% for the corresponding period in 2004, due to a decrease in investment gains of $1.0 compared to the 40 weeks ended October 9, 2004. The Company
expects the insurance gross margin percentage to grow modestly over the near term.

41

---



General
and administrative expenses decreased $4.7 million for the 40 weeks ended October 8, 2005, to $31.5 million, or 5.5% of consolidated revenue, compared
to $36.2 million, or 6.6% of consolidated revenue, for the corresponding period in 2004. General and administrative expenses included the
following items affecting the comparison of the 40 weeks ended October 8, 2005 to the 40 weeks ended October 9, 2004:

|                                                                                              |  | 40 Weeks Ended |      
|--------------------------------------------------------------------------------------------- |  | -------------- | -----
|
|
|Recovery of corporate receivable previously fully reserved against                            |  | $              | (10.9
|Reduction in accrual on settlement of U.S. trustee bankruptcy fee                             |  |                | (0.9 
|Increased Sarbanes-Oxley compliance costs                                                     |  |                | 2.5  
|Increased support center facilities costs                                                     |  |                | 1.0  
|Retirement allowance accrual                                                                  |  |                | 1.1  
|Foreign exchange impact on Canadian dollar based support centers                              |  |                | 0.7  
|Reversal of legal claim accrual due to approvals obtained for insurance coverage of the costs |  |                |     

In
accordance with FAS 142, the Company undertook its annual goodwill impairment review during the 40 weeks ended October 8, 2005. 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 reporting unit exceeded its carrying amount as of October 8, 2005.

Interest
expense on long-term debt for the 40 weeks ended October 8, 2005, was $23.5 million, a decrease of $44.0 million from the corresponding
period of $67.5 million, reflecting the effect of principal repayments and lower interest rates compared to interest expense, tender premium and refinancing costs in the corresponding period in
2004 partially offset by the inclusion in the 40 weeks ended October 9, 2004 of a credit of $7.2 million from the unamortized premium upon the early retirement of the 12.25%
Convertible Subordinated Notes due in 2012, as detailed in the following table:

|                                                                                                                              |  | 40 Weeks Ended |     
|----------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----
|
|
|Interest on long-term debt                                                                                                    |  | $              | 20.6
|Amortization of debt issue costs                                                                                              |  |                | 2.6 
|Tender premiums on the repurchase of the 12.25% Senior Unsecured Notes due in 2009                                            |  |                | 0.3 
|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 were fully retired |  |                |    
|Allocation of interest to discontinued operations                                                                             |  |                |    
|                                                                                                                              |  |                |     
|Total interest on long-term debt and refinancing costs                                                                        |  | $              | 23.5
|                                                                                                                              |  |                |     

42

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Income tax expense for the 40 Weeks Ended October 8, 2005 was $5.8 million compared to $1.6 million for the corresponding period in 2004. During the
40 Weeks Ended October 8, 2005, the Company recorded the non-cash resolution of an outstanding tax liability by reducing its tax expense by $12.1 million. The
year-to-date effective tax rate before the above benefit was approximately 45%. Future realizations of the benefits of the tax assets that had a corresponding valuation
allowance established on January 2, 2002 will result in a reduction to goodwill established on January 2, 2002. The effective tax rate also varied from the statutory tax rate for the
40 weeks ended October 8, 2005, because in certain jurisdictions, losses incurred may not offset the tax expense in profitable jurisdictions.

During
the 40 weeks ended October 8, 2005, the Company sold 22 funeral, five cemetery and four combination locations for gross proceeds of $9.1 million.

Discontinued Operations

Over the previous three 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 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.

As
of June 18, 2005, the Company completed the strategic market rationalization program except for one cemetery which was classified back to continuing operations during
the 12 weeks ended June 18, 2005.

The
Company had classified all the locations identified in its strategic market rationalization program 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 within 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 relates to Security Plan Life Insurance 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

43

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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                                                                  |                | $         | 1,307,643      |  
|                                | Sales, net of cancellations                                                        |                |           | 50,835         |  
|                                | Maturities                                                                         |                |           | (34,475        | )
|                                | Net increase in insurance benefits and earnings realized on funeral trust balances |                |           | 9,634          |  
|                                | Change in cancellation reserve                                                     |                |           | (2,829         | )
|                                | Other                                                                              |                |           | 2,378          |  
|                                |                                                                                    |                |           |                |  
|                                | Ending balance                                                                     |                | $         | 1,333,186      |  
|                                |                                                                                    |                |           |                |  
|Trust funded                    |                                                                                    | $              | 349,972   |                | $
|Third party insurance companies |                                                                                    |                | 662,745   |                |  
|Subsidiary insurance companies  |                                                                                    |                | 320,469   |                |  
|                                |                                                                                    |                |           |                |  
|                                |                                                                                    | $              | 1,333,186 |                | $
|                                |                                                                                    |                |           |                |  

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                            |                | $ | 270,650        |  
|                  | Sales, net of cancellations                  |                |   | 26,842         |  
|                  | Maturities                                   |                |   | (26,006        | )
|                  | Earnings realized on cemetery trust balances |                |   | 4,243          |  
|                  | Change in cancellation reserve               |                |   | 270            |  
|                  | Other                                        |                |   | (1709          | )
|                  |                                              |                |   |                |  
|                  | Ending balance                               |                | $ | 274,290        |  
|                  |                                              |                |   |                |  

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 52 weeks ended January 1, 2005, as filed with the SEC.

Net
cash from continuing operating activities was $45.9 million for the 16 weeks ended October 8, 2005, compared to $37.3 million for the corresponding period
in 2004. The increase is due primarily to an $11.5 million settlement the Company received for satisfaction of all outstanding obligations under the $15 million of notes which were set
up as part of the purchase price for the 2001 sale by the predecessor

44

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company
of its interests in certain Michigan cemeteries. The Company had established an allowance against the full principal amount of the notes at the time of sale of the cemeteries due to concerns
over collectability.

Net
cash from continuing operating activities was $116.8 million for the 40 weeks ended October 8, 2005, compared to $75.8 million for the corresponding
period in 2004. The increase is primarily due to $25.4 million in withdrawals of excess funds from funeral and cemetery trusts resulting from the Company's ongoing review process (which is
substantially complete), $16.1 million related to collateral for liability lines of insurance coverage replaced with a letter of credit and the collection of an $11.5 million settlement
for notes receivables previously set up as an allowance (as described above). The increase is partially offset by the payment of $9.1 million as settlement of the U.S. trustee
bankruptcy fee.

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

Net
cash used in continuing investing activities was $29.8 million for the 16 weeks ended October 8, 2005, compared to $44.5 million for the corresponding
period in 2004, primarily due to the decrease of $14.2 million in net purchases of insurance assets.

Net
cash used in continuing investing activities was $52.7 million for the 40 weeks ended October 8, 2005, compared to $54.9 million for the corresponding
period in 2004, primarily due to the decrease of $9.7 million in net purchase of insurance assets, partially offset by an increase in purchase of property and equipment of $7.9 million.

Net
cash used in continuing financing activities was $21.7 million for the 16 weeks ended October 8, 2005, compared to $128.3 million for the corresponding
period in 2004. The decrease of $106.6 million was due primarily to the lower net repayment of debt during the 16 weeks ended October 8, 2005, compared to the corresponding period
in 2004.

Net
cash used in continuing financing activities was $74.3 million for the 40 weeks ended October 8, 2005, compared to $156.9 million for the corresponding
period in 2004. The decrease of $82.6 million was primarily due to the lower net repayment of debt during the 40 weeks ended October 8, 2005, compared to the corresponding period
in 2004.

The
net cash from discontinued operations of nil for the 16 weeks ended October 8, 2005, compared to net cash provided by discontinued operations of $97.5 million in
the corresponding period in 2004 was due to the completion of the Company's disposition program as of the end of the second fiscal quarter of 2005.

For
the 40 weeks ended October 8, 2005, the majority of proceeds from the sale of the Company's operating locations and excess real estate were used to further reduce long
term debt.

As
of October 8, 2005, the Company's cash balance was $6.3 million and the amount available under the Credit Agreement's $75.0 million revolving credit facility
(the "Revolving Credit Facility") was $75.0 million, less $17.7 million in outstanding letters of credit. The Company's debt repayment obligation over the next 12 months is
$2.5 million and aggregates $185.1 million over the next five years. The Company believes that the Revolving Credit Facility, 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.

45

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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 1, 2005 |       | Net increase
(decrease) |   | Long-Term
Indebtedness Carrying
Value October 8, 2005
|------------------------------------------------ | ---------------- | ----------------------------------------------------- | ----- | ----------------------- | - | -----------------------------------------------------
|
|Revolving credit facility                        |                  | $                                                     |      |                         | $ |                                                     
|Senior secured Term Loan B due in 2009           |                  |                                                       | 246.8 |                         |   | (68.3                                                
|7.75% Senior unsecured notes due in 2012         |                  |                                                       | 200.0 |                         |   |                                                     
|12.25% Senior unsecured notes due in 2009        |                  |                                                       | 4.5   |                         |   | (4.5                                                 
|Promissory notes and capitalized obligations (a) |                  |                                                       | 12.3  |                         |   | (4.0                                                 
|                                                 |                  |                                                       |       |                         |   |                                                      
|                                                 | Carrying amounts |                                                       | $     | 463.6                   |   | $                                                    
|                                                 |                  |                                                       |       |                         |   |                                                      

---

The
Credit Agreement and the Eight-Year Senior Unsecured Notes are guaranteed by substantially all of Alderwoods Group's wholly-owned U.S. subsidiaries, other than the
Alderwoods Group'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 8, 2005, the Company met all of the financial covenants required by the Credit Agreement.

In
connection with the issuance of the Eight-Year Senior Unsecured Notes, the Company entered into a registration rights agreement, pursuant to which the Company was
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 SEC. On May 12, 2005, the Company
filed the exchange offer registration statement with the SEC. The registration statement was subsequently declared effective by the SEC on June 7, 2005. On June 8, 2005, the Company
commenced an exchange offer (the "Exchange Offer") pursuant to which holders of the Eight-Year Senior Unsecured Notes were given the opportunity to exchange their outstanding notes
for new notes with substantially identical terms covered by the exchange offer registration statement. The Company consummated the Exchange Offer on July 18, 2005.

46

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Contractual Obligations and Commercial Commitments

The following table details the Company's contractual obligations of continuing and discontinued operations as of October 8, 2005. Significant changes to
long-term debt are discussed above under "Long-Term Indebtedness."

|                                                     |  | Payments Due by Period
|---------------------------------------------------- |  | ----------------------
|
|
|Long-term debt (a)                                   |  | $                     
|Promissory notes and capitalized obligations (a) (b) |  |                       
|Operating leases (c)                                 |  |                       
|                                                     |  |                       
|Total                                                |  | $                     
|                                                     |  |                       

---

In
addition to the operating leases noted in the table above, as of October 8, 2005, the Company leased approximately 1,236 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 $7.7 million over the next 12 months.

The
Company issues purchase orders for the supply of goods and services for its operations. As of October 8, 2005, 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.

The
following table details the Company's commercial commitments as of October 8, 2005.

|                                   |  | Amount of Commitment Expiration Per Period
|---------------------------------- |  | ------------------------------------------
|
|
|Lines of credit (a)                |  | $                                         
|Standby letters of credit (b)      |  |                                           
|                                   |  |                                           
|Total contractual cash obligations |  | $                                         
|                                   |  |                                           

---

47

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At
October 8, 2005, the aggregate fair value of the Company's forward foreign currency exchange contracts and foreign currency option contracts was an asset of
$1.4 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 52 weeks ended
January 1, 2005, as filed with the SEC.

Employment Agreements

On July 21, 2005, the Board of Directors of Alderwoods Group: (1) adopted new employment agreements with each of John S. Lacey, Chairman of the
Board, Paul A. Houston, President and Chief Executive Officer, Kenneth A. Sloan, Executive Vice President, Chief Financial Officer, and Ross S. Caradonna, Executive Vice
President, Chief Information Officer, in each case to be effective August 1, 2005 and to replace the existing employment agreement with such individual; (2) adopted an amendment to the
2003-2005 Executive Strategic Incentive Plan; and (3) adopted the 2005-2007 Executive Strategic Incentive Plan.

On
July 25, 2005 the Company filed a Current Report on Form 8-K that contains further details with respect to these actions, as well as certain other recent
actions taken by the Board of Directors and the Compensation Committee.

Off-Balance Sheet Arrangements

Off-balance sheet arrangements as of October 8, 2005, 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 on long-term debt and refinancing costs, taxes, depreciation and amortization,
provision for goodwill impairment and provision for asset impairment ("EBITDA"), a non-GAAP financial measure, 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 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, income from operations 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 the Company's liquidity.

48

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EBITDA
has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of results as reported under GAAP. Some of these limitations are:



Because
of these limitations, EBITDA should not be considered as a measure of discretionary cash available to the Company to invest in the growth of its business or reduce its
indebtedness.

|                                                 |  | 16 weeks Ended |         | 40 weeks Ended |  
|------------------------------------------------ |  | -------------- | ------- | -------------- | -
|
|
|EBITDA from continuing operations:               |  |                |         |                |  
|Net income from continuing operations            |  | $              | 6,905   |                | $
|Income taxes                                     |  |                | (12,349 | )              |  
|Interest on long-term debt and refinancing costs |  |                | 8,967   |                |  
|Depreciation                                     |  |                | 13,778  |                |  
|Provision for asset impairment                   |  |                | 254     |                |  
|                                                 |  |                |         |                |  
|EBITDA from continuing operations                |  | $              | 17,555  |                | $
|                                                 |  |                |         |                |  

Restrictions

The Credit Agreement and the indenture governing the Eight-Year Senior 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 $40.0 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

49

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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 and in the indenture governing the Eight-Year Senior Unsecured Notes restrict, and under specified circumstances prohibit, the payment of
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 subsidiary is subject to certain state regulations that restrict distributions, loans and advances from the subsidiary to the Company and its other subsidiaries.
The cash flow used in operations of the insurance subsidiary for the 16 and 40 weeks ended October 8, 2005, was approximately $18.1 million and $35.9 million,
respectively, all of which premiums have been used for net purchases of insurance invested assets.

50

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Operating Locations

The Company's number of operating locations by country, state and province as of October 8, 2005, and the overall totals as of October 8, 2005, and
January 1, 2005, are summarized in the table below.

|                                     |                  | Number of
Operating Locations |    |   
|------------------------------------ | ---------------- | ----------------------------- | -- | --
|
|
|Canada                               |                  |                               |    |   
|                                     | British Columbia |                               | 17 |   
|                                     | Alberta          |                               | 11 |   
|                                     | Saskatchewan     |                               | 23 |   
|                                     | Manitoba         |                               | 3  |   
|                                     | Ontario          |                               | 22 |   
|                                     | Quebec           |                               | 14 |   
|                                     | Nova Scotia      |                               | 7  |   
|                                     |                  |                               |    |   
|Total Canadian                       |                  | 97                            |    | 1 
|United States                        |                  |                               |    |   
|                                     | Alabama          |                               | 7  |   
|                                     | Alaska           |                               | 3  |   
|                                     | Arizona          |                               | 5  |   
|                                     | Arkansas         |                               | 3  |   
|                                     | California       |                               | 44 |   
|                                     | Colorado         |                               | 3  |   
|                                     | Connecticut      |                               | 3  |   
|                                     | Florida          |                               | 31 |   
|                                     | Georgia          |                               | 25 |   
|                                     | Idaho            |                               | 4  |   
|                                     | Illinois         |                               | 6  |   
|                                     | Indiana          |                               | 16 |   
|                                     | Kansas           |                               | 7  |   
|                                     | Kentucky         |                               | 1  |   
|                                     | Louisiana        |                               | 21 |   
|                                     | Maryland         |                               | 2  |   
|                                     | Massachusetts    |                               | 13 |   
|                                     | Michigan         |                               | 12 |   
|                                     | Minnesota        |                               | 9  |   
|                                     | Mississippi      |                               | 21 |   
|                                     | Montana          |                               | 4  |   
|                                     | Nevada           |                               | 2  |   
|                                     | New Hampshire    |                               | 4  |   
|                                     | New Mexico       |                               | 5  |   
|                                     | New York         |                               | 37 |   
|                                     | North Carolina   |                               | 26 |   
|                                     | Ohio             |                               | 16 |   
|                                     | Oklahoma         |                               | 18 |   
|                                     | Oregon           |                               | 18 |   
|                                     | Pennsylvania     |                               | 6  |   
|                                     | Rhode Island     |                               | 3  |   
|                                     | South Carolina   |                               | 6  |   
|                                     | Tennessee        |                               | 30 |   
|                                     | Texas            |                               | 56 |   
|                                     | Virginia         |                               | 22 |   
|                                     | Washington       |                               | 21 |   
|                                     | West Virginia    |                               | 3  |   
|                                     | Puerto Rico      |                               | 3  |   
|                                     |                  |                               |    |   
|Total United States                  |                  | 516                           |    | 71
|                                     |                  |                               |    |   
|Overall total, as of October 8, 2005 |                  | 613                           |    | 72
|                                     |                  |                               |    |   
|Overall total, as of January 1, 2005 |                  | 648                           |    | 79
|                                     |                  |                               |    |   

51

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As of June 18, 2005, the Company had completed the sale of all locations classified as discontinued operations.

The
total number of locations of 790 as of January 1, 2005, includes operating locations that had been classified as discontinued operations.

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 52 weeks ended January 1, 2005, as filed with the SEC. As of October 8, 2005,
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 the end of the period covered
by the report, an evaluation was carried out, under the supervision and with the participation of the Company's management, including the Chief Executive Officer, the Company's principal executive
officer (the "CEO"), and the Chief Financial Officer, the Company's principal financial officer (the "CFO"), of the effectiveness of the Company's disclosure controls and procedures as
of October 8, 2005. The Company has substantially completed implementation of the changes it believes are required to remediate the previously reported material weaknesses in internal control
over financial reporting related to maintaining an effective control environment (i) over the financial reporting and income tax processes that have resulted in limitation in the capacity of
the accounting and tax resources to identify and react in a timely manner to new accounting pronouncements and non-routine and complex business transactions and (ii) at its
operating locations that have resulted in the Company not achieving full awareness and consistent compliance with the Company's policies and procedures which are designed to both prevent and detect
misstatements at the location level. The changes the Company has implemented include those outlined below, as well as other procedures to correct and/or mitigate the material weaknesses and other
deficiencies the Company has identified; however, certain of the corrective processes, procedures and controls have not been tested. Accordingly, the CEO and CFO have concluded that the Company's
disclosure controls and procedures were not effective as of October 8, 2005.

We
continue to monitor the effectiveness of our internal controls over financial reporting and will make any further changes management deems appropriate. The Company believes that the
actions it has taken to date in this regard, when taken as a whole, have mitigated the material weaknesses and other deficiencies with respect to the preparation of this Quarterly Report on
Form 10-Q such that the information required to be disclosed herein has been recorded, processed, summarized and reported correctly.

Remediation of Material Weakness

In order to remediate these material weaknesses, the Company has made the following changes:



52

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Changes In Internal Controls Over Financial Reporting

During the third fiscal quarter of 2005 the Company completed the implementation of phase 1 of the new tax accounting system for use in interim reporting.
The new tax accounting system is designed to improve the accuracy and timing of the state and entity level calculations required for financial statement disclosure and detailed analysis of the
valuation allowance.

During
the third fiscal quarter of 2005 the Company continued implementing a new pre-need funeral trust accounting software system. The implementation has involved changes to
our processes, and accordingly, has required changes to internal controls.

Other
than the changes discussed above, there have not been any changes in the Company's internal control over financial reporting (as defined in
Rules 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 have materially affected, or are 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

53

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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.

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 is permitted 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

54

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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 indenture governing the Eight-Year Senior
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.

The Company depends on the cash flows from its subsidiaries to meet its obligations.

Alderwoods Group is a holding company with no independent operations. As a result, Alderwoods Group depends on its subsidiaries to provide cash flows necessary to
service debt obligations at the Alderwoods Group level. Alderwoods Group's cash flows and its ability to service its debt depends on the earnings of its subsidiaries and on the distribution of
earnings, loans or other payments to it by these subsidiaries. The ability of a subsidiary to make any dividend, distribution, loan or other payment to Alderwoods Group or another subsidiary could be
subject to statutory or contractual restrictions. For example, Alderwoods Group's insurance subsidiary is subject to state regulation that restrict distributions, loans and advances to Alderwoods
Group and other subsidiaries. Payments by a subsidiary to Alderwoods Group or another subsidiary will also be contingent upon earnings and business considerations of such subsidiary. Because
Alderwoods Group depends on the cash flows of subsidiaries to meet its obligations, these types of restrictions may impair Alderwoods Group's ability to make scheduled interest and principal payments
on its debts.

Restrictive covenants in the Company's Credit Agreement and the indenture governing the Eight-Year Senior 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 indenture governing the Eight-Year Senior Unsecured Notes limit its ability and the ability of its
subsidiaries to, among other things:



55

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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, and if the
Company is unable to negotiate a waiver with its lenders, 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 death care 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 three largest public operators in the death care industry in the United States based on total
revenue and number of locations, are Service Corporation International, Alderwoods Group and Stewart Enterprises, Inc. The Company believes the three largest public death care companies
collectively generate approximately 20% of funeral service 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 attention and
well-maintained locations are also important. Gains in market share within a 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,

56

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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 organization. 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.

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. Expenses for the Company's corporate and administrative functions are paid principally in Canadian dollars and have predictable future cash outflows ("Foreign
Currency Expenditure"). The Company has a program to hedge the variability in the United States dollar equivalent of a portion of the Foreign Currency Expenditure due to the fluctuation in the
exchange rate between the United States dollar and Canadian dollar ("Foreign Currency Hedge Program"). The Company uses forward foreign exchange contracts and foreign exchange option contracts
to partially mitigate foreign exchange variability. Under the Foreign Currency Hedge Program, losses or gains in the Company's underlying foreign exchange exposure are partially offset by gains or
losses on the forward foreign exchange contracts and foreign exchange option contracts, so as to reduce the magnitude of foreign exchange transaction gains or losses. Any hedging activities the
Company undertakes may not be successful in mitigating all of this risk.

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The Company's effective income tax rate may vary.

The Company expects that its effective income tax rate for 2005 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.

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 death care 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 and 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 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 access to capital and the market price of the Company's Common Stock.

In performing the evaluation of the effectiveness of its internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act,
management identified two material weaknesses in the Company's internal control over financial reporting as of January 1, 2005. One material weakness identified was that the Company did not
maintain an effective control environment over the financial reporting and income tax processes such that there were limitations in the capacity of the accounting and tax resources to identify and
react in a timely manner to new accounting pronouncements and non-routine and complex business transactions, certain of which limitations were due to a lack of experienced personnel and
turnover in accounting and corporate tax functions. The other material weakness identified was that the Company did not maintain an effective control environment at its operating locations that has
resulted in the Company not achieving full awareness and consistent compliance with the Company's policies and procedures which are designed to both prevent and detect misstatements at the location
level.

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Accordingly,
management concluded that the Company did not maintain effective internal control over financial reporting as of January 1, 2005. These factors, the Company's ability to remediate
the material weaknesses in a timely manner, or other future changes in internal controls could cause investors to lose confidence in the accuracy of the Company's financial statements and 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 29% of all deaths in 2003
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 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 4 to the Company's interim consolidated financial statements included in
Part I of this Quarterly Report on Form 10-Q, which Note 4 is incorporated herein by reference.

ITEM 5.    OTHER INFORMATION

The Company's Nominating and Corporate Governance Committee recommended, and the Company's Board of Directors approved amendments to the Company's Code of
Business Conduct and Ethics (the "Code"), which applies to all officers (including senior financial and executive officers), directors and employees of the Company, effective
November 14, 2005. The amendments to the Code are briefly described below, and the revised Code is furnished as an exhibit to this Form 10-Q. The Code is posted on, and is
available, free of charge through, the Company's web site (http://www.alderwoods.com) in the Corporate Governance section of the Investor Relations page. Copies of the Code are also available free of
charge upon written request to the Company's Secretary at 311 Elm Street, Suite 1000, Cincinnati, Ohio 45202-2706.

The
amendments to the Code:



ITEM 6.    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)
|               |  |                                                                                                                                                                                                                                                                                                               

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|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 Fourth 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 10-12G/A 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)                                                                                                                                                                                                   
|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)                                                                                                                   
|    |  |                                                                                                                                                                                                                                                                                                                                                                                   

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|4.9   |  | Indenture governing the 73/4% Senior Unsecured Notes due 2012 (incorporated by reference to Exhibit 4.9 to the Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277,
 filed November 18, 2004)                                                                                                                                                                                                                                
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 (incorporated by reference to Exhibit 4.11 to the
Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed November 18, 2004)                                                                                                                                                                         
|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
(incorporated by reference to Exhibit 10.4 to the Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed November 18, 2004)                                                                                     
|10.5  |  | Amendment No. 3 dated December 3, 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
(incorporated by reference to Exhibit 10.1 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed December 8, 2004)                                                                                      
|10.6  |  | Amendment No. 4 dated March 18, 2005, 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
(incorporated by reference to Exhibit 10.1 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 24, 2005)                                                                                          
|*10.7 |  | Amended and Restated Employment Agreement dated August 1, 2005, by and between Alderwoods Group Canada Inc. and Kenneth A. Sloan (incorporated by reference to Exhibit 10.3 to the Form 8-K of Alderwoods
Group, Inc., SEC File No. 000-33277, filed July 25, 2005)                                                                                                                                                                  
|*10.8 |  | 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)                                                                                                                                                                                                 
|*10.9 |  | Amended and Restated Employment Agreement dated August 1, 2005, by and between Alderwoods Group Canada Inc. and Ross S. Caradonna (incorporated by reference to Exhibit 10.4 to the Form 8-K of
Alderwoods Group, Inc., SEC File No. 000-33277, filed July 25, 2005)                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      

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|*10.10 |  | 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)                           
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.11 |  | Amended and Restated Employment Agreement dated August 1, 2005, by and between Alderwoods Group Canada Inc. and John S. Lacey (incorporated by reference to Exhibit 10.1 to the Form 8-K of Alderwoods
Group, Inc., SEC File No. 000-33277, filed July 25, 2005)  
|*10.12 |  | Amended and Restated Employment Agreement dated August 1, 2005, by and between Alderwoods Group Canada Inc. and Paul A. Houston (incorporated by reference to Exhibit 10.2 to the Form 8-K of Alderwoods
Group, Inc., SEC File No. 000-33277, filed July 25, 2005)
|*10.13 |  | Employment Agreement dated May 10, 2005, by and between Alderwoods Group, Inc. and Aaron Shipper (incorporated by reference to Exhibit 10.1 to Form 8-K of Alderwoods Group, Inc., SEC File
No. 000-33277, filed May 12, 2005)                                    
|*10.14 |  | Employment Agreement dated May 10, 2005, by and between Alderwoods Group, Inc. and Mark W. H. Wilson (incorporated by reference to Exhibit 10.2 to Form 8-K of Alderwoods Group, Inc., SEC File
No. 000-33277, filed May 12, 2005)                                
|*10.15 |  | 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)                                                                           
|*10.16 |  | Alderwoods Group, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed May 3,
2005)                                                                                
|*10.17 |  | Alderwoods Group, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed May 3,
2005)                                                                              
|*10.18 |  | 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)                                                                                                  
|*10.19 |  | 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)                                                        
|*10.20 |  | Amendment to the Alderwoods Group Canada Inc. 2003-2005 Executive Strategic Incentive Plan (incorporated by reference to Exhibit 10.5 to the Form 8-K of Alderwoods Group, Inc., SEC File
No. 000-33277, filed July 25, 2005)                                     
|*10.21 |  | Alderwoods Support Function Annual Incentive Plan (incorporated by reference to Exhibit 10.19 to Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 28, 2005)                                                                               
|10.22  |  | Description of Compensation of Directors (incorporated by reference to Exhibit 10.20 to the Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed April 28, 2005)                                                                                    
|10.23  |  | Form of Indemnification Agreement between Alderwoods Group, Inc. and each of its directors and executive officers (incorporated by reference to Exhibit 10.33 to Form S-1/A of Alderwoods Group, Inc.,
SEC File No. 333-85316, filed July 25, 2002)               
|*10.24 |  | 2005-2007 Executive Strategic Incentive Plan of Alderwoods Group Canada Inc. (incorporated by reference to Exhibit 10.6 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed
July 25, 2005)                                                   
|       |  |                                                                                                                                                                                                                                                                   

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|*10.25 |  | Form of Director Non-Qualified Stock Option Agreement (2005 Equity Incentive Plan) (incorporated by reference to Exhibit 10.7 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed
July 25, 2005)
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.26 |  | Form of Employee Non-Qualified Stock Option Agreement (2005 Equity Incentive Plan) (incorporated by reference to Exhibit 10.8 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed
July 25, 2005)
|*10.27 |  | Form of Restricted Stock Units Agreement (2005 Equity Incentive Plan) (incorporated by reference to Exhibit 10.9 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed July 25,
2005)             
|14.1   |  | Code of Business Conduct and Ethics**                                                                                                                                                                                
|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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SIGNATURES

Pursuant to the requirements 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 16, 2005 |  | By:                   

65

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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 Fourth 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 10-12G/A 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)                                                                                                                                                                                                   
|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)                                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                                                                                                   

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|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 (incorporated by reference to Exhibit 4.9 to the Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277,
 filed November 18, 2004)                                                                                                                                                                                                                                
|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 (incorporated by reference to Exhibit 4.11 to the
Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed November 18, 2004)                                                                                                                                                                         
|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
(incorporated by reference to Exhibit 10.4 to the Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed November 18, 2004)                                                                                     
|10.5 |  | Amendment No. 3 dated December 3, 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
(incorporated by reference to Exhibit 10.1 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed December 8, 2004)                                                                                      
|10.6 |  | Amendment No. 4 dated March 18, 2005, 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
(incorporated by reference to Exhibit 10.1 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 24, 2005)                                                                                          
|10.7 |  | Amended and Restated Employment Agreement dated August 1, 2005, by and between Alderwoods Group Canada Inc. and Kenneth A. Sloan (incorporated by reference to Exhibit 10.3 to the Form 8-K of Alderwoods
Group, Inc., SEC File No. 000-33277, filed July 25, 2005)                                                                                                                                                                  
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      

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|10.8  |  | 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)                                
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.9  |  | Amended and Restated Employment Agreement dated August 1, 2005, by and between Alderwoods Group Canada Inc. and Ross S. Caradonna (incorporated by reference to Exhibit 10.4 to the Form 8-K of
Alderwoods Group, Inc., SEC File No. 000-33277, filed July 25, 2005)
|10.10 |  | 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)                             
|10.11 |  | Amended and Restated Employment Agreement dated August 1, 2005, by and between Alderwoods Group Canada Inc. and John S. Lacey (incorporated by reference to Exhibit 10.1 to the Form 8-K of Alderwoods
Group, Inc., SEC File No. 000-33277, filed July 25, 2005)    
|10.12 |  | Amended and Restated Employment Agreement dated August 1, 2005, by and between Alderwoods Group Canada Inc. and Paul A. Houston (incorporated by reference to Exhibit 10.2 to the Form 8-K of Alderwoods
Group, Inc., SEC File No. 000-33277, filed July 25, 2005)  
|10.13 |  | Employment Agreement dated May 10, 2005, by and between Alderwoods Group, Inc. and Aaron Shipper (incorporated by reference to Exhibit 10.1 to Form 8-K of Alderwoods Group, Inc., SEC File
No. 000-33277, filed May 12, 2005)                                      
|10.14 |  | Employment Agreement dated May 10, 2005, by and between Alderwoods Group, Inc. and Mark W. H. Wilson (incorporated by reference to Exhibit 10.2 to the Form 8-K of Alderwoods Group, Inc., SEC
File No. 000-33277, filed May 12, 2005)                              
|10.15 |  | 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)                                                                             
|10.16 |  | Alderwoods Group, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed May 3,
2005)                                                                                  
|10.17 |  | Alderwoods Group, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed May 3,
2005)                                                                                
|10.18 |  | 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)                                                                                                    
|10.19 |  | 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)                                                          
|10.20 |  | Amendment to the Alderwoods Group Canada Inc. 2003-2005 Executive Strategic Incentive Plan (incorporated by reference to Exhibit 10.5 to the Form 8-K of Alderwoods Group, Inc., SEC File
No. 000-33277, filed July 25, 2005)                                       
|10.21 |  | Alderwoods Support Function Annual Incentive Plan (incorporated by reference to Exhibit 10.19 to Form 10-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed March 28, 2005)                                                                                 
|10.22 |  | Description of Compensation of Directors (incorporated by reference to Exhibit 10.20 to the Form 10-Q of Alderwoods Group, Inc., SEC File No. 000-33277, filed April 28, 2005)                                                                                      
|10.23 |  | Form of Indemnification Agreement between Alderwoods Group, Inc. and each of its directors and executive officers (incorporated by reference to Exhibit 10.33 to Form S-1/A of Alderwoods Group, Inc.,
SEC File No. 333-85316, filed July 25, 2002)                 
|      |  |                                                                                                                                                                                                                                                                     

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|10.24 |  | 2005-2007 Executive Strategic Incentive Plan of Alderwoods Group Canada Inc. (incorporated by reference to Exhibit 10.6 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed
July 25, 2005)      
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.25 |  | Form of Director Non-Qualified Stock Option Agreement (2005 Equity Incentive Plan) (incorporated by reference to Exhibit 10.7 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed
July 25, 2005)
|10.26 |  | Form of Employee Non-Qualified Stock Option Agreement (2005 Equity Incentive Plan) (incorporated by reference to Exhibit 10.8 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed
July 25, 2005)
|10.27 |  | Form of Restricted Stock Units Agreement (2005 Equity Incentive Plan) (incorporated by reference to Exhibit 10.9 to the Form 8-K of Alderwoods Group, Inc., SEC File No. 000-33277, filed July 25,
2005)             
|14.1  |  | Code of Business Conduct and Ethics                                                                                                                                                                                  
|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:

|Date: November 16, 2005 | By: | /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:

|Date: November 16, 2005 | By: | /s/KENNETH A. SLOANKenneth A. Sloan
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer and
Chief 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 8, 2005, 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 16, 2005 | /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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