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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission file number _____________
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PRIME SUCCESSION, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 13-3904211
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3940 Olympic Blvd., Suite 500 41018
Erlanger, Kentucky, U.S.A. (Postal Code)
(Address of principal executive offices)
(Registrant's telephone number, including area code) (606) 746-6800
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ______
The number of outstanding shares of Common Stock as of November 10,
1998, was 100.
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<PAGE>
TABLE OF CONTENTS
Page
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS
as of September 30, 1998 and December 31, 1997 1
CONSOLIDATED STATEMENTS OF OPERATIONS
for the Three Months Ended September 30, 1998 and 1997
and the Nine Months Ended September 30, 1998 and 1997 3
CONSOLIDATED STATEMENTS of CASH FLOWS
for the Nine Months Ended September 30, 1998 and 1997 4
NOTES to INTERIM CONSOLIDATED FINANCIAL STATEMENTS 5
Item 2. MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS 6
Part II. OTHER INFORMATION
Item 5. OTHER INFORMATION 13
Item 6. EXHIBITS and REPORTS on FORM 8-K 13
SIGNATURES 13
(i)
<PAGE>
<TABLE>
PART I
ITEM 1. FINANCIAL STATEMENTS
PRIME SUCCESSION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1998 December 31, 1997
(unaudited)
Assets
<S> <C> <C>
Cash and cash equivalents $ 1,642,112 $ 1,555,415
Receivables:
Trade, less allowance of $2,280,987 and $2,647,693 10,954,735 13,073,005
Other 1,976,438 4,492,005
----------- -----------
Total receivables 12,931,173 17,565,010
Inventories:
Merchandise 3,646,968 3,836,994
Cemetery lots and mausoleum spaces 1,252,411 1,693,530
----------- -----------
Total inventories 4,899,379 5,530,524
----------- -----------
Prepaids and other current assets 454,176 319,000
Deferred income taxes 749,859 723,566
----------- -----------
Total current assets 20,676,699 25,693,515
----------- -----------
Property and equipment:
Land and land improvements 16,549,402 16,190,801
Buildings and improvements 47,421,415 47,313,605
Equipment, furniture and fixtures 10,086,756 9,051,236
Accumulated depreciation (5,150,885) (3,165,322)
----------- -----------
Net property and equipment 68,906,688 69,390,320
----------- -----------
Developed cemetery properties 14,745,197 12,996,135
Undeveloped cemetery properties 30,992,379 31,902,345
Goodwill, less accumulated amortization of $11,784,665 and $7,482,615 219,615,546 222,086,427
Other intangible assets, less accumulated amortization of $8,936,378 and 20,394,493 23,147,315
$5,866,178
Long-term receivables, less allowance of $3,594,613 and $3,288,268 15,159,224 9,318,513
Other assets 534,646 571,615
------------ ------------
$391,024,872 $395,106,185
============ ============
See accompanying notes to interim consolidated financial statements.
</TABLE>
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<TABLE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1998 December 31, 1997
(unaudited)
Liabilities and Shareholders' Equity
<S> <C> <C>
Accounts payable $ 1,400,254 $ 2,679,090
Other accrued expenses 6,365,668 8,441,985
Current installments of obligations under agreements with former owners 2,601,416 2,369,684
Current installments of long-term debt 1,355,171 1,389,530
Due to related party -- 83,333
------------ ------------
Total current liabilities 11,722,509 14,963,622
------------ ------------
Deferred merchandise liabilities and revenues, less trust fund deposits 13,819,834 17,600,097
Obligations under agreements with former owners, less current installments 13,310,351 15,259,919
Long-term debt, less current installments 208,815,461 201,580,635
Deferred income taxes 16,770,181 16,770,180
Other long-term liabilities 3,934,206 2,690,510
Shareholders' equity:
Common stock, par value $.01 per share, 1,000 shares authorized;
100 issued and outstanding shares 1 1
Additional paid-in capital 128,918,236 129,047,493
Accumulated deficit (6,265,907) (2,806,272)
----------- -----------
Total shareholders' equity 122,652,330 126,241,222
------------ ------------
$391,024,872 $395,106,185
============ ============
See accompanying notes to interim consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Funeral services $17,373,676 $16,920,121 $56,477,498 $54,788,505
Cemetery sales 6,317,333 5,888,749 18,911,323 16,579,559
----------- ----------- ----------- -----------
23,691,009 22,808,870 75,388,821 71,368,064
Costs and expenses:
Funeral homes 11,940,408 11,412,570 37,044,373 35,101,640
Cemetery 4,208,433 4,156,177 12,598,202 11,773,258
----------- ----------- ----------- -----------
16,148,841 15,568,747 49,642,575 46,874,898
Corporate general and administrative
expenses 927,252 744,784 2,467,398 2,455,763
Depreciation and amortization 2,810,166 2,865,783 8,479,614 8,289,703
----------- ----------- ----------- -----------
Operating income 3,804,750 3,629,556 14,799,234 13,747,700
Other expenses:
Interest expense, including
amortization of deferred loan
costs (see Note 1) 6,005,984 6,082,747 18,188,728 17,846,431
----------- ----------- ----------- -----------
Loss before income taxes (2,201,234) (2,453,191) (3,389,494) (4,098,731)
Income tax expense (32,641) (1,323) (70,141) (27,008)
----------- ----------- ----------- -----------
Net loss $(2,233,875) $(2,454,514) $(3,459,635) $(4,125,739)
=========== =========== =========== ===========
See accompanying notes to interim consolidated financial statements.
</TABLE>
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<TABLE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,459,635) $(4,125,739)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 9,795,033 9,632,970
Depletion of cemetery property 909,217 1,308,064
Loss on sale of assets 14,870 --
Gain on sale of business (7,653) --
Changes in operating assets and liabilities
net of effects of acquisition of subsidiaries:
Receivables (net) (1,217,761) (3,045,410)
Inventories (1,068,363) (3,085,904)
Accounts payable and accrued expenses (3,526,285) (3,455,099)
Deferred merchandise liabilities and revenue (net) (3,763,523) (742,612)
Other long-term liabilities 1,243,696 (1,283,068)
Other (845,237) (793,368)
---------- -----------
Net cash used in operating activities (1,925,641) (5,590,166)
---------- -----------
Cash flows from investing activities:
Proceeds from the disposal of assets 426,023 188,698
Purchases of property and equipment (2,100,802) (2,757,977)
Net cash received for sale of business 250,000 2,041,033
Net cash paid for purchase of business (805,000) (2,606,951)
---------- -----------
Net cash used in investing activities (2,229,779) (3,135,197)
---------- -----------
Cash flows from financing activities:
Net proceeds of bank indebtedness under revolving loan 7,300,000 9,500,000
Proceeds from long-term debt 113,307 1,309,782
Payments on long-term debt (1,342,430) (4,525,801)
Payments on obligations under agreements with former owners (1,828,760) (3,040,698)
Decrease in restricted cash -- 4,388,837
----------- -----------
Net cash provided by financing activities 4,242,117 7,632,120
----------- -----------
Net increase (decrease) in cash and cash equivalents 86,697 (1,093,243)
Cash and cash equivalents at beginning of period 1,555,415 2,985,704
----------- -----------
Cash and cash equivalents at end of period $ 1,642,112 $ 1,892,461
=========== ===========
See accompanying notes to interim consolidated financial statements.
</TABLE>
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<TABLE>
PRIME SUCCESSION, INC. AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(unaudited)
(1) Interest expense includes amortization of deferred loan costs as
follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
---- ---- ---- ----
$438,473 $452,396 $1,315,419 $1,343,266
(2) Footnote disclosure which would substantially duplicate the disclosure
contained in the Annual Report on Form 10-K for the year ended December 31, 1997
has not been included. The unaudited interim consolidated financial statements
reflect all adjustments which, in the opinion of management, are necessary to
reflect a fair statement of the results for the periods presented and to present
fairly the consolidated financial position of Prime Succession, Inc. and
subsidiaries as of September 30, 1998. All such adjustments are of a normal
recurring nature.
(3) Certain reclassifications have been made to the 1997 amounts to conform
to the 1998 presentation.
</TABLE>
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Overview
On August 26, 1996 (the "Closing Date"), Prime Succession, Inc.'s
(Predecessor Company) capital stock was purchased (the Acquisition) by
Blackstone Capital Partners II Merchant Banking Fund L.P. and affiliates, Loewen
Group International, Inc. and PSI Management Direct L.P. A new entity, Prime
Succession, Inc. (Successor Company), was formed and became a wholly-owned
subsidiary of the Predecessor Company. In connection with the Acquisition, all
of the assets and liabilities of the Predecessor Company were transferred to the
Successor Company. Collectively, the Predecessor Company and Successor Company
are herein referred to as "the Company".
The Company provides merchandise and services in both the funeral home and
cemetery segments of the death care industry in the United States. In addition
to providing merchandise and services at the time of need, the Company also
makes funeral, cemetery and cremation arrangements on a pre-need basis. As of
November 10, 1998, the Company through its subsidiaries owns and operates 143
funeral homes and 21 cemeteries in 20 states, primarily in non-urban areas of
the United States. The Company commenced operations in 1992 and expanded rapidly
through the aggressive acquisition of funeral homes and cemeteries. The
Company's consolidated revenues were $75.4 million and $71.4 million for the
nine months ended September 30, 1998 and 1997, respectively. Sales of funeral
services of $56.5 million and cemetery sales of $18.9 million accounted for
approximately 74.9% and 25.1%, respectively, of total net sales for the nine
months ended September 30, 1998.
The Company had no funeral homes when it began operations in 1992 and grew
to 146 funeral homes in 1996. In order to achieve this rapid growth, former
management was primarily focused on identifying funeral homes to be acquired and
consummating acquisitions of such homes rather than on maximizing profitability
of the funeral homes and cemeteries which it had acquired. As a result, former
management did not take advantage of certain opportunities to improve the
efficiency and performance of the funeral homes acquired. New management
substantially eliminated the Company's acquisition program. In addition, in
order to improve the Company's present and long-term operating performance, new
management took advantage of (i) the quality and size of the Company's portfolio
of properties, (ii) the opportunity to operate more efficiently those properties
located in close proximity to one another, and (iii) the shift in focus from
acquisitions to profit maximization at existing locations and (iv) the benefits
at both local sites and the corporate headquarters from the Administrative
Services Agreement with Loewen. The Company's future results of operations will
depend in large part on the ability of management to successfully maintain its
business strategy.
The Company is a party to a supply agreement with Batesville Casket
Company, Inc. ("BCC"), The Forethought Group and Forethought Life Insurance
Company ("FLIC"), pursuant to which the Company must purchase caskets
exclusively from BCC and, in connection with its pre-need sales of funeral
services funded by insurance, the Company must offer to its customers in
specified markets exclusively FLIC insurance products. The agreement expires on
December 31, 2004, subject to earlier termination by any party thereto upon 30
days notice following a material, uncured breach of the agreement or the
occurrence of certain insolvency events. Management of the Company believes that
the terms of such supply agreement are favorable to the Company.
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<TABLE>
Results of Operations
The Company's operations are detailed below for the three months and the
nine months ended September 30, 1998 and the corresponding period in the prior
year expressed in dollar amounts as well as relevant percentages. Revenue, gross
margin, earnings (loss) from operations and expenses other than income taxes are
presented as a percentage of revenue. Income taxes are presented as a percentage
of losses before income taxes.
Three Months Ended September 30, 1998 Compared to Three Months Ended September 30, 1997
Three months ended Three months ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
(millions of dollars) (percent)
--------------------- ---------
Revenue
<S> <C> <C> <C> <C>
Funeral $17.4 $16.9 73.4% 74.1%
Cemetery 6.3 5.9 26.6 25.9
----- ----- ------ ------
Total $23.7 $22.8 100.0% 100.0%
===== ===== ====== ======
Gross Margin
Funeral $ 5.5 $ 5.5 31.6% 32.5%
Cemetery 2.1 1.7 33.3 28.8
----- -----
Total 7.6 7.2 32.1 31.6
Expenses
General and administrative 0.9 0.7 3.8 3.1
Depreciation and amortization 2.9 2.9 12.2 12.7
----- -----
Earnings From Operations 3.8 3.6 16.0 15.9
Interest on long-term debt 6.0 6.1 25.3 26.8
----- -----
Loss Before Income Taxes (2.2) (2.5) (9.3) (11.0)
Income taxes -- -- -- --
----- -----
Net loss $(2.2) $(2.5) (9.3)% (11.0)%
===== =====
</TABLE>
Consolidated revenues increased 3.9% to $23.7 million for the three months
ended September 30, 1998 compared to $22.8 million in the corresponding period
for 1997, with funeral service revenues increasing 3.0% to $17.4 million
compared to $16.9 million in the corresponding period in 1997, and cemetery
revenues increasing 6.8% to $6.3 million compared to $5.9 million in the
corresponding period for 1997. Funeral revenues increased primarily as a result
of increased pricing and enhanced merchandising. On same-store business,
excluding 1997 and 1998 acquisitions and dispositions, total calls decreased by
2 from 4,357 calls for the three months ended September 30, 1997 to 4,355 calls
for the three months ended September 30, 1998 and average revenue per call
increased by $106 from $3,883 in 1997 to $3,989 in 1998. Cemetery revenues
increased primarily due to increased pre-need sales efforts in Alabama, Florida
and Tennessee. Consolidated operating income increased from $3.6 million for the
three months ended September 30, 1997, to $3.8 million for the three months
ended September 30, 1998.
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<PAGE>
Consolidated contribution margin of $7.6 million increased 5.6% for the
three months ended September 30, 1998 from $7.2 million for the three months
ended September 30, 1997, with funeral contribution margin of 31.6% for the
three months ended September 30, 1998 compared to 32.5% for the three months
ended September 30, 1997 and cemetery contribution margin of 33.3% for the three
months ended September 30, 1998 compared to 28.8% for the corresponding period
in 1997. Contribution margin is defined as a percentage of funeral revenues or
cemetery revenues, as the case may be, less related cost of sales (including
direct operating expenses).
Corporate general and administrative expense of $0.9 million increased from
$0.7 million for the three months ended September 30, 1998 and 1997. As a
percentage of consolidated revenue, general and administrative expense increased
to 3.8% in 1998 from 3.1% for the corresponding period in 1997. Corporate
general and administrative expense increased primarily due to adjustment of
accounting accruals in 1998.
Depreciation and amortization expense remained constant at $2.9 million for
the three months ended September 30, 1998 and 1997.
Interest expense of $6.0 million for the three months ended September 30,
1998 decreased by $0.1 million compared to $6.1 million for the corresponding
period in 1997, primarily as a result of repayment of debt.
-8-
<PAGE>
<TABLE>
Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 30, 1997
Nine months ended Nine months ended
September 30, September 30
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
(millions of dollars) (percent)
--------------------- ---------
Revenue
<S> <C> <C> <C> <C>
Funeral $56.5 $54.8 74.9% 76.8%
Cemetery 18.9 16.6 25.1 23.2
----- ----- ------ ------
Total $75.4 $71.4 100.0% 100.0%
===== ===== ====== ======
Gross Margin
Funeral $19.5 $19.7 34.5% 35.9%
Cemetery 6.3 4.8 33.3 28.9
----- -----
Total 25.8 24.5 34.2 34.3
Expenses
General and administrative 2.5 2.5 3.3 3.5
Depreciation and amortization 8.5 8.3 11.3 11.6
----- -----
Earnings From Operations 14.8 13.7 19.6 19.2
Interest on long-term debt 18.2 17.8 24.1 24.9
----- -----
Loss Before Income Taxes (3.4) (4.1) (4.5) (5.7)
Income taxes 0.1 -- 0.1 --
----- -----
Net Loss $(3.5) $(4.1) 4.6% (5.7)%
===== =====
</TABLE>
Consolidated revenues increased 5.6% to $75.4 million for the nine months
ended September 30, 1998 compared to $71.4 million in the corresponding period
for 1997, with funeral service revenues increasing 3.1% to $56.5 million
compared to $54.8 million in the corresponding period in 1997, and cemetery
revenues increasing 13.9% to $18.9 million compared to $16.6 million in the
corresponding period for 1997. Funeral revenues increased primarily as a result
of increased pricing and enhanced merchandising of merchandise display areas. On
same-store business, excluding 1997 and 1998 acquisitions and dispositions,
total calls decreased by 106 from 14,331 calls for the nine months ended
September 30, 1997 to 14,225 calls for the nine months ended September 30, 1998
and average revenue per call increased by $147 from $3,823 in 1997 to $3,970 in
1998. Cemetery revenues increased primarily due to increased pre-need sales
efforts in Alabama, Florida and Tennessee. Consolidated operating income
increased from $13.7 million for the nine months ended September 30, 1997, to
$14.8 million for the nine months ended September 30, 1998.
Consolidated contribution margin of $25.8 million increased 5.3% for the
nine months ended September 30, 1998 from $24.5 million for the nine months
ended September 30, 1997, with funeral contribution margin of 34.5% for the nine
months ended September 30,1998 compared to 35.9% for the nine months ended
September 30, 1997 and cemetery contribution margin of 33.3% for the nine months
ended September 30, 1998 compared to 28.9% for the corresponding period in 1997.
Contribution margin is defined as a percentage of funeral revenues or cemetery
revenues, as the case may be, less related cost of sales (including direct
operating expenses).
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<PAGE>
Corporate general and administrative expense remained constant at $2.5
million for the nine months ended September 30, 1998 and 1997. As a percentage
of consolidated revenue, general and administrative expense decreased to 3.3% in
1998 from 3.5% for the corresponding period in 1997. Corporate general and
administrative expense decreased primarily due to restructured, upgraded and
more efficient information and accounting systems.
Depreciation and amortization expense increased $0.2 million to $8.5
million for the nine months ended September 30, 1998 compared to $8.3 million
for the corresponding period in 1997. This increase is primarily the result of
increased depreciation on capital expenditures.
Interest expense of $18.2 million for the nine months ended September 30,
1998 increased by $0.4 million compared to $17.8 million for the corresponding
period in 1997, primarily as a result of additional borrowings to finance
operating activities of the Company.
Liquidity and Capital Resources
The Company's primary sources of cash since 1995 have been funds provided
by operating activities, proceeds from additional long-term debt and capital
contributions. As of September 30, 1998, the Company had a net working capital
surplus of $9.0 million and a current ratio of 1.76:1, compared to a net working
capital surplus of $10.7 million and a current ratio of 1.72:1 as of December
31, 1997.
The primary uses of cash since 1995 have been for the acquisition of
funeral homes and cemeteries, including the Acquisition, principal payments on
long-term debt and capital expenditures. In the nine months ended September 30,
1997, the Company purchased three cemeteries and a funeral home for $2.6 million
and sold two funeral homes for $2.0 million with the acquisition of a cemetery
and two funeral homes occurring in the comparable period in 1998 for $0.8
million.
In the nine months ended September 30, 1998 and 1997, the Company used $2.1
million and $2.8 million for capital expenditures, respectively. In the nine
months ended September 30, 1998, the Company paid $1.3 million in principal
payments on long-term debt, principally relating to payment of former owner
obligations, compared to $4.5 million in the corresponding period in 1997. In
the nine months ended September 30, 1997 the Company borrowed $9.5 million on
its revolving line of credit compared to $7.3 million for the same period in
1998.
The Company estimates that capital expenditures net of estimated disposals
of $0.6 million will be approximately $1.5 million in 1998, to be used in part
for the repair and improvement of existing facilities. The Company also expects
to invest approximately $1.0 million in 1998 for cemetery inventory development.
Contemporaneously with the consummation of the Acquisition, the Company
entered into senior secured credit facilities (the "Bank Credit Facilities")
with a syndicate of financial institutions and The Bank of Nova Scotia, as
administrative agent.
The Bank Credit Facilities provided the Company with senior secured
amortization extended term loan facilities (the "Bank Term Facility") in an
aggregate principal amount of $90 million, the proceeds of which were used to
finance the Acquisition and related transaction costs, to pre-fund certain
capital expenditures and to refinance existing indebtedness of the Company, and
a senior secured revolving credit facility (the "Bank Revolving Facility") in an
aggregate principal amount of up to $25 million, the proceedsof which will be
used for general corporate purposes and a portion of which may be extended (as
agreed upon) in the form of swing line loans or letters of credit for the
account of the Company. The Bank Term Facility will mature 7 years after the
Acquisition Closing Date, and the Bank Revolving Facility will mature 5 years
after the Acquisition Closing Date. The Bank Term Facility is subject to
amortization, subject to certain conditions, in semi-annual installments in the
amounts of $1 million in each of the first three years after the anniversary of
the closing date of the Bank Term Facility (the "Bank Closing"); $4 million in
the fourth year after the Bank Closing; $9 million in the fifth year after the
Bank Closing; $12.5 million in the sixth year after the Bank Closing and $61.5
million upon the maturity of the Bank Term Facility. The Revolving Credit
Facility will be payable in full at maturity, with no prior amortization.
-10-
<PAGE>
All obligations under the Bank Credit Facilities and any interest rate
hedging agreements entered into with the lenders or their affiliates in
connection therewith are unconditionally guaranteed (the "Bank Guarantees")
jointly and severally, by the Company and each of the Company's existing and
future domestic subsidiaries (the "Bank Guarantors"). All obligations of the
Company and the guarantors under the Bank Credit Facilities and the Bank
Guarantees are secured by first priority security interests in all existing and
future assets (other than real property and vehicles covered by certificates of
title) of the Company and the Guarantors. In addition, the Bank Credit
Facilities are secured by a first priority security interest in 100% of the
capital stock of the Company and each subsidiary thereof and all intercompany
receivables.
In connection with the Acquisition, the Company also issued $100 million of
10 3/4% Senior Subordinated Notes due 2004, which were exchanged in January 1997
for $100 million of 10 3/4% Senior Subordinated Notes due 2004 (the "Notes")
that were registered under the Securities Act of 1933. The Notes mature on
August 15, 2004. Interest on the Notes is payable semi-annually on February 15
and August 15 at the annual rate of 10 3/4%. The Notes are redeemable in cash at
the option of the Company, in whole or in part, at any time on or after August
15, 2000, at prices ranging from 105.375% with annual reductions to 100% in 2003
plus accrued and unpaid interest, if any, to the redemption date. The proceeds
of the Notes were used, in part, to finance the Acquisition.
The Company and its subsidiaries are subject to certain restrictive
covenants contained in the Indenture relating to the Notes, including, but not
limited to, covenants imposing limitations on the incurrence of additional
indebtedness; certain payments, including dividends and investments; the
creation of liens; sales of assets and preferred stock; transactions with
interested persons; payment restrictions affecting subsidiaries; sale-leaseback
transactions; and mergers and consolidations. In addition, the Bank Credit
Facilities contain certain restrictive covenants that, among other things, limit
the ability of the Company and its subsidiaries to dispose of assets, incur
additional indebtedness, prepay other indebtedness, pay dividends or make
certain restricted payments, create liens on assets, engage in mergers or
acquisitions or enter into leases or transactions with affiliates.
As of September 30, 1998, the Company had approximately $210.2 million of
indebtedness outstanding and approximately $5.6 million of borrowing
availability under the Revolving Credit Facility. The Company believes that,
based upon current levels of operations and anticipated growth and availability
under the Revolving Credit Facility, it can adequately service its indebtedness.
If the Company cannot generate sufficient cash flow from operations or borrow
under the Revolving Credit Facility to meet such obligations, then the Company
may be required to take certain actions, including reducing capital
expenditures, restructuring its debt, selling assets or seeking additional
equity in order to avoid an Event of Default. There can be no assurance that
such actions could be effected or would be effective in allowing the Company to
meet such obligations.
In September 1998, Statement of Financial Accounting Standards (FAS) No.
133, "Accounting for Derivative Instruments and Hedging" was issued. FAS No. 133
requires companies to record derivatives on the balance sheet as assets or
liabilities measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualified under the standard hedge accounting. The
Company is currently assessing the effect of this standard, but does not
anticipate a material impact on the result of operations.
Year 2000 Issues
Overview. As the Year 2000 approaches, all companies that use computers
must address "Year 2000" issues. Year 2000 issues result from the past practice
in the computer industry of using two digits rather than four to identify the
applicable year. This practice can create breakdowns or erroneous results when
computers perform operations involving years later than 1999.
The Company's State of Readiness. The Company has devised and commenced an
extensive compliance plan with the objective of bringing all of the Company's
information technology (IT) systems and non-IT systems into Year 2000 compliance
by the end of the second quarter of fiscal year 1999. The Company has divided
its systems into (i) critical systems, consisting of IT systems, and (ii)
non-critical systems, consisting of a mixture of IT and non-IT systems. Each
system will be evaluated and brought into compliance in four phases:
-11-
<PAGE>
Phase I -- Evaluate and assess compliance of the system
Phase II -- Identify whether a non-compliant system needs to be
retired, replaced or outsourced and estimate the costs
involved.
Phase III -- Commit and assign resources need to implement
compliance plan
Phase IV -- Modify or replace non-compliant system
The Company's systems used to maintain financial records were either found
to be compliant or have completed Phases I through IV. As a result, 100% of
these critical systems are currently compliant. One hundred percent of the
Company's other critical systems have completed Phase I, and fifty percent were
found to be compliant. The remaining non-compliant critical systems have
completed Phases II and III and commenced Phase IV, with a scheduled completion
of the second quarter of fiscal year 1999.
Seventy-five percent of the Company's non-critical systems have completed
Phase I and were either found to be compliant or made compliant by completing
Phases II through IV. The Company anticipates that the remaining non-critical
systems will be evaluated and brought into compliance by the end of the second
quarter of fiscal year 1999.
In addition, the Company has communicated with all of its significant
vendors, financial institutions and insurers to determine the extent to which
these third parties' failure to resolve their Year 2000 issues could affect the
Company's operations. The Company has indications that its significant suppliers
expect to be in compliance with Year 2000 issues ranging between fourth quarter
of 1998 and second quarter of 1999. The Company expects to complete its
evaluation of third parties' compliance by the end of the second quarter of
fiscal year 1999.
The Costs Involved. Because all of the Company's computer systems have been
replaced in the past two years as part of the Company's ongoing goal to maintain
state of the art technology, the Company's Year 2000 compliance costs have been
relatively low. To date, the Company has incurred minor expenses in implementing
its compliance plan. Management estimates that the total cost to be incurred by
the Company to complete its compliance plan will be insignificant. This estimate
includes the use of both internal and external resources. All costs related to
the Year 2000 compliance plan are included in the Information Systems budget and
are based on management's best estimates. There can be no guarantee that actual
results will not differ from those estimated.
Risks. If the Company is not successful in its efforts to bring its systems
into Year 2000 compliance, the Company's ability to procure merchandise in a
timely and cost-effective manner may be impaired, daily business procedures may
be delayed due to the use of manual procedures, and some business procedures may
be interrupted if no alternative methodology is available, which could have a
material adverse effect on the Company's operations.
The Company has no guarantee that the systems of third parties will be
brought into compliance on a timely basis. The non-compliance of a third party's
system could have a material adverse effect on the Company's operations.
The Company's contingency Plan. Although the Company believes that its Year
2000 compliance plan is adequate to achieve full system operation on a timely
basis, the Company is in the process of developing a contingency plan to address
the possibility of the Company's and third parties' non-compliance. The Company
anticipates completing its contingency plan by the end of the second quarter of
fiscal year 1999.
-12-
<PAGE>
PART II
ITEM 5 - OTHER INFORMATION
Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q include
"forward-looking statements" as defined in Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of historical facts
included herein, including, without limitation, the statements under Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding the Company's financial position, plans to increase
revenues, reduce general and administrative expense and take advantage of
synergies, are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to be correct. Important
factors that could cause actual results to differ materially from the Company's
expectations ("Cautionary Statements") are disclosed herein, including, without
limitation, in conjunction with the forward-looking statements included herein.
All subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The Exhibits, as shown in the "Index of Exhibits", attached hereto as
pages 14 and 15, are filed as a part of this Report.
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.
PRIME SUCCESSION, INC.
/s/ MYLES S. CAIRNS
-------------------
Myles S. Cairns
Chief Financial Officer,
Secretary and Treasurer
November 10, 1998
-13-
<PAGE>
INDEX OF EXHIBITS
a) Exhibit
Number Document Description
3.1* Certificate of Incorporation of Blackhawk Acquisition Corp.
3.2* Certificate of Amendment of Certificate of Incorporation of
Blackhawk Acquisition Corp. changing its name to Prime
Succession Acquisition Corp.
3.3* Certificate of Amendment of Certificate of Incorporation of
Prime Succession Acquisition Corp. changing its name to Prime
Succession, Inc.
3.4* By-Laws of Prime Succession, Inc.
4.1* Indenture dated as of August 15, 1996 between Prime Succession
Acquisition Corp. and United States Trust Company of New York,
as Trustee
4.2* Form of 10 3/4% Senior Subordinated Note due 2004 (included in
Exhibit 4.1)
10.1(a)* Casket Supply Agreement, dated January 1, 1993, between
Batesville Casket Company, Inc. and Prime Succession, Inc.
10.1(b)* Amendment Agreement, dated August 1994, between Batesville
Casket Company, Inc. and Prime Succession, Inc. (with respect
to Casket Supply Agreement)
10.1(c)* Amendment 2, dated May 22, 1995, between Batesville Casket
Company, Inc. and Prime Succession, Inc. (with respect to
Casket Supply Agreement)
10.1(d)* Exclusive Supply Agreement, dated January 1, 1998 between
Batesville Casket Company, Inc., The Forethought Group,
Forethought Life Insurance Company and Prime Succession, Inc.
10.2* Stockholders' Agreement dated as of August 26, 1996 among
Prime Succession, Inc. (to be renamed Prime Succession
Holdings, Inc.), Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital Partners II
L.P., Blackstone Family Investment Partnership II L.P., PSI
Management Direct L.P. and Loewen Group International, Inc.
10.3* Administrative Services Agreement dated as of August 26, 1996
between Prime Succession Acquisition Corp. (to be renamed
Prime Succession, Inc.) and Loewen Group International, Inc.
10.4* Credit Agreement dated as of August 26, 1996 among Prime
Succession, Inc. (to be renamed Prime Succession Holdings,
Inc.), Prime Succession Acquisition Corp. (to be renamed Prime
Succession, Inc.), Goldman, Sachs & Co., as syndication agent
and arranging agent, the financial institutions from time to
time parties thereto as lenders and The Bank of Nova Scotia,
as administrative agent for such lenders.
10.4(a) First Amendment to Credit Agreement dated September 30, 1998
among Prime Succession, Inc. (formerly known as Prime
Succession Acquisition Corp.), Prime Holdings, Inc. (formely
known as Prime Succession, Inc.), Goldman, Sachs & Co. L.P.,
as syndication agent and arranging agent, The Bank of Nova
Scotia, as administrative agent.
10.5* Letter Agreement dated August 1, 1996 between Prime Succession
Acquisition Corp. (to be renamed Prime Succession, Inc.) and
Gary Wright.
10.6* Letter Agreement dated August 1, 1996 between Prime Succession
Acquisition Corp. (to be renamed Prime Succession, Inc.) and
Myles Cairns.
10.7* Put/Call Agreement, dated as of August 26, 1996, among
Blackstone Capital Partners II Merchant Banking Fund L.P.,
Blackstone Offshore Capital Partners II L.P., Blackstone
Family Investment Partnership II L.P., PSI Management Direct
L.P., Loewen Group International Inc. and the Loewen Group
Inc.
10.8* Stock Purchase Agreement, dated as of June 14, 1996, by and
among Prime Succession, Inc., the individuals or entities
listed on the signature pages thereof, The Loewen Group Inc.
and Blackhawk Acquisition Corp.
-14-
<PAGE>
12 Computation of Ratio of Earnings to Fixed Charges
21* Subsidiaries of Prime Succession, Inc. (formerly known as Prime
Succession Acquisition Corp.)
27 Financial Data Schedule
* Incorporated by reference to the Exhibits to the Company's Registration
Statement on Form S-4 (Registration No. 333-14599).
(b) Reports on Form 8-K
None
-15-
<PAGE>
<TABLE>
Exhibit 12
Prime Succession, Inc. and subsidiaries
Ratio of Earnings to Fixed Charges
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Three months ended Nine months ended
September 30, September 30,
------------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
Ratio of Earnings to
Fixed Charges
Earnings:
Loss before income taxes (2,201) (2,453) (3,389) (4,099)
Add: Fixed charges, net 6,240 6,327 18,918 18,499
Income before income taxes and fixed
charges, net 4,039 3,874 15,529 14,400
Fixed Charges:
Total interest expense (1) 6,006 6,083 18,189 17,846
Interest factor in rents (2) 234 244 729 653
Total fixed charges 6,240 6,327 18,918 18,499
Ratio of earnings to fixed charges 0.65 0.61 0.82 0.78
Coverage deficiency (3) 2,201 2,453 3,389 4,099
FN
(1) Total interest expense for each period includes amortization of
loan costs.
(2) Interest factor in rents represents one-third of rent expense,
which is considered representative of the interest factor.
(3) The Company's earnings are inadequate to cover fixed charges for
all periods indicated above. Coverage deficiency represents the
excess of fixed charges over income before income taxes and fixed
charges, net.
</TABLE>
EXHIBIT 10.4(a)
EXECUTION
PRIME SUCCESSION, INC.
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as
of September 30, 1998 and entered into by and among PRIME SUCCESSION, INC.
(formerly known as Prime Succession Acquisition Corp.), a Delaware corporation
("Borrower"), PRIME SUCCESSION HOLDINGS, INC. (formerly known as Prime
Succession, Inc.), a Delaware corporation ("Holdings"), THE FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to
herein as a "Lender" and collectively as the "Lenders"), GOLDMAN SACHS CREDIT
PARTNERS L.P., as syndication agent and arranging agent (in such capacities,
"Arranging Agent"), and THE BANK OF NOVA SCOTIA ("ScotiaBank"), as
administrative agent (in such capacity, "Administrative Agent"), and is made
with reference to that certain Credit Agreement dated as of August 26, 1996, as
heretofore amended, supplemented or otherwise modified (as so amended,
supplemented or modified, the "Credit Agreement"), by and among Borrower,
Holdings, the Lenders, Arranging Agent and Administrative Agent. Capitalized
terms used herein without definition shall have the same meanings herein as set
forth in the Credit Agreement and in the amendments contained in Section 1
hereof.
RECITALS
WHEREAS, the parties to the Credit Agreement desire to amend the Credit
Agreement (i) to permit the substitution of surety bonds for certain letters of
credit and merchandise trust funds and (ii) to make certain other amendments as
set forth herein.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT
1.1 Amendments to Section 1: Definitions
A. Subsection 1.1 of the Credit Agreement is hereby amended by deleting
the definitions of "Leverage Ratio" and "Total Senior Debt" therefrom in their
entirety and substituting therefor the following:
"Leverage Ratio" means the ratio of (i) Consolidated Total Debt as of
the last day of any Fiscal Quarter plus 75% of the aggregate amount of surety
bonds outstanding as of such date pursuant to subsection 7.4(ix), to (ii)
Consolidated Adjusted EBITDA for the four Fiscal Quarter period then ended, in
each case as set forth in the most recent Compliance Certificate delivered by
Borrower to Administrative Agent and Lenders pursuant to clause (iii) of
subsection 6.1.
"Total Senior Debt" means, as at any date of determination, the sum of
(i) the aggregate stated balance sheet amount of all Indebtedness and Contingent
Obligations of Holdings and its Subsidiaries in respect of Indebtedness, in each
case other than Indebtedness evidenced by the Senior Subordinated Notes and
Indebtedness in respect of the Batesville Liability and Covenants not to
Compete, all as determined on a consolidated basis in accordance with GAAP, plus
(ii) 75% of the aggregate amount of surety bonds outstanding pursuant to
subsection 7.4(ix).
B. Subsection 1.1 of the Credit Agreement is hereby further amended by
adding the following definition of "Specified Merchandise Trusts" thereto in
proper alphabetical order:
"Specified Merchandise Trusts" means (i) the Fred Hunter Memorial
Merchandise Trust, DTD July 23, 1993, Account Number: 56331150 with a balance at
August 31, 1998 of $1,308,337 and (ii) the Fred Hunter Memorial Service Trust
Post, DTD October 1, 1993, Account Number: 56331170 with a balance at August 31,
1998 of $4,331,086.
1.2 Amendments to Section 7: Negative Covenants
Subsection 7.4 of the Credit Agreement is hereby amended by (i)
deleting the "and" at the end of clause (vi) thereof, (ii) deleting the "." at
the end of clause (vii) thereof, and (iii) adding a new clause (viii) and a new
clause (ix) at the end thereof as follows:
"(viii) Borrower and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of surety bonds used to replace the
Letters of Credit described on Schedule 3.1 annexed hereto so long as such
surety bonds support only the obligations supported by such Letters of Credit;
provided that the aggregate amount of the Contingent Obligations in respect of
such surety bonds shall not exceed the aggregate amount of such replaced Letters
of Credit; and
(ix) Borrower and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of surety bonds utilized by
Borrower and its Subsidiaries in lieu of funding the Specified Merchandise
Trusts pursuant to the Florida Administrative Code; provided that the aggregate
amount of the Contingent Obligations at any time outstanding in respect of such
surety bonds shall not exceed the lesser of (x) $20,000,000 and (y) the sum of
(1) $10,000,000 plus (2) as of any date of determination, an additional
$2,000,000 for each Fiscal Year which shall have commenced on or after January
1, 1999."
SECTION 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the prior
or concurrent satisfaction of all of the following conditions precedent (the
date of satisfaction of such conditions being referred to herein as the "First
Amendment Effective Date"):
On or before the First Amendment Effective Date, each of Borrower and
Holdings shall have delivered to Lenders (or to Administrative Agent for Lenders
with sufficient originally executed copies, where appropriate, for each Lender
and its counsel) a certificate of its corporate secretary or an assistant
secretary dated the First Amendment Effective Date certifying that (i) there
have been no amendments to its Certificate of Incorporation or Bylaws after the
Closing Date, (ii) attached resolutions of its Board of Directors authorizing
this Amendment are in full force and effect without modification or amendment,
and (iii) there have been no changes after the Closing Date in the incumbency of
its officers, together with a good standing certificate from the Secretary of
State of the State of Delaware, dated a recent date prior to the First Amendment
Effective Date.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, Holdings and Borrower each
represents and warrants to each Lender that the following statements are true,
correct and complete:
A. Corporate Power and Authority. Each of Holdings and Borrower has all
requisite corporate power and authority to enter into this Amendment and to
carry out the transactions contemplated by, and perform its obligations under,
the Credit Agreement as amended by this Amendment (the "Amended Agreement") and
the other Loan Documents.
B. Authorization of Agreements. The execution and delivery of this
Amendment and the performance of the Amended Agreement and the other Loan
Documents have been duly authorized by all necessary corporate action on the
part of Holdings and Borrower.
C. No Conflict. The execution and delivery by each of Holdings and
Borrower of this Amendment and the performance by each of Holdings and Borrower
of the Amended Agreement and the other Loan Documents do not and will not (i)
violate any provision of any law or any governmental rule or regulation
applicable to Holdings, Borrower or any of its Subsidiaries, the Certificate or
Articles of Incorporation or Bylaws of Holdings, Borrower or any of its
Subsidiaries or any order, judgment or decree of any court or other agency of
government binding on Holdings, Borrower or any of its Subsidiaries, (ii)
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any Contractual Obligation of Holdings, Borrower
or any of its Subsidiaries, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of Holdings,
Borrower or any of its Subsidiaries, or (iv) require any approval of
stockholders or partners or any approval or consent of any Person under any
Contractual Obligation of Holdings, Borrower or any of its Subsidiaries, except
for such approvals or consents which have been obtained and disclosed in writing
to Lenders.
D. Governmental Consents. The execution and delivery by each of
Holdings and Borrower of this Amendment and the performance by each of Holdings
and Borrower of the Amended Agreement, the other Loan Documents and the
transactions contemplated by this Amendment do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body other than the approval of the Florida State Board of Funeral Services
which will be obtained on or before the date the transactions contemplated by
this Amendment are consummated.
E. Binding Obligation. This Amendment and the Amended Agreement have
been duly executed and delivered by each of Holdings and Borrower and are the
legally valid and binding obligations of each of Holdings and Borrower,
enforceable against each of Holdings and Borrower in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
F. Incorporation of Representations and Warranties From Credit
Agreement. The representations and warranties contained in Section 5 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the First Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
G. Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default.
SECTION 4. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the Other Loan
Documents.
(i) On and after the First Amendment Effective Date, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words
of like import referring to the Credit Agreement, and each reference in the
other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words
of like import referring to the Credit Agreement shall mean and be a reference
to the Credit Agreement as amended by this Amendment.
(ii) Except as specifically amended by this Amendment, the Credit Agreement
and the other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy of any Agent or Lender under,
the Credit Agreement or any of the other Loan Documents.
B. Headings. Section and subsection headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose or be given any substantive effect.
C. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 51401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
D. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment (other than the provisions of Section 1
hereof) shall become effective upon the execution of a counterpart hereof by
Holdings, Borrower and Requisite Lenders and receipt by Borrower and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first written above.
BORROWER: PRIME SUCCESSION, INC.
By:/s/MYLES S. CAIRNS
---------------------
Name:Myles S. Cairns
Title:Chief Financial Officer
HOLDINGS: PRIME SUCCESSION HOLDINGS, INC.
By:/s/MYLES S. CAIRNS
---------------------
Name:Myles S. Cairns
Title:Chief Financial Officer
AGENTS AND LENDERS: GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually and as Arranging Agent and
Syndication Agent
By:/s/STEPHEN B. KING
---------------------
Authorized Signatory
THE BANK OF NOVA SCOTIA,
as a Lender and as Administrative Agent
By:/s/F.C.H. ASHBY
------------------
Name:F.C.H. Ashby
Title:Senior Manager Loan Operations
MASSACHUSETTS MUTUAL LIFE INSURANCE CO.
as a Lender
By:/s/STEVEN J. KATZ
--------------------
Name:Steven J. Katz
Title:Second Vice President and Associate
General Counsel
CAPTIVA FINANCE LTD.
as a Lender
By:/s/DAVID EGGLISHAW
---------------------
Name:David Egglishaw
Title:Director
INDOSUEZ CAPITAL FUNDING IIA, LIMITED
as a Lender
by Indosuez Capital as Collateral Manager
By:/s/FRANCOISE BERTHELOT
-------------------------
Name:Francoise Berthelot
Title:Vice President
STEIN ROE & FARNHAM INCORPORATED
as agent for
KEYPORT LIFE INSURANCE COMPANY
as a Lender
By:/s/BRIAN W. GOOD
-------------------
Name:Brian W. Good
Title:Vice President & Portfolio Manager
MERRILL LYNCH SENIOR FLOATING RATE FUND
as a Lender
By:/s/GILLES MARCHAND
---------------------
Name:Gilles Marchand, CFA
Title:Authorized Signatory
MERRILL LYNCH PRIME RATE PORTFOLIO
as a Lender
By:/s/GILLES MARCHAND
---------------------
Name:Gilles Marchand, CFA
Title:Authorized Signatory
NEW YORK LIFE INSURANCE COMPANY
as a Lender
By:/s/STEVEN M. BENEVENTO
-------------------------
Name:Steven M. Benevento
Title:Director
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST
as a Lender
By:/s/SHEILA FINNERTY
---------------------
Name:Sheila Finnerty
Title:Vice President
SENIOR DEBT PORTFOLIO
By: Boston management and Research
as Investment Advisor
By:/s/PAYSON F. SWAFFIELD
-------------------------
Name:Payson F. Swaffield
Title:Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited interim consolidated financial statements of Prime Succession, Inc.
and subsidiaries, for the nine months ended September 30, 1998 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001023294
<NAME> Prime Succession, Inc.
multiplier 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> Sep-30-1998
<CASH> 1,642
<SECURITIES> 0
<RECEIVABLES> 33,966
<ALLOWANCES> 5,876
<INVENTORY> 50,637
<CURRENT-ASSETS> 20,677
<PP&E> 74,058
<DEPRECIATION> 5,151
<TOTAL-ASSETS> 391,025
<CURRENT-LIABILITIES> 11,723
<BONDS> 222,125
0
0
<COMMON> 0
<OTHER-SE> 122,652
<TOTAL-LIABILITY-AND-EQUITY> 391,025
<SALES> 75,389
<TOTAL-REVENUES> 75,389
<CGS> 49,642
<TOTAL-COSTS> 49,642
<OTHER-EXPENSES> 10,947
<LOSS-PROVISION> 514
<INTEREST-EXPENSE> 18,189
<INCOME-PRETAX> (3,389)
<INCOME-TAX> 70
<INCOME-CONTINUING> (3,459)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,459)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
