<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
-----------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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 333-14599
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PRIME SUCCESSION, INC.
(Exact name of registrant as specified in its charter)
---------------------
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 (Zip Code)
(Address of principal executive offices)
(859) 746-6800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 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 ____ No _____
The number of outstanding shares of Common Stock as of August 7, 2000,
was 100.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS
as of June 30, 2000 and December 31, 1999 1
CONSOLIDATED STATEMENTS OF OPERATIONS
for the Three Months Ended June 30, 2000 and 1999 3
and the Six Months Ended June 30, 2000 and 1999
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the Six Months Ended June 30, 2000 and 1999 4
NOTES to INTERIM CONSOLIDATED FINANCIAL STATEMENTS 5
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 16
Item 3. DEFAULT UPON SENIOR SECURITIES 16
Item 5. OTHER INFORMATION 17
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 18
SIGNATURES 18
</TABLE>
(i)
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
(UNAUDITED)
<S> <C> <C>
Assets
Cash and cash equivalents $ 2,051,064 $ 3,891,970
Receivables:
Trade, less allowance of $2,204,912 and $2,216,347 11,652,949 13,902,326
Other 1,107,567 797,128
------------ ------------
Total receivables 12,760,516 14,699,454
------------ ------------
Inventories:
Merchandise 3,356,029 3,276,136
Cemetery lots and mausoleum spaces 964,606 827,694
------------ ------------
Total inventories 4,320,635 4,103,830
------------ ------------
Prepaids and other current assets 245,792 424,576
------------ ------------
Total current assets 19,378,007 23,119,830
------------ ------------
Property and equipment:
Land and land improvements 16,878,371 16,929,888
Buildings and improvements 52,369,227 51,318,985
Equipment, furniture and fixtures 10,857,421 10,763,764
Accumulated depreciation (10,367,733) (8,673,146)
------------ ------------
Net property and equipment 69,737,286 70,339,491
------------ ------------
Developed cemetery properties 14,138,915 14,564,994
Undeveloped cemetery properties 30,830,259 30,830,259
Goodwill, less accumulated amortization of $21,438,015
and $18,996,653 204,928,671 207,755,119
Other intangible assets, less accumulated amortization of
$15,480,640 and $13,614,443 12,821,813 14,839,249
Long-term receivables, less allowance of $3,814,738 and
$3,965,996 14,237,016 14,397,421
Merchandise trust assets and investments in insurance
contracts 21,232,741 21,814,901
Deferred obtaining costs, less accumulated amortization of
$4,592,492 and $3,493,640 16,022,407 15,270,796
Other assets 1,169,887 1,211,976
------------ ------------
$404,497,002 $414,144,036
============ ============
</TABLE>
See accompanying notes to interim consolidated financial statements.
1
<PAGE> 4
PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
(UNAUDITED)
<S> <C> <C>
Liabilities and Shareholders' Equity
Accounts payable $ 372,936 $ 2,594,453
Other accrued expenses 14,645,779 9,988,292
Current installments of obligations under agreements with
former owners 2,752,993 2,738,706
Current installments of long-term debt 1,076,099 682,284
Long-term debt in default 208,672,000 209,000,000
Due to related party 333,333 343,750
------------ ------------
Total current liabilities 227,853,140 225,347,485
------------ ------------
Deferred merchandise liabilities and revenues 56,375,888 54,965,220
Obligations under agreements with former owners, less
current installments 8,073,647 9,510,666
Long-term debt, less current installments 3,105,973 3,398,698
Deferred income taxes 17,747,792 17,747,792
Other long-term liabilities 2,494,080 2,761,744
Shareholders' equity
Common stock, par value $.01 per share, 1,000 shares
authorized; 100 issued and outstanding shares 1 1
Additional paid-in capital 128,307,885 128,501,398
Accumulated deficit (39,461,404) (28,088,968)
------------ ------------
Total shareholders' equity 88,846,482 100,412,431
------------ ------------
$404,497,002 $414,144,036
============ ============
</TABLE>
See accompanying notes to interim consolidated financial statements.
2
<PAGE> 5
PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
2000 1999 2000 1999
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Funeral $16,522,379 $18,052,753 $ 35,533,044 $38,927,876
Cemetery 3,925,954 4,247,818 7,895,565 9,166,820
----------- ----------- ------------ -----------
20,448,333 22,300,571 43,428,609 48,094,696
Costs and expenses:
Funeral 12,819,217 12,385,593 26,087,172 25,067,869
Cemetery 3,497,730 2,629,352 6,497,378 5,906,255
----------- ----------- ------------ -----------
16,316,947 15,014,945 32,584,550 30,974,124
Corporate general and
administrative expenses 725,673 861,241 1,491,999 1,693,847
Depreciation and amortization 3,032,709 2,867,179 5,923,105 5,793,590
Debt refinancing costs 697,034 -- 1,649,115 --
----------- ----------- ------------ -----------
Operating income (loss) (324,030) 3,557,206 1,779,840 9,633,135
----------- ----------- ------------ -----------
Other expenses:
Interest expense, including
amortization of deferred
loan costs (see note 2) 6,741,859 6,003,090 13,055,670 11,855,167
----------- ----------- ------------ -----------
Loss before income taxes (7,065,889) (2,445,884) (11,275,830) (2,222,032)
Income tax expense (48,304) (31,472) (96,606) (49,744)
----------- ----------- ------------ -----------
Net loss $(7,114,193) $(2,477,356) $(11,372,436) $(2,271,776)
=========== =========== ============ ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE> 6
PRIME SUCCESSION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------
2000 1999
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(11,372,436) $(2,271,776)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 6,785,002 6,681,115
Depletion of cemetery property 446,421 393,942
Gain on assets (34,305) (28,127)
Changes in operating assets and liabilities:
Receivables (net) 2,219,343 1,821,668
Inventories (237,147) (586,908)
Merchandise trust assets and investments in insurance
contracts 582,160 (3,859,279)
Deferred obtaining costs (954,753) (1,691,047)
Accounts payable and accrued expenses 2,435,970 (661,751)
Due to related party (10,417) 208,333
Deferred merchandise liabilities and revenues 1,410,668 3,860,304
Other long-term liabilities (267,664) (368,500)
Other 47,438 44,458
------------ -----------
Net cash provided by operating activities 1,050,280 3,542,432
------------ -----------
Cash flows from investing activities:
Proceeds from the disposal of property and equipment 63,787 150,768
Purchases of property and equipment (1,295,383) (1,900,989)
------------ -----------
Net cash used in investing activities (1,231,596) (1,750,221)
------------ -----------
Cash flows from financing activities:
Net proceeds of bank indebtedness under revolving loan 1,672,000 --
Net payments on long-term debt (1,908,858) (733,036)
Payments on obligations under agreements with former owners (1,422,732) (1,367,624)
------------ -----------
Net cash used in financing activities (1,659,590) (2,100,660)
------------ -----------
Net decrease in cash and cash equivalents (1,840,906) (308,449)
Cash and cash equivalents at beginning of period 3,891,970 1,146,670
------------ -----------
Cash and cash equivalents at end of period $ 2,051,064 $ 838,221
============ ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
4
<PAGE> 7
PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) On July 12, 2000 (the "Petition Date"), Prime Succession Holdings,
Inc., Prime Succession, Inc. (the "Company") and certain of the
Company's subsidiaries (collectively, the "Debtors") filed petitions
for relief (the "Bankruptcy Cases") under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court").
Since the Petition Date, the Debtors have continued to operate their
businesses as debtors in possession under the Bankruptcy Code.
The Bankruptcy Cases were commenced to implement a financial
restructuring of the Debtors that had been negotiated with the holders
of more than 66 2/3% of the principal amount of the Company's senior
subordinated notes (the "Notes") and the Company's bank group.
DEBT RESTRUCTURING
As described above, on the Petition Date, the Debtors commenced the
Bankruptcy Cases in the Bankruptcy Court for the District of Delaware.
Since such date, the Debtors have been operating their businesses as
debtors-in-possession under the Bankruptcy Code.
The Bankruptcy Cases were commenced to implement a financial
restructuring of the Debtors that had been negotiated with an informal
committee of some of the Company's largest noteholders (the "Informal
Committee"). As of the Petition Date, the members of the Informal
Committee or certain funds managed or advised by them, held in the
aggregate more than 66 2/3% of the outstanding principal amount of the
Company's senior subordinated notes. Prior to the Petition Date, three
members of the Informal Committee signed a support agreement under
which they have agreed to support the Company's joint plan of
reorganization (the "Plan") within certain specified time frames.
In connection with the filing of the Bankruptcy Cases, shortly after
the Petition Date, the Bankruptcy Court approved, on an interim basis,
$5.5 million of a $10 million debtor in possession financing (the "DIP
Facility") with The Bank of Nova Scotia and Goldman Sachs Credit
Partners L.P. (collectively the "DIP Facility Lenders"), proceeds of
which will be used for general corporate purposes, including payments
to the Company's trade creditors. On August 3, 2000, the Bankruptcy
Court entered a final order approving the DIP Facility. Under the DIP
Facility the DIP Facility Lenders have been granted a first priority
security interest in substantially all of the Debtors assets. In
connection with consummation of the Plan, the Company intends to enter
into a new credit facility (the "New Credit Facility"), the proceeds of
which will be used to repay the DIP Facility in full on the effective
date of the Plan, refinance existing bank debt and will provide the
Company with funds for its expected working capital and capital
expenditure needs following such date.
To maintain strong relationships with its vendors, on July 13, 2000,
the Debtors obtained an order from the Bankruptcy Court pursuant to
which they have been authorized to pay in full all of their trade
creditors that continue to provide them with goods on customary terms
and credit, or otherwise acceptable to the Debtors. To date, all of the
Debtors' trade creditors have been providing acceptable trade terms to
them, and the Debtors have been paying them in the ordinary course of
business.
The Bankruptcy Court has scheduled August 21, 2000 as the hearing date
to consider the Debtors' disclosure statement relating to the Plan.
Once the disclosure statement is approved, the Debtors will mail the
disclosure statement to all of their creditors and shareholders
entitled to vote on the Plan. The Bankruptcy Court has scheduled a
hearing on confirmation of the Plan for September 28, 2000. Assuming
the Plan is accepted by the classes of creditors and shareholders
entitled to vote on the Plan and the Bankruptcy Court approves the
Plan, the Company expects the Plan to become effective approximately
two
5
<PAGE> 8
PRIME SUCCESSION, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
weeks following the confirmation date. There is no assurance that the
Bankruptcy Court will confirm the Plan on September 28, 2000 or that
the Plan will become effective two weeks thereafter.
(2) Interest expense includes amortization of deferred loan costs as
follows:
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
-------- -------- -------- --------
$430,949 $449,102 $861,898 $887,525
(3) Footnote disclosure which would substantially duplicate the disclosure
contained in the Annual Report on Form 10-K for the year ended December
31, 1999 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
June 30, 2000 assuming continuation as a going concern. All such
adjustments are of a normal recurring nature.
(4) The unaudited interim consolidated financial statements have been
prepared assuming Prime Succession, Inc. and subsidiaries will continue
as a going concern. As discussed in Note 1 to Interim Consolidated
Financial Statements, the Company filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code. The unaudited interim
consolidated financial statements do not include any adjustments that
might result from the outcome of the Bankruptcy Cases.
(5) Certain reclassifications have been made to the 1999 amounts to conform
to the 2000 presentations.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
On August 26, 1996 (the "Closing Date"), the capital stock of Prime
Succession, Inc. ("Predecessor Company") 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 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
June 30, 2000, the Company through its subsidiaries owns or operates 140 funeral
homes and 19 cemeteries in 19 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 $43.4 million and $48.1 million for the six months
ended June 30, 2000 and 1999, respectively. Sales of funeral services of $35.5
million and $38.9 million accounted for approximately 81.8% and 80.9% and
cemetery sales of $7.9 million and $9.2 million accounted for approximately
18.2% and 19.1%, respectively, of total net sales for the six months ended June
30, 2000 and 1999.
The Company had no funeral homes when it began operation in 1992 and
grew to 146 funeral homes in 1996. In order to achieve this rapid growth, former
management was primarily focused on identifying properties to be acquired and
consummating such acquisitions rather than on maximizing profitability of the
funeral homes and cemeteries which it had acquired. New management substantially
eliminated the Company's acquisition program and sought to take greater
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.
7
<PAGE> 10
RESULTS OF OPERATIONS
The Company's operations are detailed below for the three months ended
June 30, 2000 and 1999 expressed in dollar amounts as well as relevant
percentages. Revenue, gross margin, earnings from operations and expenses are
presented as a percentage of revenue. Income taxes are presented as a percentage
of losses before incomes taxes.
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
(MILLIONS OF DOLLARS) (PERCENT)
--------------------- ---------
<S> <C> <C> <C> <C>
REVENUE
Funeral $16.5 $18.1 80.9% 81.0%
Cemetery 3.9 4.2 19.1 19.0
----- ----- ----- -----
Total $20.4 $22.3 100.0% 100.0%
===== ===== ===== =====
GROSS MARGIN
Funeral $ 3.7 $ 5.7 22.4% 31.5%
Cemetery 0.4 1.6 10.3 38.1
----- -----
Total 4.1 7.3 20.1 32.7
EXPENSES
Corporate general and administrative 0.7 0.9 3.4 4.0
Depreciation and amortization 3.0 2.9 14.7 13.0
Debt refinancing costs 0.7 -- 3.4 --
----- -----
OPERATING INCOME (LOSS) (0.3) 3.5 (1.5) 15.7
Interest expense 6.8 6.0 33.3 26.9
----- -----
LOSS BEFORE INCOME TAXES (7.1) (2.5) (34.8) (11.2)
Income taxes -- -- -- --
----- -----
NET LOSS $(7.1) $(2.5) (34.8)% (11.2)%
===== =====
</TABLE>
Consolidated revenues decreased 8.5% to $20.4 million for the three
months ended June 30, 2000 compared to $22.3 million in the corresponding period
for 1999, with funeral service revenues decreasing 8.8% to $16.5 million
compared to $18.1 million in the corresponding period in 1999, and cemetery
revenues decreasing 7.1% to $3.9 million compared to $4.2 million in the
corresponding period for 1999. Funeral revenues decreased primarily as a result
of a decline in call volume. Cemetery revenues decreased primarily due to a
decline in prearranged sales of property, merchandise and services. Consolidated
operating income (loss) decreased to $(0.3) million for the three
8
<PAGE> 11
months ended June 30, 2000 from $3.5 million for the three months ended June 30,
1999 due to a decline in both funeral and cemetery revenue as well as the
incurrence of $0.7 million in debt refinancing costs.
Consolidated gross margin decreased 43.8% to $4.1 million for the three
months ended June 30, 2000 compared to $7.3 million for the three months ended
June 30, 1999, with funeral gross margin of 22.4% for the three months ended
June 30, 2000 compared to 31.5% for the three months ended June 30, 1999 and
cemetery gross margin of 10.3% for the three months ended June 30, 2000 compared
to 38.1% for the corresponding period in 1999. Funeral gross margin decreased
primarily as a result of a decline in call volume. Cemetery gross margin
decreased due to a decline in pre-need sales. Gross 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 decreased to $0.7 million
for the three months ended June 30, 2000 from $0.9 million for the three months
ended June 30, 1999 this decrease is primarily due to a reduction in salary and
bonus expenses. As a percentage of consolidated revenue, general and
administrative expense decreased to 3.4% in 2000 from 4.0% for the corresponding
period in 1999.
Depreciation and amortization expense increased to $3.0 million for the
three months ended June 30, 2000 from $2.9 million for the three months ended
June 30, 1999 due primarily to increased depreciation on capital expenditures.
Interest expense of $6.8 million for the three months ended June 30,
2000 increased by $0.8 million compared to $6.0 million for the corresponding
period in 1999, primarily as a result of additional borrowings, pricing premiums
on existing debt and a change in pricing structure. Pricing reduction or premium
is determined based on the Company's ability to achieve certain ratios set forth
in the Bank Credit Agreement.
9
<PAGE> 12
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
(MILLIONS OF DOLLARS) (PERCENT)
--------------------- ---------
<S> <C> <C> <C> <C>
REVENUE
Funeral $ 35.5 $38.9 81.8% 80.9%
Cemetery 7.9 9.2 18.2 19.1
------ ----- ----- -----
Total $ 43.4 $48.1 100.0% 100.0%
====== ===== ===== =====
GROSS MARGIN
Funeral $ 9.4 $13.9 26.5% 35.7%
Cemetery 1.4 3.2 17.7 34.8
------ -----
Total 10.8 17.1 24.9 35.6
EXPENSES
Corporate general and administrative 1.5 1.7 3.5 3.5
Depreciation and amortization 5.9 5.8 13.6 12.0
Debt refinancing costs 1.6 -- 3.7 --
------ -----
OPERATING INCOME 1.8 9.6 4.1 20.0
Interest expense 13.1 11.8 30.2 24.5
------ -----
LOSS BEFORE INCOME TAXES (11.3) (2.2) (26.0) (4.6)
Income taxes 0.1 0.1 (0.9) (4.5)
------ -----
NET LOSS $(11.4) $(2.3) (26.3)% (4.8)%
====== =====
</TABLE>
Consolidated revenues decreased 9.8% to $43.4 million for the six
months ended June 30, 2000 compared to $48.1 million in the corresponding period
for 1999, with funeral service revenues decreasing 8.7% to $35.5 million
compared to $38.9 million in the corresponding period in 1999, and cemetery
revenues decreasing 14.1% to $7.9 million compared to $9.2 million in the
corresponding period for 1999. Funeral revenues decreased primarily as a result
of a decline in call volume. Cemetery revenues decreased primarily due to a
decline in prearranged sales of property, merchandise and services. Consolidated
operating income decreased to $1.8 million for the six months ended June 30,
2000 from $9.6 million for the six months ended June 30, 1999 due to a decline
in both funeral and cemetery revenue as well as the incurrence of $1.6 million
in debt refinancing costs.
10
<PAGE> 13
Consolidated gross margin decreased 36.8% to $10.8 million for the six
months ended June 30, 2000 compared to $17.1 million for the six months ended
June 30, 1999, with funeral gross margin of 26.5% for the six months ended June
30, 2000 compared to 35.7% for the six months ended June 30, 1999 and cemetery
gross margin of 17.7% for the six months ended June 30, 2000 compared to 34.8%
for the corresponding period in 1999. Funeral gross margin decreased primarily
as a result of a decline in call volume. Cemetery gross margin decreased due to
a decline in pre-need sales. Gross 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 decreased 11.8% to $1.5
million for the six months ended June 30, 2000 compared to $1.7 million for the
six months ended June 30, 1999. This decrease is primarily due to a reduction in
salary and bonus expenses. As a percentage of consolidated revenue, general and
administrative expense remained constant at 3.5% for the six months ended June
30, 2000 and 1999.
Depreciation and amortization expense increased 1.7% to $5.9 million
for the six months ended June 30, 2000 compared to $5.8 million for the six
months ended June 30, 1999 due primarily to increased depreciation on capital
expenditures.
Interest expense of $13.1 million for the six months ended June 30,
2000 increased by $1.3 million compared to $11.8 million for the corresponding
period in 1999, primarily as a result of additional borrowings, pricing premiums
on existing debt, and a change in pricing structure. Pricing reduction or
premium is determined based on the Company's ability to achieve certain ratios
set forth in the Bank Credit Agreement.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash in 2000 and 1999 have been funds
provided by operating activities and proceeds under the revolving loan. As of
June 30, 2000, the Company had a net working capital deficit of $208.5 million
and a current ratio of 0.09:1, compared to a net working capital deficit of
$202.2 million and a current ratio of 0.10:1 as of December 31, 1999.
The primary uses of cash in 2000 and 1999 have been for the principal
payments on long-term debt, payments on obligations under agreements with former
owners and capital expenditures.
In the six months ended June 30, 2000 and 1999, the Company used $1.3
million and $1.9 million for capital expenditures, respectively. In the six
months ended June 30, 2000 and 1999, the Company paid $1.9 million and $0.7
million in principal payments on long-term debt, respectively. Payments relating
principally to payment of former owner obligations for the six months ended June
30, 2000 and 1999 were $1.4 million. In the six months ended June 30, 2000, the
Company borrowed a net of $1.7 million on its revolving line of credit.
The Company estimates that net capital expenditures in 2000 will be
$2.4 million which will be used in part for the repair and improvement of
existing facilities.
Contemporaneously with the consummation of the Acquisition, the Company
entered into a credit agreement (the "Bank Credit Agreement") with a syndicate
of financial institutions (the "Lender") and The Bank of Nova Scotia, as
administrative agent.
11
<PAGE> 14
The Bank Credit Agreement provided the Company with senior secured
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 Bank Term Facility will
mature 7 years after the Acquisition Closing Date, and the Bank Revolving
Facility matures 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. The Company also has a $0.5 million bank credit
line, renewable annually, for general corporate purposes exclusive of the Bank
Revolving Facility.
All obligations under the Bank Credit Agreement 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 Bank Guarantors under the
Bank Credit Agreement and the Bank Guarantees are secured by first priority
security interests in all existing and future assets (other than certain real
property and vehicles covered by certificates of title) of the Company and the
Bank Guarantors. In addition, the obligations 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 is 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 Agreement contains 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, 1999, the Company was in default with respect to
certain financial covenants set forth in the Bank Credit Agreement. On November
12, 1999, the Lenders granted the Company a conditional waiver of non-compliance
until January 31, 2000 pursuant to a Limited Waiver and Amendment to Credit
Agreement entered into among the Company, the Bank Guarantors, the Lenders and
The Bank of Nova Scotia.
On January 31, 2000, the Company and the Bank Guarantors entered into a
Limited Waiver and Forebearance Agreement to Credit Agreement with the Lenders
and The Bank of Nova Scotia pursuant to which the Lenders agreed to waive
certain conditions to additional borrowings under the Revolving Credit Facility
and to forbear from exercising certain rights and remedies under the Bank Credit
Agreement through March 15, 2000. The Lenders have not granted the Company a
further waiver beyond March 15, 2000 and have specifically reserved all of their
rights and remedies under the Bank Credit Agreement with respect to the existing
defaults. However, the Lenders have not accelerated the indebtedness outstanding
under the Bank Credit Agreement or pursued any available remedies.
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<PAGE> 15
Pursuant to the Limited Waiver and Forebearance Agreement to Credit
Agreement dated January 31, 2000, on February 8, 2000, The Bank of Nova Scotia,
as Administrative Agent under the Bank Credit Agreement, issued a Payment
Blockage Notice to the Trustee under the Indenture relating to the Notes. As a
consequence, the Company did not make the semi-annual interest payment due
February 15, 2000 on the Notes. The Company has not received an acceleration
notice from either the Trustee or the holders of the Notes, nor have the holders
of the Notes otherwise pursued any remedies available to them.
The Company did not make the monthly interest payment of approximately
$1.0 million on the Bank Facilities due June 30, 2000.
On July 12, 2000, Prime Succession Holdings, Inc., the Company and
certain of the Company's subsidiaries filed petitions for relief under Chapter
11 of the United States Bankruptcy Code in the United States Bankruptcy Court
for the District of Delaware. Since the Petition Date, the Debtors have
continued to operate their businesses as debtors in possession under the
Bankruptcy Code.
The Bankruptcy Cases were commenced to implement a financial
restructuring of the Debtors that had been negotiated with the holders of more
than 66 2/3% of the principal amount of the Company's senior subordinated notes
and the Company's bank group. See "Debt Restructuring" and Part II Item 3 --
Default upon Senior Securities.
DEBT RESTRUCTURING
As described above, on the Petition Date, the Debtors commenced the
Bankruptcy Cases in the Bankruptcy Court for the District of Delaware. Since
such date, the Debtors have been operating their businesses as debtors-in-
possession under the Bankruptcy Code.
The Bankruptcy Cases were commenced to implement a financial
restructuring of the Debtors that had been negotiated with an informal committee
of some of the Company's largest noteholders. As of the Petition Date, the
members of the Informal Committee or certain funds managed or advised by them,
held in the aggregate more than 66 2/3% of the outstanding principal amount of
the Company's senior subordinated notes. Prior to the Petition Date, three
members of the Informal Committee signed a support agreement under which they
have agreed to support the Company's joint plan of reorganization within certain
specified time frames.
In connection with the filing of the Bankruptcy Cases, shortly after
the Petition Date, the Bankruptcy Court approved, on an interim basis, $5.5
million of a $10 million debtor in possession financing with The Bank of Nova
Scotia and Goldman Sachs Credit Partners L.P., the proceeds of which will be
used for general corporate purposes, including payments to the Company's trade
creditors. On August 3, 2000, the Bankruptcy Court entered a final order
approving the DIP Facility. Under the DIP Facility the DIP Facility Lenders have
been granted a first priority security interest in substantially all of the
Debtors assets. In connection with consummation of the Plan, the Company intends
to enter into a new credit facility (the "New Credit Facility"), the proceeds of
which will be used to repay the DIP Facility in full on the effective date of
the Plan, refinance existing bank debt and will provide the Company with funds
for its expected working capital and capital expenditure needs following such
date.
To maintain strong relationships with its vendors, on July 13, 2000,
the Debtors obtained an order from the Bankruptcy Court pursuant to which they
have been authorized to pay in full all of their trade creditors that continue
to provide them with goods on customary terms and credit, or otherwise
acceptable to the Debtors. To date, all of the Debtors' trade creditors have
been providing acceptable trade terms to them, and the Debtors have been paying
them in the ordinary course of business.
The Bankruptcy Court has scheduled August 21, 2000 as the hearing date
to consider the Debtors' disclosure statement relating to the Plan. Once the
disclosure statement is approved, the Debtors will mail the Disclosure Statement
to all of their creditors and shareholders entitled to vote on the Plan. The
Bankruptcy Court has scheduled a hearing on confirmation of the Plan for
September 28, 2000. Assuming the Plan is accepted by the
13
<PAGE> 16
classes of creditors and shareholders entitled to vote on the Plan and the
Bankruptcy Court approves the Plan, the Company expects the Plan to become
effective approximately two weeks following the confirmation date. There is no
assurance that the Bankruptcy Court will confirm the Plan on September 28, 2000
or that the Plan will become effective two weeks thereafter.
Statements of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities," is required to
be implemented in the first quarter of the Company's fiscal year 2001. The
effect of this pronouncements on the Company's consolidated financial condition
and results of operations is not expected to be material.
The SEC issued Staff Accounting Bulletin (SAB) No. 101, "Revenue
Recognition in Financial Statements" in December 1999. SAB 101 presents the
staff's views on the application of existing generally accepted accounting
principles to revenue recognition in the financial statements. The industry is
currently assessing the impact of the application of SAB 101 on revenue
recognition policies. If it is determined that SAB 101 modifies or amends
revenue recognition policies followed by the industry and previously accepted by
the SEC, the adjustment would be required to be reflected in the Company's
consolidated financial statement in the quarter ending December 31, 2000.
14
<PAGE> 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in the Company's market risk sensitive
instruments and positions is the potential change arising from increases or
decreases in interest rates as discussed below. Generally, the Company's market
risk sensitive instruments and positions are characterized as "other than
trading". The Company's exposure to market risk as discussed below includes
"forward-looking statements" and represents an estimate of possible changes in
fair value or future earnings that would occur assuming hypothetical future
movements in interest rates. The Company's views on market risk are not
necessarily indicative of actual results that may occur and do not represent the
maximum possible gains and losses that may occur, since actual gains and losses
will differ from those estimated, based upon actual fluctuations in interest
rates and the timing of transactions.
INTEREST
The Company has entered into various fixed and variable rate debt
obligations.
As of June 30, 2000, the carrying value of the Company's long-term
fixed-rate debt was approximately $103.7 million compared to fair value of $24.7
million. Fair value was determined using quoted market prices, where applicable,
or discounted future cash flows based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. If these
instruments are held to maturity, no reduction in the carrying value due to
market value decline will be realized.
As of June 30, 2000, the Company had $109.2 million in variable-rate
debt. Each 0.5% change in average interest rates applicable to such debt would
result in a change of approximately $0.5 million in the Company's annual pre-tax
earnings.
The Company monitors its mix of fixed and variable rate debt
obligations in light of changing market conditions and from time to time may
alter that mix as permitted by, for example, entering into interest rate swaps
or other interest rate hedging transactions.
15
<PAGE> 18
PART II
ITEM 1. - LEGAL PROCEEDINGS
On February 25, 1999, the Department of Legal Affairs, a part of the
Office of the Attorney General of the State of Florida, issued a subpoena duces
tecum requiring the production of various documents and materials by the Company
in connection with an investigation into the compliance of the Company's
pre-need and at-need policies and procedures with Florida law. The Company has
delivered the information required and has met with representatives of the
Department of Legal Affairs to review the findings and charges which may arise
from the investigation. The Company is gathering additional information and will
meet again with the Department of Legal Affairs personnel in the near future to
discuss an overall resolution of all matters of concern.
ITEM 3. - DEFAULT UPON SENIOR SECURITIES
As of September 30, 1999, the Company was in default with respect to
certain financial covenants set forth in the Bank Credit Agreement. On November
12, 1999, the Lenders granted the Company a conditional waiver of non-compliance
until January 31, 2000 pursuant to a Limited Waiver and Amendment to Credit
Agreement entered into among the Company, the Bank Guarantors, the Lenders and
The Bank of Nova Scotia.
On January 31, 2000, the Company and the Bank Guarantors entered into a
Limited Waiver and Forebearance Agreement to Credit Agreement with the Lenders
and The Bank of Nova Scotia pursuant to which the Lenders agreed to waive
certain conditions to additional borrowings under the Revolving Credit Facility
and to forbear from exercising certain rights and remedies under the Bank Credit
Agreement through March 15, 2000. The Lenders have not granted the Company a
further waiver beyond March 15, 2000 and have specifically reserved all of their
rights and remedies under the Bank Credit Agreement with respect to the existing
defaults. However, the Lenders have not accelerated the indebtedness outstanding
under the Bank Credit Agreement or pursued any available remedies.
Pursuant to the Limited Waiver and Forebearance Agreement to Credit
Agreement dated January 31, 2000, on February 8, 2000, The Bank of Nova Scotia,
as Administrative Agent under the Bank Credit Agreement, sent a Payment Blockage
Notice to the Trustee under the Indenture relating to the Notes. As a
consequence, the Company did not make the semi-annual interest payment in the
amount of $5,375,000 due February 15, 2000 on the Notes. The Company has not
received an acceleration notice from either the Trustee or the holders of the
Notes, nor have the holders of the Notes otherwise pursued any remedies
available to them.
The Company did not make the monthly interest payment of approximately
$1.0 million on the Bank Facility due June 30, 2000.
On July 12, 2000, Prime Succession Holdings, Inc., the Company and
certain of the Company's subsidiaries filed petitions for relief under Chapter
11 of the United States Bankruptcy Code in the United States Bankruptcy Court
for the District of Delaware. Since the Petition Date, the Debtors have
continued to operate their businesses as debtors in possession under the
Bankruptcy Code.
The Bankruptcy Cases were commenced to implement a financial
restructuring of the Debtors that had been negotiated with the holders of more
than 66 2/3% of the principal amount of the Company's senior subordinated notes
and the Company's bank group. See "Debt Restructuring" and Part I Item 2 --
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
DEBT RESTRUCTURING
As described above, on the Petition Date, the Debtors commenced the
Bankruptcy Cases in the Bankruptcy Court for the District of Delaware. Since
such date, the Debtors have been operating their businesses as debtors-in-
possession under the Bankruptcy Code.
The Bankruptcy Cases were commenced to implement a financial
restructuring of the Debtors that had been negotiated with an informal committee
of some of the Company's largest noteholders. As of the Petition Date, the
members of the Informal Committee or certain funds managed or advised by them,
held in the aggregate more than 66 2/3% of the outstanding principal amount of
the Company's senior subordinated notes. Prior to the Petition Date, three
members of the Informal Committee signed a support agreement under which they
have agreed to support the Company's joint plan of reorganization within certain
specified time frames.
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<PAGE> 19
In connection with the filing of the Bankruptcy Cases, shortly after
the Petition Date, the Bankruptcy Court approved, on an interim basis, $5.5
million of a $10 million debtor in possession financing with The Bank of Nova
Scotia and Goldman Sachs Credit Partners L.P., the proceeds of which will be
used for general corporate purposes, including payments to the Company's trade
creditors. On August 3, 2000, the Bankruptcy Court entered a final order
approving the DIP Facility. Under the DIP Facility the DIP Facility Lenders have
been granted a first priority security interest in substantially all of the
Debtors assets. In connection with consummation of the Plan, the Company intends
to enter into a new credit facility, the proceeds of which will be used to repay
the DIP Facility in full on the effective date of the Plan, refinance existing
bank debt and will provide the Company with funds for its expected working
capital and capital expenditure needs following such date.
To maintain strong relationships with its vendors, on July 13, 2000,
the Debtors obtained an order from the Bankruptcy Court pursuant to which they
have been authorized to pay in full all of their trade creditors that continue
to provide them with goods on customary terms and credit, or otherwise
acceptable to the Debtors. To date, all of the Debtors' trade creditors have
been providing acceptable trade terms to them, and the Debtors have been paying
them in the ordinary course of business.
The Bankruptcy Court has scheduled August 21, 2000 as the hearing date
to consider the Debtors' disclosure statement relating to the Plan. Once the
disclosure statement is approved, the Debtors will mail the Disclosure Statement
to all of their creditors and shareholders entitled to vote on the Plan. The
Bankruptcy Court has scheduled a hearing on confirmation of the Plan for
September 28, 2000. Assuming the Plan is accepted by the classes of creditors
and shareholders entitled to vote on the Plan and the Bankruptcy Court approves
the Plan, the Company expects the Plan to become effective approximately two
weeks following the confirmation date. There is no assurance that the Bankruptcy
Court will confirm the Plan on September 28, 2000 or that the Plan will become
effective two weeks thereafter.
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 2
"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.
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ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The Exhibits, as show in the "Index of Exhibits", attached hereto as
pages 19 through 21, 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/ ARTHUR J. ANSIN
---------------------
Arthur J. Ansin
Chief Financial Officer, Secretary and Treasurer
August 7, 2000
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<PAGE> 21
INDEX OF EXHIBITS
(a)EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
2* 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.
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)
5* Opinion of Simpson Thacher & Bartlett regarding the legality
of the Exchange Notes.
8* Opinion of Simpson Thacher & Bartlett regarding certain tax
matters.
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.
19
<PAGE> 22
(a)EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
10.4(a)* First Amendment to Credit Agreement dated September 30, 1998
among Prime Succession, Inc., Prime Succession Holdings, Inc.,
Goldman Sachs Credit Partners, as syndication agent and
arranging agent, and The Bank of Nova Scotia as administrative
agent for such lenders.
10.4(b)* Limited Waiver and Amendment dated November 12, 1999 entered
into by and among Prime Succession, Inc. (formerly known as
Prime Succession Acquisition Corp.), Prime Succession
Holdings, Inc. (formerly known as Prime Succession, Inc.), the
Financial Institutions listed therein, Goldman Sachs Credit
Partners L.P., as syndication agent and arranging agent, and
The Bank of Nova Scotia, as administrative agent.
10.4(c)* Limited Waiver and Forebearance Agreement to Credit Agreement
dated January 31, 2000 entered into by and among Prime
Succession, Inc. (formerly known as Prime Succession
Acquisition Corp.), Prime Succession Holdings, Inc. (formerly
known as Prime Succession, Inc.), the Financial Institutions
listed therein, Goldman Sachs Credit Partners L.P., as
syndication agent and arranging agent, and 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.
12 Computation of Ratio of Earnings to Fixed Charges
16* Letter from Ernst & Young LLP (independent auditors prior to
the Acquisition) concerning change in Company accountants
delivered pursuant to Item 304(a) of Regulation S-K.
21* Subsidiaries of Prime Succession, Inc. (formerly known as
Prime Succession Corp.)
23.1* Consent of Simpson Thacher & Bartlett (included in Exhibits 5
and 8).
23.2* Consent of Ernst & Young LLP (independent auditors prior to
the Acquisition).
23.3* Consent of KPMG Peat Marwick LLP (independent auditors
following the Acquisition).
24* Power of Attorney (included on Page II-4 of the Registration
Statement).
25* Statement of Eligibility on Form T-1 of United States Trust
Company of New York.
27 Financial Data Schedule
20
<PAGE> 23
(a)EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
99.1* Registration Rights Agreement dated as of August 15, 1996
between Prime Succession Acquisition Corp. and Smith Barney
Inc.
99.2* Form of Letter of Transmittal.
99.3* Form of Notice of Guaranteed Delivery.
* Incorporated by reference to the Exhibits to the Company's Registration
Statement on Form S-4 (Registration No. 333-14599) with respect to the
Exchange Notes.
21
