<PAGE>
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 MARCH 31, 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 333-21411
________________________________
ROSE HILLS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3915765
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3888 SOUTH WORKMAN MILL ROAD
WHITTIER, CALIFORNIA 90601
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(562) 692-1212
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
N/A
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
__________________
Indicate by check [X] 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 Common shares as of May 12, 2000 was 1,000.
<PAGE>
ROSE HILLS COMPANY AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF ROSE HILLS HOLDINGS CORP.)
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS
as of March 31, 2000 and December 31, 1999 1
CONSOLIDATED STATEMENTS OF OPERATIONS
for the Three Months Ended March 31, 2000 and 1999 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the Three Months Ended March 31, 2000 and 1999 3
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
for the Three Months Ended March 31, 2000 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 5 - 9
PART II. OTHER INFORMATION
ITEM 5 OTHER INFORMATION 10
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 10
INDEX OF EXHIBITS 11
<PAGE>
ROSE HILLS COMPANY AND SUBSIDIARIES
(A Wholly-Owned Subsidiary of Rose Hills Holdings Corp.)
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND MARCH 31, 2000
(In thousands, except share amounts)
<TABLE>
<CAPTION>
1999 2000
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 2,150 $ 6,934
Accounts receivable, net of allowances 11,805 10,825
Inventory 991 1,105
Prepaid expenses and other current assets 5,277 5,218
Deferred tax asset 3,508 3,508
-------- --------
Total current assets 23,731 27,590
-------- --------
Long-term receivables, net of allowances 18,729 19,318
Cemetery property 77,003 76,201
Property, plant and equipment, net 59,292 59,409
Goodwill 121,629 120,804
Deferred finance charges 7,407 6,999
Trust Assets 7,329 7,912
Other assets 2,692 2,718
-------- --------
Total assets $317,812 $320,951
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Short-term borrowings $ -- $ --
Accounts payable and accrued liabilities 10,377 12,415
Current portion of long-term debt 3,832 3,799
-------- --------
Total current liabilities 14,209 16,214
Retirement plan liabilities 6,990 6,909
Deferred tax liability 8,271 8,271
Subordinated notes payable 80,000 80,000
Bank senior term loan 68,513 68,513
Other long-term debt 1,913 1,860
Other liabilities 5,927 6,251
-------- --------
Total liabilities 185,823 188,018
-------- --------
Commitment and contingencies
Stockholder's equity:
Common stock par value $.01; Authorized and outstanding 1,000 shares -- --
Additional paid in capital 129,554 129,554
Retained earnings 2,435 3,379
-------- --------
Total stockholder's equity 131,989 132,933
-------- --------
Total liabilities and stockholder's equity $317,812 $320,951
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
1
<PAGE>
ROSE HILLS COMPANY AND SUBSIDIARIES
(A Wholly-Owned Subsidiary of Rose Hills Holdings Corp.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
March 31
--------
1999 2000
---- ----
<S> <C> <C>
Sales and services:
Funeral sales and services $ 8,962 $ 9,143
Cemetery sales and services 12,825 14,704
------- -------
Total sales and services 21,787 23,847
------- -------
Cost of sales and services:
Funeral sales and services 5,557 5,932
Cemetery sales and services 7,801 9,318
------- -------
Total costs of sales and services 13,358 15,250
------- -------
Gross profit 8,429 8,597
General and administrative expenses 1,709 1,842
Amortization of purchase price in excess of
net assets acquired and other intangibles 931 931
------- -------
Income from operations 5,789 5,824
Other income (expense):
Interest expense, net (3,839) (4,021)
Settlement Agreement 2,500 --
------- -------
Total other income (expense) (1,339) (4,021)
Income before income tax 4,450 1,803
Income tax expense 2,071 859
------- -------
Net income $ 2,379 $ 944
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
ROSE HILLS COMPANY AND SUBSIDIARIES
(A Wholly-Owned Subsidiary of Rose Hills Holdings Corp.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended
March 31
1999 2000
------- -------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 2,379 $ 944
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,281 2,339
Amortization of cemetery property 400 563
Provision for bad debts and sales cancellation 882 1,215
Gain on disposal of property, plant and equipment -- (2)
Changes in assets and liabilities:
Increase in accounts receivable (2,417) (824)
Decrease (increase) in inventories 75 (114)
Decrease in prepaid expenses and in other current assets 1,134 59
Increase (decrease) in accounts payable and accrued expenses (4,615) 2,038
Decrease in retirement plan liabilities (79) (81)
Net decrease (increase) in other assets and liabilities 102 (16)
------- -------
Net cash provided by operating activities 142 6,121
------- -------
Cash flows from investing activities:
Capital expenditures (1,375) (1,118)
Proceeds from disposal of property, plant and equipment -- 1
------- -------
Net cash used in investing activities (1,375) (1,117)
------- -------
Cash flows from financing activities:
Additions of borrowings under Bank Credit Agreement 1,000 --
Increase in other long-term debt 400 --
Principal payments of capital lease obligations (118) (134)
Decrease in other long term debt -- (86)
------- -------
Net cash provided by financing activities 1,282 (220)
------- -------
Net increase in cash and cash equivalents 49 4,784
Cash and cash equivalents at beginning of period 1,645 2,150
------- -------
Cash and cash equivalents at end of period $ 1,694 $ 6,934
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest paid $ 1,641 $ 1,673
Taxes paid $ 0 $ 200
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
ROSE HILLS COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of Rose Hills Holdings Corp.)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(In thousands, except shares outstanding)
(UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
SHARES ADDITIONAL ACCUMULATED STOCKHOLDER'S
OUTSTANDING PAID IN CAPITAL EARNINGS EQUITY
----------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1999 1,000 129,554 2,435 131,989
Net income -- -- 944 944
------ ------- ------ -------
Balance, March 31, 2000 1,000 129,554 3,379 132,933
====== ======= ====== =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
ROSE HILLS COMPANY AND SUBSIDIARIES
(A Wholly-Owned Subsidiary of Rose Hills Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying March 31, 2000 interim consolidated financial statements of
Rose Hills Company and subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting and with the instructions to Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnote disclosures
necessary for complete financial statements in conformity with generally
accepted accounting principles. In the opinion of management, the accompanying
interim consolidated financial statements contain all adjustments (consisting of
normal recurring accruals and adjustments) considered necessary for a fair
presentation of the financial condition, results of operations and cash flows
for the periods presented. These unaudited consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
included in the Company's annual report on Form 10-K for the year ended December
31, 1999.
The Company operates 14 funeral homes, 3 funeral home and cemetery
combination properties and 1 cemetery property in Southern California area.
Services offered at the locations include cemetery interment and professional
mortuary services, both of which include pre-need and at-need sales. In
addition, the Company offers for sale caskets, memorials, vaults, flowers and
the sale of pre-need funeral insurance from which commissions are earned.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and the prevailing practices within the cemetery
and mortuary industry. All significant intercompany accounts and transactions
have been eliminated.
Reclassification
Certain reclassifications have been made to the 1999 consolidated financial
statements to conform to the 2000 presentation.
2. SETTLEMENT AGREEMENT
In connection with the acquisition of Rose Hills Memorial Park and Rose Hills
Mortuary in November 1996, the predecessor to the Company entered into a
Settlement Agreement dated November 19, 1996 with Rose Hills Memorial Park
Association (the "Association") to resolve amounts due/owed under an operation
and management agreement between the predecessor company and the Association as
of November 18, 1996. On March 30, 1999, the parties finally determined the
amounts due from the Company to the Association under the Settlement Agreement.
Under the final settlement, the Company paid to the Association's successor the
sum of $3.9 million, including interest of $0.8 million. The Company had accrued
$6.4 million, including interest, for the settlement, which resulted in a gain
to the Company of $2.5 million during the first quarter ended March 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Rose Hills Company (the "Company"), a Delaware corporation, is a wholly-owned
subsidiary of Rose Hills Holdings Corp. ("RH Holdings"). The Company was formed
in 1996 for purposes of acquiring Roses, Inc. (the "Mortuary") and purchasing
certain assets and assuming certain liabilities of Rose Hills Memorial Park
Association and Workman Mill Investment Company (the "Association" and the
assets and liabilities purchased therefrom, the "Cemetery"). Also, in
connection with the acquisition, a subsidiary of The Loewen Group, Inc. (The
Loewen Group, Inc. collectively with its
5
<PAGE>
affiliates, "Loewen"), a shareholder of RH Holdings, contributed 14 funeral
homes and 2 funeral home cemetery combination properties (the "Satellite
Properties"). As a result of these acquisitions (collectively the "Acquisition
Transaction"), the Company is the successor to the operations of the predecessor
Mortuary and Cemetery.
The Cemetery and the Mortuary (collectively, "Rose Hills") are located on the
grounds of the Cemetery, Rose Hills Memorial Park. Rose Hills is the largest
single location cemetery funeral home combination in the United States and the
Cemetery is the largest single location cemetery in the United States. Rose
Hills is situated less than 14 miles from downtown Los Angeles on approximately
1,418 acres of permitted cemetery land near Whittier, California. The Cemetery
and Mortuary have been continuously operating since 1914 and 1956, respectively.
As a result of the Acquisition Transaction, the Company owns a strategic
assembly of cemeteries and funeral homes in the greater Los Angeles area.
RESULTS OF OPERATIONS
The following table sets forth certain income statement data as a percentage
of total sales for the Company.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1999 2000
----- -----
<S> <C> <C>
Sales and services:
Funeral sales and services 41.1% 38.3%
Cemetery sales and services 58.9% 61.7%
Total sales and services 100.0% 100.0%
Gross profit:
Funeral sales and services 38.0% 35.1%
Cemetery sales and services 39.2% 36.6%
Total gross profit 38.7% 36.1%
General and administrative
expenses 7.8% 7.7%
Goodwill amortization 4.3% 3.9%
Interest expense 17.6% 16.9%
</TABLE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Consolidated revenues for the quarter ended March 31, 2000 increased 9.5% to
$23.8 million from $21.8 million for the quarter ended March 31, 1999.
Consolidated gross profit for the first quarter of 2000 totaled $8.6 million
compared to $8.4 million for the first quarter of 1999. As a percentage of
revenue, consolidated gross margin percentage for the first quarter decreased
to 36.1% in 2000 from 38.7% in the same quarter 1999.
Funeral revenue for the quarter increased to $9.1 million from $9.0 million in
the same quarter for the prior year. At-need funeral revenue for the quarter
totaled $8.5 million and represents a 7.6% increase over the same period last
year. The Company performed 2,403 funeral service calls during the first quarter
of 2000 compared to 2,284 in the first quarter of 1999. Pre-need funeral
revenue for the quarter was $.6 million compared to $1.0 million in the prior
year due to a one-time payment of $.5 million paid in February 1999 by the
Company's new pre-need funeral insurance supplier, Forethought. The operating
margin for the funeral segment was 35.1% for the first quarter of 2000 compared
to 38.0% for the same quarter last year. Excluding the $.5 million insurance
payment, there was a slight improvement over last year of 34.3%, as adjusted.
Cemetery revenue for the quarter increased 14.7% to $14.7 million. Pre-need
cemetery revenue for the first quarter was $9.1 million compared to $7.6 million
for the same quarter during the prior year. The increase is due primarily to a
34% increase in the number of properties sold. The pre-need sales force has
increased from 426 at March 31, 1999 to 504 as of March 31, 2000. At-need
cemetery revenue for the quarter was $3.9 million, a 6.1% increase over last
year. Total interments were 2,643 for the quarter, which represented a 9.2%
increase over the same quarter in the prior year. The operating margin for the
cemetery segment was 36.6% of sales, which was slightly lower than for the same
quarter last year at 39.2%. Selling commission expense as a percentage of sales
was 29% for the first quarter compared to 23% for the first quarter last year
due to more sales management and higher average commission rate counselors.
6
<PAGE>
General and administrative expenses increased to $1.8 million from $1.7
million for the first quarter in 1999. As a percentage of total sales, general
and administrative expenses was 7.7% compared to 7.8% for the same quarter of
1999.
EBITDA, earnings before interest, taxes, depreciation and amortization
(including cemetery property amortization included in cost of sales), decreased
to $8.6 million for the quarter ended March 31, 2000 from $10.5 million for the
quarter ended March 31, 1999. The decrease from 1999 was primarily a result of
the $2.5 million gain recognized on finalizing the Settlement Agreement with the
previous owners of Rose Hills cemetery. EBITDA should not be considered in
isolation, as a substitute for net income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of a
company's profitability or liquidity.
LIQUIDITY AND CAPITAL RESOURCES
The Company presently believes that, based upon current levels of operations
and anticipated growth and the availability of the Bank Revolving Facility (see
description below), it can meet working capital and short-term liquidity
requirements for current operations, satisfy its contingent obligation and
service its indebtedness through December 31, 2002. As of March 31, 2000, the
Company had net working capital of $11.4 million and a current ratio of 1.70 as
compared to $9.5 million of net working capital and current ratio of 1.67 at
December 31, 1999.
Net cash provided by operating activities was $5.8 for the three months ended
March 31, 2000. For the same period last year, net cash provided by operating
activities was $.1 million. The primary reason for the increase over the prior
year is the $3.9 million settlement payment made by the Company to the
Association during 1999. As a result of the settlement payment, the Company was
required to borrow $3.0 million under its bank line to finance operations, which
was paid down to zero during fiscal 1999.
The primary use of cash will be for working capital, principal payments on
outstanding long-term indebtedness and capital expenditures as permitted under
the terms of bank agreements. The Company estimates its current year capital
expenditures of approximately $4.6 million will be used primarily to develop and
improve the existing infrastructure and cemetery grounds, as well as the
addition of rolling stock. In addition to principal payments on outstanding
long-term debt and capital expenditures, cash will be used to finance
installment contracts receivable, however, the Company does not expect a
significant increase in borrowing under its revolver to finance these
activities.
Concurrent with the Acquisition Transaction, the Company entered into senior
secured amortization extended term loan facilities (the "Bank Term Facility") in
an aggregate principal amount of $75 million, the proceeds of which were used to
finance the Acquisition Transaction 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 proceeds
of which are available 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. In addition, the Company has the right,
subject to certain conditions and performance tests, to increase the Bank Term
Facility by up to $25.0 million. The Bank Term Facility and the Bank Revolving
Facility will mature on November 1, 2003. The Bank Term Facility is subject to
amortization, subject to certain conditions, in semi-annual installments in the
amounts of $1.0 million in each of the first three years after the anniversary
of the closing date of the Bank Term Facility (the "Bank Closing"); $3.0 million
in the fourth year after the Bank Closing; $7.0 million in the fifth year after
the Bank Closing; $9.0 million in the sixth year after the Bank Closing and
$53.0 million upon maturity of the Bank Term Facility. The Revolving Credit
Facility is payable in full at maturity, with no prior amortization.
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 Rose Hills Holdings, Corp. and each of the Company's existing and
future domestic subsidiaries (the "Bank Guarantors"). All obligations of the
Company and the Bank Guarantees are secured by first priority security interests
in all existing and future assets (including real property located at Rose Hills
but excluding other real property and vehicles covered by certificates of title)
of the Company and the Bank 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 Transaction, the Company also issued $80
million of 9-1/2% Senior Subordinated Notes due 2004, which were exchanged in
September 1997 for $80 million of 9-1/2% Senior Subordinated Notes due 2004 (the
"Notes") that were registered under the Securities Act of 1933. The Notes
mature on November 15, 2004. Interest on the
7
<PAGE>
Notes is payable semi-annually on May 15 and November 15 at the annual rate of
9-1/2%. The Notes are redeemable in cash at the option of the Company, in whole
or in part, at any time on or after November 15, 2000, at prices ranging from
104.75% 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 Transaction.
As a result of the Acquisition Transaction and the application of proceeds
therefrom, the Company's total outstanding indebtedness was approximately $151.5
million as of March 31, 2000. The Company also had the entire $25.0 million of
borrowing capacity available under the Bank Revolving Facility available as of
March 31, 2000. Management currently believes that, based upon current levels
of operations and anticipated growth and the availability under the Bank
Revolving Facility, it can adequately service its indebtedness through December
31, 2002. If the Company cannot generate sufficient cash flow from operations
or borrow under the Bank Revolving Facility to meet such obligations, 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 addition, the Company currently expects that it will
have to obtain new or additional financing to pay some or all of the principal
amount due at maturity under the Bank Term Facility ($53 million by November 1,
2003) and under the Notes ($80 million on November 15, 2004). No assurance can
be given that such financing will be available to the Company or, if available,
that it may be obtained on terms and conditions that are satisfactory to the
Company.
The Company and its Subsidiaries are subject to certain restrictive covenants
contained in the indenture 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 (including the Exchange Notes), pay
dividends or make certain restricted payments, create liens on assets, engage in
mergers or acquisitions or enter into leases or transactions with affiliates.
At March 31, 2000 the Company was in compliance with the terms of the indenture
and the bank credit facilities. The Company does not believe that the
implementation of SAB 101 (discussed below) will have a negative effect on any
existing indenture and bank credit facility financial covenant in the year 2000.
NEW ACCOUNTING PRONOUNCEMENTS
SAB101
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" ("Bulletin"). The Bulletin provides the
staff's views on the application of existing generally accepted accounting
principles to revenue recognition in financial statements. The Bulletin states
that industry practice would not override these views. The Company has followed
industry practices in recognizing revenues and is in the process of determining
whether any of the industry practice is outside of the guidelines contained in
this Bulletin. It is likely that changes will be required which will impact
reporting techniques for revenue recognition by amounts material to the
financial statements. The Company, along with other affected companies in the
industry, is currently engaged in discussions with the SEC over the revenue
recognition principles to be applied going forward. However, no agreement has
been reached at this time. Therefore, the impact cannot be quantified at this
time. Any changes will likely be reflected in the second quarter interim
financial statements of 2000 pursuant to SAB 101A (issued March 24, 2000), which
delays implementation of SAB 101 until the second quarter of fiscal year 2000
for calendar year companies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's market risk is impacted by changes in interest rates. Pursuant
to the Company's policies, derivative financial instruments may be utilized to
reduce the impact of adverse changes in interest rates. The Company does not
use derivative instruments for speculation or trading purposes, and has no
material sensitivity to changes in market rates and prices on its derivative
financial instrument positions. The Company has market risk in interest rate
exposure, but manages the exposure through its interest rate Collar Agreements
which effectively set maximum and minimum interest rates on the $75.0 million of
senior debt.
8
<PAGE>
The Company has entered into interest rate collar agreements, which
effectively set maximum and minimum interest rates on the principal amount of
Senior Debt, ranging from a floor of 5.5% (the Company would pay 5.5% even if
rates fall below that level) to a maximum or cap of 6.5% for the period
commencing January 2, 1997 through December 1, 2000. The collar agreement is
based on three-month LIBOR. The fair value of the collar agreement at March 31,
2000 and December 31, 1999, as estimated by a dealer, was a favorable $100,000
and $85,000, respectively.
The counterparty to these contractual relationships is a major financial
institution with which the Company has other financial relationships. The
Company is exposed to credit losses in the event of nonperformance by the other
parties to the interest rate collar agreements. However, the Company does not
anticipate nonperformance by the other party, and no material loss would be
expected from nonperformance of such counterparty.
9
<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 2 "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position and its plans to increase revenues
and operating margins, reduce general and administrative expenses, take
advantage of synergies, and make capital expenditures, and the ability to meet
its financial obligations, 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 include those which have been disclosed herein
and in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999. Persons should review the factors identified herein and in
the Company's Form 10-K to understand the risks inherent in such forward-looking
statements.
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 qualifications in the preceding paragraph.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
The Exhibit, as shown in the "Index of Exhibits", attached hereto as page 12,
is 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.
ROSE HILLS COMPANY
/s/ KENTON C. WOODS
-------------------
Kenton C. Woods
Senior Vice President Finance and Chief Financial Officer,
Secretary and Treasurer
(Duly Authorized Officer and Principal Financial Officer)
May 12, 2000
10
<PAGE>
INDEX OF EXHIBITS
Exhibit
Number Description
- ------ -----------
(a)
27* __Financial Data Schedule
(b) Reports on Form 8-K
None
________________
*Filed Herewith.
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS OF ROSE HILLS COMPANY AND
SUBSIDIARIES, FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,934
<SECURITIES> 0
<RECEIVABLES> 10,825
<ALLOWANCES> 0
<INVENTORY> 1,105
<CURRENT-ASSETS> 27,590
<PP&E> 59,409
<DEPRECIATION> 0
<TOTAL-ASSETS> 320,951
<CURRENT-LIABILITIES> 16,214
<BONDS> 80,000
0
0
<COMMON> 0
<OTHER-SE> 132,933
<TOTAL-LIABILITY-AND-EQUITY> 320,951
<SALES> 23,847
<TOTAL-REVENUES> 23,847
<CGS> 15,250
<TOTAL-COSTS> 15,250
<OTHER-EXPENSES> 2,773
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<INCOME-TAX> 859
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<NET-INCOME> 944
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</TABLE>
