LOEWEN GROUP INC, 10-Q, 2000-05-12

LOEWEN GROUP INC
10-Q, 2000-05-12
PERSONAL SERVICES

Previous: COHEN & STEERS CAPITAL MANAGEMENT INC, 13F-HR, 2000-05-12

Next: TENET INFORMATION SERVICES INC, 10QSB, 2000-05-12

<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------

FORM 10-Q

<TABLE>
<S> <C>
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
(Mark One) OF THE SECURITIES EXCHANGE ACT OF 1934
/X/ For the quarterly period ended March 31, 2000
</TABLE>

<TABLE>
<S> <C>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
</TABLE>

COMMISSION FILE NUMBER 1-12163
------------------------
THE LOEWEN GROUP INC.
(Exact name of registrant as specified in its charter)
------------------------------

<TABLE>
<S> <C>
BRITISH COLUMBIA 98-0121376
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

4126 NORLAND AVENUE, BURNABY, BRITISH COLUMBIA, V5G 3S8
CANADA (Postal Code)
(Address of principal executive offices)
</TABLE>

Registrant's telephone number, including area code: 604-299-9321

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of outstanding Common shares as of April 28, 2000 was 74,145,466.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE LOEWEN GROUP INC.

<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C> <C>
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 AND DEFICIT
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

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.......... 4

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 18

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK................................................. 24

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS........................................... 26

ITEM 3. DEFAULTS ON SENIOR SECURITIES............................... 26

ITEM 5. OTHER INFORMATION........................................... 26

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 30

SIGNATURES...................................................................... 37
</TABLE>

i
<PAGE>
PART I

ITEM 1. FINANCIAL STATEMENTS

THE LOEWEN GROUP INC.
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS

<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash...................................................... $ 88,794 $ 55,166
Receivables, net of allowances............................ 197,774 198,500
Inventories............................................... 34,404 34,850
Prepaid expenses.......................................... 12,166 12,332
---------- ----------
333,138 300,848
Long-term receivables, net of allowances.................... 581,966 577,733
Cemetery property........................................... 918,227 923,344
Property and equipment...................................... 788,056 799,813
Names and reputations....................................... 642,722 650,200
Insurance invested assets................................... 289,559 281,423
Future income tax assets.................................... 4,473 5,128
Pre-arranged funeral services............................... 430,355 438,541
Other assets................................................ 131,451 133,553
---------- ----------
$4,119,947 $4,110,583
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities not subject to compromise
Current liabilities
Accounts payable and accrued liabilities................ $ 93,974 $ 97,637
Long-term debt, current portion......................... 22,263 20,693
---------- ----------
116,237 118,330
---------- ----------
Long-term debt, net of current portion.................... 58,362 70,511
Other liabilities......................................... 427,186 426,019
Insurance policy liabilities.............................. 189,264 184,207
Future income tax liabilities............................. 153,382 146,028
Deferred pre-arranged funeral services revenue............ 430,355 438,541
Liabilities subject to compromise........................... 2,278,704 2,282,601

Shareholders' equity
Common shares............................................. 1,276,384 1,276,434
Preferred shares.......................................... 157,146 157,146
Deficit................................................... (982,118) (1,004,917)
Foreign exchange adjustment............................... 15,045 15,683
---------- ----------
466,457 444,346
---------- ----------
$4,119,947 $4,110,583
========== ==========
BANKRUPTCY PROCEEDINGS AND BASIS OF PRESENTATION (NOTE 1)

COMMITMENTS AND CONTINGENCIES (NOTES 3, 4 AND 6)
</TABLE>

SEE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1
<PAGE>
THE LOEWEN GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------------
2000 1999
----------- ---------
(UNAUDITED)
<S> <C> <C>
Revenue
Funeral................................................... $ 161,070 $ 174,282
Cemetery.................................................. 71,228 108,770
Insurance................................................. 24,559 23,761
----------- ---------
256,857 306,813
----------- ---------
Costs and expenses
Funeral................................................... 106,274 106,762
Cemetery.................................................. 51,634 78,713
Insurance................................................. 19,107 19,197
----------- ---------
177,015 204,672
----------- ---------
79,842 102,141
Expenses
General and administrative................................ 17,745 26,287
Depreciation and amortization............................. 14,571 15,768
----------- ---------
32,316 42,055
----------- ---------
Earnings from operations.................................... 47,526 60,086

Interest on long-term debt.................................. 3,298 44,861
Reorganization costs........................................ 6,939 --
Dividends on preferred securities of subsidiary............. -- 1,772
Other expenses.............................................. 1,666 140
----------- ---------
Earnings before income taxes................................ 35,623 13,313
Income taxes................................................ 12,824 6,386
----------- ---------
Net earnings for the period................................. $ 22,799 $ 6,927

Deficit, beginning of period................................ (1,004,917) (539,741)
----------- ---------
Deficit, end of period...................................... $ (982,118) $(532,814)
=========== =========
Basic earnings per Common share............................. $ 0.28 $ 0.06
</TABLE>

SEE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2
<PAGE>
THE LOEWEN GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

EXPRESSED IN THOUSANDS OF U.S. DOLLARS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------
2000 1999
-------- ---------
(UNAUDITED)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings.............................................. $ 22,799 $ 6,927
Items not affecting cash
Depreciation and amortization........................... 18,941 19,786
Amortization of debt issue costs........................ 928 1,401
Future income taxes..................................... 8,146 (597)
Losses on disposition of assets and investments......... 1,666 --
Non-cash reorganization costs........................... 170 --
Other, including net changes in other non-cash balances..... 432 (66,615)
-------- ---------
53,082 (39,098)
-------- ---------
Investing
Proceeds on disposition of assets and investments......... 5,752 187,143
Purchase of property and equipment........................ (4,471) (6,615)
Construction of new facilities............................ (455) (4,975)
Purchase of insurance invested assets..................... (36,107) (49,869)
Proceeds on disposition and maturities of insurance
invested assets......................................... 27,947 47,551
-------- ---------
(7,334) 173,235
-------- ---------
Financing
Increase in long-term debt................................ -- 4,168
Repayment of long-term debt............................... (11,739) (130,216)
Repayment of current indebtedness......................... -- (17,440)
Debt issue costs.......................................... (381) (4,022)
Preferred share dividends................................. -- (2,157)
-------- ---------
(12,120) (149,667)
-------- ---------
Increase (decrease) in cash................................. 33,628 (15,530)
Cash, beginning of period................................... 55,166 94,141
-------- ---------
Cash, end of period......................................... $ 88,794 $ 78,611
======== =========
</TABLE>

SEE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

3
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 1. BANKRUPTCY PROCEEDINGS AND BASIS OF PRESENTATION

BANKRUPTCY PROCEEDINGS

The Loewen Group Inc. (the "Company") is a company organized under the laws
of British Columbia, Canada.

On June 1, 1999 (the "Petition Date"), the Company, 869 United States
subsidiaries and one European subsidiary voluntarily filed a petition for
creditor protection under Chapter 11 of the U.S. Bankruptcy Code ("Chapter 11")
in the U.S. Bankruptcy Court for the District of Delaware. Concurrent with the
Chapter 11 filing, the Company and 116 Canadian subsidiaries voluntarily filed
an application for creditor protection under the Companies' Creditors
Arrangement Act ("CCAA") with the Ontario Superior Court of Justice, Toronto,
Ontario, Canada (together with the U.S. Bankruptcy Court, the "Bankruptcy
Courts"). Subsequent to the Petition Date, three additional subsidiaries of the
Company voluntarily filed for creditor protection and seven subsidiaries were
voluntarily deleted.

The Company and its subsidiaries under creditor protection (the "Debtors")
are presently operating their businesses as debtors-in-possession. The United
States trustee for the District of Delaware appointed a statutory committee of
unsecured creditors (the "Official Unsecured Creditors' Committee"). The
proceedings of the Debtors are being jointly administered for procedural
purposes only. The Company's United Kingdom subsidiaries, which generate
approximately 1% of the Company's revenues, along with the Company's insurance
and certain funeral and cemetery subsidiaries, were excluded from the filings.

The Company is reorganizing its affairs under the protection of Chapter 11
and CCAA and will propose a plan of reorganization for itself and its filing
subsidiaries, which will be submitted to the Bankruptcy Courts overseeing the
Chapter 11 and CCAA proceedings for confirmation after submission to any vote
and approval required by affected parties.

BASIS OF PRESENTATION

The accompanying interim consolidated financial statements have been
prepared on a "going concern" basis in accordance with Canadian generally
accepted accounting principles ("GAAP"). The "going concern" basis of
presentation assumes that the Company will continue in operation for the
foreseeable future and will be able to realize its assets and discharge its
liabilities and commitments in the normal course of business. There is
substantial doubt about the appropriateness of the use of the "going concern"
assumption because of the Chapter 11 and CCAA bankruptcy proceedings and
circumstances relating to this event, including the Company's current debt
structure, recent losses and cash flow. As such, realization of assets and
discharge of liabilities are subject to significant uncertainty.

The interim consolidated financial statements do not reflect adjustments
that would be necessary if the "going concern" basis was not appropriate. If the
"going concern" basis was not appropriate for these interim consolidated
financial statements, then significant adjustments would be necessary in the
carrying value of assets and liabilities, the reported revenues and expenses,
and the balance sheet classifications used. The appropriateness of the "going
concern" basis is dependent upon, among other things, confirmation of a plan of
reorganization, future profitable operations, the ability to renegotiate and
comply with the terms of a debtor-in-possession revolving credit facility, and
the ability to generate sufficient cash from operations and financing
arrangements to meet obligations.

4
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 1. BANKRUPTCY PROCEEDINGS AND BASIS OF PRESENTATION (CONTINUED)
Additionally, if a plan of reorganization is approved by the Bankruptcy
Courts, the Company will be required to adopt "fresh start" accounting under
Canadian and U.S. GAAP. This accounting will require that assets and liabilities
be recorded at fair value, based on the values determined in connection with the
plan of reorganization. As a result, the reported amounts in the interim
consolidated financial statements could materially change, because they do not
give effect to the adjustments to the carrying values of assets and liabilities
that may ultimately result from the adoption of "fresh start" accounting.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The interim consolidated financial statements of the Company have been
prepared in accordance with accounting principles generally accepted in Canada,
which in the case of the Company, generally conform with those established in
the United States, except as explained in Note 9.

The United States dollar is the principal currency of the Company's business
and, accordingly, the interim consolidated financial statements are expressed in
United States dollars.

The interim consolidated financial statements include the accounts of all
subsidiary companies and all adjustments, including normal recurring
adjustments, which in management's opinion are necessary for a fair presentation
of the financial results for the interim periods. The interim consolidated
financial statements have been prepared consistent with the accounting policies
described in the Company's Annual Report on Form 10-K/A filed with the
Securities and Exchange Commission for the year ended December 31, 1999 and
should be read in conjunction therewith.

MEASUREMENT UNCERTAINTY

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

COMPARATIVE FIGURES

Certain of the comparative figures have been reclassified to conform to the
presentation adopted in the current period.

NOTE 3. LIABILITIES SUBJECT TO COMPROMISE AND DEBT

In the Chapter 11 and CCAA proceedings, substantially all unsecured and
under-secured liabilities of the Debtors as of the Petition Date are subject to
compromise or other treatment under a plan of reorganization to be confirmed by
the Bankruptcy Courts after submission to any required vote and approval by
affected parties. For financial reporting purposes, those liabilities and
obligations whose treatment and satisfaction are dependent on the outcome of the
Chapter 11 and CCAA proceedings have been segregated and classified as
liabilities subject to compromise in the interim consolidated financial
statements. Generally, all actions to enforce or otherwise effect repayment of
pre-Petition Date liabilities

5
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 3. LIABILITIES SUBJECT TO COMPROMISE AND DEBT (CONTINUED)
as well as all pending litigation against the Debtors are stayed while the
Debtors continue their business operations as debtors-in-possession. The Bar
Date, which was the last date by which claims against the Company had to be
filed in the U.S. Bankruptcy Court if the claimants wished to receive any
distribution in the Chapter 11 proceedings, expired on December 15, 1999. The
Bar Date for claims against operating entities applicable to the CCAA proceeding
was extended to and expired on March 17, 2000.

Differences between amounts shown by the Debtors and claims filed by
creditors will be investigated and either amicably resolved, adjudicated before
the Bankruptcy Courts, or resolved through other resolution processes. The
ultimate amount of and settlement terms for such liabilities are subject to an
approved plan of reorganization and, accordingly, are not presently
determinable.

Under the U.S. Bankruptcy Code, the Debtors may elect to assume or reject
leases, employment contracts, service contracts and other pre-Petition Date
executory contracts, subject to U.S. Bankruptcy Court approval. Liabilities
related to executory contracts are recorded as liabilities not subject to
compromise, unless the Company has decided to reject the contract. Claims for
damages resulting from the rejection, after December 15, 1999, of executory
contracts will be subject to separate bar dates. The Debtors are reviewing all
executory contracts for assumption or rejection. In August 1999, the Debtors
applied to the U.S. Bankruptcy Court to reject approximately 200 non-compete
agreements. The Company has suspended payments applicable to these non-compete
agreements. The U.S. Bankruptcy Court disallowed the Company's motion to reject
these non-compete agreements as a group in August 1999. The Company may resubmit
some or all of these non-compete agreements on an individual or smaller group
basis in the future, as well as applications to reject additional executory
contracts.

The principal categories of obligations classified as liabilities subject to
compromise under the reorganization proceedings are identified below. The
amounts in total may vary significantly from the stated amount of proofs of
claim that are filed with the Bankruptcy Courts, and may be subject to future
adjustment depending on Bankruptcy Court action, further developments with
respect to potential disputed claims, and determination as to the value of any
collateral securing claims or other events. Additional claims may also arise
from the rejection of executory contracts by the Debtors.

6
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 3. LIABILITIES SUBJECT TO COMPROMISE AND DEBT (CONTINUED)
The liabilities subject to compromise and debt are as follows:

<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
------------------------- -------------------------
LIABILITIES LIABILITIES
SUBJECT TO LONG-TERM SUBJECT TO LONG-TERM
COMPROMISE DEBT COMPROMISE DEBT
------------- --------- ------------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
DIP Facility................................ $ -- $ -- $ -- $ 8,000
Bank credit agreements...................... 345,378 -- 338,689 --
11.12% Series D senior amortizing notes
due in 2003............................... 36,518 -- 36,518 --
7.82% Series E senior amortizing notes
due in 2004............................... 30,432 -- 30,432 --
7.50% Series 1 senior notes due in 2001..... 225,000 -- 225,000 --
8.25% Series 2 senior notes due in 2003..... 125,000 -- 125,000 --
7.75% Series 3 senior notes due in 2001..... 125,000 -- 125,000 --
8.25% Series 4 senior notes due in 2003..... 225,000 -- 225,000 --
6.10% Series 5 senior notes due in 2002
(Cdn. $200,000,000)....................... 137,599 -- 139,567 --
7.20% Series 6 senior notes due in 2003..... 200,000 -- 200,000 --
7.60% Series 7 senior notes due in 2008..... 250,000 -- 250,000 --
6.70% Pass-through Asset Trust Securities
("PATS") and related option liability
recorded, due in 1999..................... 309,760 -- 309,760 --
Promissory notes and capital lease
obligations............................... 76,196 80,625 80,159 83,204
Accounts payable and accrued liabilities.... 90,503 -- 95,622 --
9.45% Cumulative Monthly Income Preferred
Securities, Series A ("MIPS")............. 75,000 -- 75,000 --
Executory contracts......................... 27,318 -- 26,854 --
---------- ------- ---------- -------
2,278,704 80,625 2,282,601 91,204
Less current portion of long-term debt...... -- 22,263 -- 20,693
---------- ------- ---------- -------
$2,278,704 $58,362 $2,282,601 $70,511
========== ======= ========== =======
</TABLE>

Litigation against the Company and its filing subsidiaries as of June 1,
1999 and any additional liabilities related thereto will be subject to
compromise (see Note 6(a)).

As a result of the Chapter 11 and CCAA filings, no principal or interest
payments will be made on most pre-Petition Date debt obligations without
Bankruptcy Court approval or until a plan of reorganization providing for the
repayment terms has been submitted to any required vote and approval of affected
parties, has been confirmed by the Bankruptcy Courts and has become effective.
Interest on unsecured and under-secured pre-Petition Date debt obligations
subject to compromise has not been accrued after the Petition Date. Interest
expense and principal payments will continue to be recorded on most secured
vendor financing, including capital lease obligations, unless the leases are
rejected by

7
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 3. LIABILITIES SUBJECT TO COMPROMISE AND DEBT (CONTINUED)
the Debtors. Contractual interest expense not recorded on liabilities subject to
compromise totaled $43,065,000 for the three months ended March 31, 2000
(1999 -- nil).

In 1996, the Company, LGII and their senior lenders entered into a
collateral trust agreement pursuant to which the senior lenders share certain
collateral and guarantees on a pari passu basis (the "Collateral Trust
Agreement"). The security for lenders under the Collateral Trust Agreement
consists of (i) all of LGII's right, title and interest in and to all rights to
receive payment under or in respect of accounts, contracts, contractual rights,
chattel paper, documents, instruments and general intangibles, (ii) a pledge of
the shares of capital stock of substantially all of the subsidiaries in which
the Company directly or indirectly holds more than a 50% voting or economic
interest, and (iii) a guarantee by each subsidiary that is pledging stock. The
security is held by a trustee for the equal and ratable benefit of the senior
lending group. The senior lending group consists principally of the lenders
under the senior amortizing notes, senior notes and bank and term credit
agreements as well as the holders of certain letters of credit.

In April 2000, the Company announced that there is uncertainty as to the
secured status of certain senior debt under the Collateral Trust Agreement with
respect to $1,100,000,000 of senior debt issued subsequent to the execution of
the Collateral Trust Agreement. In accordance with the terms of the Collateral
Trust Agreement, holders of future indebtedness or their representatives were to
effect registration by delivering to the collateral trustee Additional Secured
Indebtedness Registration Statements in a form set forth in the Collateral Trust
Agreement.

Subsequent to the execution of the Collateral Trust Agreement, among other
financings, the Company issued the Series 3, Series 4, Series 6 and Series 7
Senior Notes and the PATS (the "Subject Debt"). Pursuant to the agreements with
lender representatives in connection with those financings, the Company and LGII
have treated the Subject Debt as secured under the Collateral Trust Agreement.
On this basis, the total indebtedness owed to the senior lending group subject
to the Collateral Trust Agreement, including holders of certain letters of
credit, at the Petition Date aggregated $2,016,000,000.

The Company was recently advised that Additional Secured Indebtedness
Registration Statements relating to the Subject Debt were either not entered
into the collateral trustee's register or were entered with an incorrect
outstanding amount. Under the terms of the Collateral Trust Agreement, these
circumstances give rise to uncertainty as to the secured status of the Subject
Debt. The Company has confirmed that it satisfied its obligations under the
financing agreements to adopt appropriate corporate resolutions and to deliver
to lender representatives, in connection with closing, Additional Secured
Indebtedness Registration Statements relating to the Subject Debt. It is not
known when the uncertainty will be resolved. Accordingly, the effects of this
contingency, if any, have not been reflected in the Company's interim
consolidated financial statements.

In March 1999, the Company deferred future dividends applicable to the MIPS.
Since June 1, 1999, as a result of the bankruptcy filings, the Company was in
default of its bank credit agreements, Series D and E senior amortizing notes,
Series 1 through 7 Senior notes, and PATS and, accordingly, has not made

8
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 3. LIABILITIES SUBJECT TO COMPROMISE AND DEBT (CONTINUED)
interest, principal or dividend payments when due on secured, unsecured and
under-secured debt obligations. The amounts in arrears on the Company's senior
debt obligations are as follows:

<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
Interest payments in arrears:
Bank credit agreements.................................... $ 29,125 $ 21,417
11.12% Series D senior notes.............................. 3,956 1,825
7.82% Series E senior notes............................... 2,186 958
7.50% Series 1 senior notes............................... 8,438 8,438
8.25% Series 2 senior notes............................... 5,156 5,156
7.75% Series 3 senior notes............................... 4,844 4,844
8.25% Series 4 senior notes............................... 9,281 9,281
6.10% Series 5 senior notes............................... 4,197 4,257
7.20% Series 6 senior notes............................... 14,659 14,659
7.60% Series 7 senior notes............................... 19,361 19,361
6.70% PATS................................................ 10,050 10,050
-------- --------
$111,253 $100,246
======== ========
Principal payments in arrears:
11.12% Series D senior notes.............................. $ 8,571 $ 8,571
7.82% Series E senior notes............................... 7,143 --
6.70% PATS................................................ 300,000 300,000
-------- --------
$315,714 $308,571
======== ========
Subsidiary dividends in arrears:
9.45% MIPS................................................ $ 7,678 $ 5,906
======== ========
</TABLE>

The Company, LGII and all of its U.S. debtor subsidiaries, as
debtors-in-possession, are parties to a Petition Date $200,000,000 revolving
credit agreement (the "DIP Facility"). The DIP Facility was approved by the U.S.
Bankruptcy Court in July 1999 and when amended in December 1999. The amended DIP
Facility has a term of two years and is secured by a perfected security interest
in substantially all of the existing and future assets of LGII and its U.S.
debtor subsidiaries (subject only to valid and perfected pre-Petition Date
liens). The lenders under the amended DIP Facility also have the benefit of a
"super-priority" administrative expense claim in LGII's bankruptcy proceedings.
The amended DIP Facility will be used primarily to fund LGII's working capital
needs during the course of the bankruptcy proceedings. Use of the amended DIP
Facility for letters of credit is limited to a maximum of $50,000,000. As at
March 31, 2000, the borrowings under the amended DIP Facility were nil and the
letters of credit outstanding were $20,162,000.

The amended DIP Facility contains various financial and other restrictive
covenants including, among other things, limitations on asset sales, additional
indebtedness, intercompany payments, capital

9
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 3. LIABILITIES SUBJECT TO COMPROMISE AND DEBT (CONTINUED)
expenditures, and minimum levels of operating cash flow, gross margin and
revenue. Under the terms of the amended DIP Facility, the cash and cash
equivalents of the Company, LGII and its subsidiaries which have filed under
Chapter 11, are generally restricted for use within this group of filed
companies. In December 1999, the Company favorably renegotiated certain
covenants and received approval from the lenders for initiative expenditures not
contemplated when the original DIP Facility was obtained. These amendments
received Bankruptcy Court approval in December 1999. The DIP Facility Agent has
proposed amendments to the DIP Facility based upon the reduced credit
requirements indicated in the Company's business plan presented to the Official
Unsecured Creditors' Committee in February 2000. These changes include the
elimination of certain financial covenants and approval of asset sales that are
proposed as part of the disposition program approved by the U.S. Bankruptcy
Court. The DIP Facility Agent is currently seeking approval of a reduced bank
syndicate to the recommended changes to the DIP Facility.

Currently, loans made under the amended DIP Facility bear interest at
floating rates of U.S. Prime plus 1.25% (LIBOR plus 2.75% for Eurodollar
advances). A fee of 2.75% is charged on letters of credit under the amended DIP
Facility. A commitment fee of 0.50% is charged on the unused portion of the
amended DIP Facility. Related debt issue costs have been deferred and are being
amortized over the two-year life of the amended DIP Facility.

In 1994, Loewen Group Capital L.P. ("LGC") issued 3,000,000 9.45% Cumulative
Monthly Income Preferred Securities, Series A ("MIPS") for an aggregate amount
of $75,000,000. LGC is a limited partnership and LGII as its general partner
manages its business and affairs. LGII serves as the holding company for all
United States assets and operations of the Company. The MIPS were due
August 31, 2024 and were subject to redemption at par at the option of LGC, in
whole or in part, from time to time on or after August 31, 2004. As a result of
the Chapter 11 filing, the MIPS became currently redeemable. The MIPS are
subject to an unsecured guarantee by the Company and LGII. Accordingly, the MIPS
have been designated as liabilities subject to compromise.

10
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 3. LIABILITIES SUBJECT TO COMPROMISE AND DEBT (CONTINUED)

LGII serves as the holding company for all United States assets and
operations of the Company. The interim consolidated financial statements of LGII
are prepared in accordance with Canadian GAAP and are presented in United States
dollars. Summarized financial data for LGII are presented as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------------
2000 1999
---------- ----------
(UNAUDITED)
<S> <C> <C>
Income statement information:
Revenue................................................... $ 231,935 $ 276,513
Gross margin.............................................. 69,482 85,848
Earnings from operations.................................. 41,776 48,126
Net earnings (loss)....................................... 22,377 (29,276)
</TABLE>

<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
Balance sheet information:
Current assets............................................ $ 256,971 $ 195,124
Non-current assets........................................ 3,452,294 3,456,213
---------- ----------
Total assets.............................................. 3,709,265 3,651,337

Liabilities not subject to compromise:
Current liabilities....................................... 105,329 104,113
Non-current liabilities................................... 1,178,689 1,175,831
Liabilities subject to compromise........................... 3,147,467 3,115,990
---------- ----------
Total liabilities........................................... 4,431,485 4,395,934

Shareholders' deficiency.................................... (722,220) (744,597)
</TABLE>

NOTE 4. DISPOSITIONS

In March 1999, the Company sold 124 cemeteries and three funeral homes to an
investor group for gross proceeds of $193,000,000, before purchase price
adjustments and transaction costs, resulting in a pre-tax loss of $1,122,000. A
pre-tax asset impairment provision for long-lived assets of $301,605,000,
relating to these properties, was recorded in 1998. The assets and liabilities
disposed of were $244,338,000 and $67,867,000, respectively.

During 1999, as a result of the Company's bankruptcy filings and operating
performance decline, the Company conducted extensive reviews of each of its
operating locations. The reviews also resulted in the identification of
371 locations as probable for sale. In January 2000, the Bankruptcy Courts
approved the Company's previously-announced program for disposition of the
locations identified. A further 54 locations are anticipated to be merged with
existing locations. As a result of these reviews, the Company recorded a pre-tax
asset impairment provision for long-lived assets of $340,068,000 in
December 1999. In calculating the long-lived asset impairment provision, the
Company used estimated cash flow from

11
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 4. DISPOSITIONS (CONTINUED)
operations and, for the locations identified as probable for sale, used
estimated cash proceeds on the anticipated sale of these properties.

The long-lived asset impairment provisions were based on management
estimates. The Company continues to assess these estimates as it proceeds with
the disposition of locations identified as probable for sale. As a result,
actual results could differ significantly from these estimates. In addition, due
to the bankruptcy proceedings, other properties, although not specifically
identified, could be sold.

NOTE 5. REORGANIZATION COSTS

The Company has incurred the following pre-tax charges for costs associated
with reorganizing its affairs under the protection of Chapter 11 and CCAA:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
2000
---------------
(UNAUDITED)
<S> <C>
Professional fees and other costs........................... $4,975
Key Employee Retention Plan costs........................... 1,964
------
$6,939
======
</TABLE>

Professional fees and other costs include accounting, legal and consulting
services provided to the Company and the Official Unsecured Creditors' Committee
which, subject to court approval, are required to be paid by the Company as it
reorganizes under Chapter 11 and CCAA.

In September 1999, the Bankruptcy Courts approved the Key Employee Retention
Plan, a long-term agreement structured to ensure that appropriate employee
levels and expertise are retained during the reorganization process.

NOTE 6. CONTINGENCIES

(a) LEGAL CONTINGENCIES

On June 1, 1999, the Company, 869 United States subsidiaries and one
European subsidiary voluntarily filed a petition for creditor protection and to
reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). The filings
subsequently were consolidated for joint administration (In re: Loewen Group
International, Inc., et al., No. 99-1244). On the same day, the Company and 116
Canadian subsidiaries voluntarily filed an application for creditor protection
under the Companies' Creditors Arrangement Act in the Ontario Superior Court of
Justice in Toronto (File No. 99-CL-3384). Subsequent to the Petition Date, three
additional subsidiaries of the Company voluntarily filed for creditor protection
and seven subsidiaries were voluntarily deleted. The Company's United Kingdom
subsidiaries, which generate approximately 1% of the Company's revenues, along
with the Company's insurance and certain funeral and cemetery subsidiaries, were
excluded from the filings. See Notes 1, 3 and 5 for additional information.

12
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 6. CONTINGENCIES (CONTINUED)
The Company and its subsidiaries under creditor protection are presently
operating their businesses as debtors-in-possession. An Official Unsecured
Creditors' Committee has been appointed by the United States trustee in the
bankruptcy proceedings. On July 16, 1999, the U.S. Bankruptcy Court approved the
DIP Facility. See Note 3 for further information about the DIP Facility.

As a result of the bankruptcy filings, litigation against the Company and
its filing subsidiaries was stayed as of June 1, 1999, and any additional
liabilities related thereto will be subject to compromise, unless the stay is
lifted by the supervising court. There were no material changes to previously
reported litigation, as described in the Company's Annual Report on Form 10-K/A
for the year ended December 31, 1999.

The Company is a party to other legal proceedings in the ordinary course of
its business but does not expect the outcome of any other proceedings,
individually or in the aggregate, to have a material adverse effect on the
Company's financial position, results of operation or liquidity.

(b) INVESTMENT CONTINGENCIES -- PRIME SUCCESSION HOLDINGS, INC. ("PRIME")
AND ROSE HILLS HOLDINGS CORP. ("ROSE HILLS")

In 1998, the Company concluded that its investments in Prime and Rose Hills
had suffered a decline in value that was other than temporary and wrote down its
investments based on an assumed distribution of Prime's and Rose Hills'
shareholders' equity. In 1999, due to the performance of Prime, the Company
wrote off its remaining investment in Prime. No further write down was made to
the investment in Rose Hills in 1999.

In addition, under separate put and call agreements entered into with the
majority investor of Prime and Rose Hills, the Company determined that its
exercise of the call was unlikely, and the exercise of the put was likely. As a
result, based on the Company's determination of the difference between the
estimated put option price and the estimated fair value of the majority
investor's equity in Prime and Rose Hills, the Company recorded contingent
losses and corresponding liabilities. The respective contingent liabilities have
been recorded in "Other liabilities," net of the carrying value of the
investment in Rose Hills. Such amounts could change based on changes in the
estimated future values of the businesses.

Prime was in default as of December 31, 1999 of certain covenants related to
its long-term borrowings under bank credit facilities and senior subordinated
notes. There were no other material changes to the information previously
reported in the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1999.

The Company's operations are subject to numerous environmental laws,
regulations and guidelines adopted by various governmental authorities in the
jurisdictions in which the Company operates. Liabilities are recorded when
environmental liabilities are either known or considered probable and can be
reasonably estimated. The Company's policies are designed to control
environmental risk upon acquisition through extensive due diligence and
corrective measures taken prior to and after acquisition. Management endeavors
to ensure that environmental issues are identified and addressed in advance of
acquisition or

13
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 6. CONTINGENCIES (CONTINUED)
are covered by an indemnity by the seller or an offset to the purchase price. On
a continuing basis, management assesses and evaluates environmental risk and,
when necessary, conducts appropriate corrective measures. The Company provides
for environmental liabilities using its best estimates. Actual environmental
liabilities could differ significantly from these estimates.

NOTE 7. CHANGES IN OTHER NON-CASH BALANCES

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

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------
2000 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
Decrease (increase) in assets:
Receivables, net of allowances
Trade................................................... $ 6,159 $ 2,237
Other................................................... (11,576) (10,253)
Inventories............................................... 350 1,388
Prepaid expenses.......................................... 142 (9,260)
Amounts receivable from cemetery merchandise trusts....... (17,197) (30,429)
Installment contracts, net of allowances.................. 14,119 9,962
Cemetery property......................................... 315 (20,202)
Other assets.............................................. 846 7,058
Increase (decrease) in liabilities, including certain
liabilities subject to compromise:
Accounts payable and accrued liabilities.................. (1,955) (30,892)
Other liabilities......................................... (1,335) (2,028)
Cemetery long-term liabilities............................ 4,097 13,033
Insurance policy liabilities.............................. 5,057 4,968
Other changes in non-cash balances........................ 1,410 (2,197)
-------- --------
$ 432 $(66,615)
======== ========
Supplemental information:
Interest paid............................................. $ 1,937 $ 63,937
Taxes paid................................................ 3,330 3,355
Bad debt expense.......................................... 8,250 13,138
Non-cash investing and financing activities:
Capital leases............................................ (1,855) (204)
</TABLE>

14
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 8. SEGMENTED INFORMATION

The Company's reportable segments are comprised of the three businesses it
operates, each of which offers different products and services: funeral homes,
cemeteries and insurance. There has been no change in the basis of this
segmentation, accounting policies of the segments, or the basis of measurement
of segment profit or loss from that disclosed in the Company's Annual Report on
Form 10-K/A for the year ended December 31, 1999.

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 2000 FUNERAL CEMETERY INSURANCE OTHER CONSOLIDATED
- ----------------------------------------- ---------- ---------- --------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue earned from external sales:
2000.................................. $ 161,070 $ 71,228 $ 24,559 $ -- $ 256,857
1999.................................. 174,282 108,770 23,761 -- 306,813
Earnings from operations:
2000.................................. $ 40,601 $ 15,296 $ 5,444 $(13,815) $ 47,526
1999.................................. 52,948 23,987 4,556 (21,405) 60,086
Total assets, as at:
March 31, 2000 (unaudited)............ $1,959,574 $1,744,801 $297,590 $117,982 $4,119,947
December 31, 1999..................... 1,984,739 1,745,673 290,398 89,773 4,110,583
</TABLE>

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

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------
2000 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
Earnings from operations of funeral, cemetery and insurance
segments.................................................. $61,341 $81,491
Other expenses of operations:
General and administrative expenses....................... (12,182) (19,058)
Depreciation and amortization............................. (1,633) (2,347)
------- -------
Total earnings from operations.............................. $47,526 $60,086
======= =======
</TABLE>

15
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 9. UNITED STATES ACCOUNTING PRINCIPLES

The interim consolidated financial statements have been prepared in
accordance with Canadian GAAP. These principles differ in the following material
respects from those in the United States as summarized below:

(a) EARNINGS AND EARNINGS PER COMMON SHARE

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------
2000 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
Net earnings in accordance with Canadian GAAP............... $22,799 $ 6,927
Effects of differences in accounting for:
Insurance operations...................................... (570) 707
Stock options............................................. (18) (22)
Cost of start-up activities............................... 124 --
------- -------
Net earnings in accordance with U.S. GAAP................... 22,335 7,612
Other comprehensive income (loss):
Foreign currency translation adjustments.................. (638) (51)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the
period................................................ 371 (7,912)
Less: reclassification adjustment for gains included in
earnings.............................................. (309) (1,459)
------- -------
Comprehensive income (loss) in accordance with U.S. GAAP.... $21,759 $(1,810)
======= =======
</TABLE>

Basic earnings per Common share in accordance with U.S. GAAP, and similar to
Canadian GAAP, is based on the weighted average number of Common shares
outstanding during the year, and is computed as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------
2000 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
Net earnings in accordance with U.S. GAAP................... $22,335 $ 7,612
Less provision for Preferred share dividends.............. 2,270 2,182
------- -------
Net earnings in accordance with U.S. GAAP attributable to
Common
shareholders................................................ $20,065 $ 5,430
======= =======
Weighted average number of shares outstanding (thousands)... 74,145 74,061
Basic earnings per Common share............................. $ 0.27 $ 0.07
</TABLE>

16
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES

NOTE 9. UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)
(b) BALANCE SHEET

The amounts in the interim consolidated balance sheets that materially
differ from those reported under Canadian GAAP are as follows:

<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
------------------------- --------------------------
CANADIAN UNITED STATES CANADIAN UNITED STATES
GAAP GAAP GAAP GAAP
--------- ------------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Assets:
Long-term receivables, net of allowances.... $ 581,966 $ 592,044 $ 577,733 $ 589,840
Cemetery property........................... 918,227 840,723 923,344 845,840
Names and reputations....................... 642,722 647,713 650,200 655,191
Insurance invested assets................... 289,559 274,102 281,423 263,960
Other assets................................ 131,451 159,772 133,553 161,091
Liabilities and shareholders' equity:
Other liabilities........................... 427,186 424,742 426,019 423,384
Insurance policy liabilities................ 189,264 224,304 184,207 217,915
Future income tax liabilities............... 153,382 132,354 146,028 125,394
Common shares............................... 1,276,384 1,302,789 1,276,434 1,302,806
Deficit..................................... (982,118) (1,037,194) (1,004,917) (1,059,529)
Accumulated other comprehensive income:
Unrealized losses on securities available
for sale, net of tax...................... -- (3,972) -- (4,034)
Foreign exchange adjustment................. 15,045 (13,952) 15,683 (13,314)
</TABLE>

The effective date for Statement of Financial Accounting Standards No. 133
("FAS 133"), "Accounting for Derivative Instruments and Hedging Activities," as
deferred by Statement of Financial Accounting Standards No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of Financial Accounting Standards No. 133 (an amendment of FASB Statement
No. 133)," is for all fiscal quarters of fiscal years beginning after June 15,
2000. FAS 133 requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. Management has not determined the impact of this
accounting standard on the Company's interim consolidated financial statements.

In December 1999, the United States Securities and Exchange Commission (the
"SEC") issued Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"). SAB 101 provides the staff's views on the
application of existing GAAP to revenue recognition in financial statements. In
March 2000, the SEC deferred the implementation date of SAB 101, as applicable
to the Company, to the second quarter of 2000. Management has not fully
determined the impact of SAB 101 on the Company's interim consolidated financial
statements.

17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Unless the context otherwise requires (i) "Loewen" refers to The Loewen
Group Inc., a company organized under the laws of British Columbia, Canada,
(ii) "LGII" refers to Loewen Group International, Inc., a Delaware corporation
and a wholly-owned subsidiary of Loewen, and (iii) the "Company" refers to
Loewen together with its subsidiaries and associated companies.

OVERVIEW

The Company is the second-largest operator of funeral homes and cemeteries
in North America. In addition to providing services at-need, the Company also
makes funeral, cemetery and cremation arrangements on a pre-need basis. As at
April 28, 2000, the Company operated 1,097 funeral homes and 426 cemeteries
throughout North America and 34 funeral homes in the United Kingdom. As at
April 28, 2000, the Company also operated three insurance subsidiaries that
principally sell a variety of life insurance products to fund funeral services
on a pre-need basis.

FINANCIAL CONDITION

BANKRUPTCY PROCEEDINGS

On June 1, 1999 (the "Petition Date"), Loewen, 869 United States
subsidiaries and one European subsidiary voluntarily filed a petition for
creditor protection under Chapter 11 of the U.S. Bankruptcy Code ("Chapter 11")
in the U.S. Bankruptcy Court for the District of Delaware (the "U.S. Bankruptcy
Court"). Concurrent with the Chapter 11 filing, Loewen and 116 Canadian
subsidiaries voluntarily filed an application for creditor protection under the
Companies' Creditors Arrangement Act ("CCAA") with the Ontario Superior Court of
Justice, Toronto, Ontario, Canada (together with the U.S. Bankruptcy Court, the
"Bankruptcy Courts"). Subsequent to the Petition Date, three additional
subsidiaries of Loewen voluntarily filed for creditor protection and seven
subsidiaries were voluntarily deleted. The Company's United Kingdom
subsidiaries, which generate approximately 1% of the Company's revenues, along
with the Company's insurance and certain funeral and cemetery subsidiaries, were
excluded from the filings. Loewen and its subsidiaries under creditor protection
(the "Debtors") are presently operating their businesses as
debtors-in-possession. The U.S. trustee for the District of Delaware appointed a
statutory committee of unsecured creditors (the "Official Unsecured Creditors'
Committee"). The proceedings of the Debtors are being jointly administered for
procedural purposes only.

The Company is reorganizing its affairs under the protection of Chapter 11
and CCAA and will propose a plan of reorganization for itself and other filing
subsidiaries, which will be submitted to the Bankruptcy Courts overseeing the
Chapter 11 and CCAA proceedings for confirmation after submission to any vote
and approval required by affected parties. If a plan of reorganization is
approved by the Bankruptcy Courts, the Company will be required to adopt "fresh
start" accounting under Canadian and U.S. generally accepted accounting
principles ("GAAP"). This accounting will require that assets and liabilities be
recorded at fair value, based on the values determined in connection with the
plan of reorganization. As a result, the reported amounts in the Interim
Consolidated Financial Statements could materially change, because they do not
give effect to the adjustments to the carrying value of assets and liabilities
that may ultimately result from the adoption of "fresh start" accounting.

On January 24, 2000, the Company announced that the U.S. Bankruptcy Court
approved the Company's disposition process in connection with its
previously-announced program for disposition of non-strategic assets. Through
this program, the Company intends to sell up to 371 of its approximately 1,400
U.S. funeral home and cemetery locations. A further 54 locations are anticipated
to be merged with existing locations.

18
<PAGE>
BASIS OF PRESENTATION

This discussion and analysis of the Company should be read in conjunction
with the Interim Consolidated Financial Statements and accompanying Notes in
Item 1 of this Form 10-Q. The results reported herein have been prepared on a
"going concern" basis in accordance with Canadian GAAP. The "going concern"
basis of presentation assumes that the Company will continue in operation for
the foreseeable future and will be able to realize its assets and discharge its
liabilities and commitments in the normal course of business. There is
substantial doubt about the appropriateness of the use of the "going concern"
assumption because of the Chapter 11 and CCAA bankruptcy proceedings and
circumstances relating to this event, including the Company's current debt
structure, recent losses and cash flow. As such, realization of assets and
discharge of liabilities are subject to significant uncertainty.

The Interim Consolidated Financial Statements do not reflect adjustments
that would be necessary if the "going concern" basis was not appropriate. If the
"going concern" basis was not appropriate for the Interim Consolidated Financial
Statements, then significant adjustments would be necessary in the carrying
value of assets and liabilities, the reported revenues and expenses, and the
balance sheet classifications used. Additionally, the amounts reported could
materially change because of a plan of reorganization, since the reported
amounts in the Interim Consolidated Financial Statements do not give effect to
adjustments to the carrying value of the underlying assets or amounts of
liabilities that may ultimately result. The appropriateness of the "going
concern" basis is dependent upon, among other things, confirmation of a plan of
reorganization, future profitable operations, the ability to renegotiate and
comply with the terms of a debtor-in-possession revolving credit agreement and
the ability to generate sufficient cash from operations and financing
arrangements to meet obligations.

As detailed below, under "Liquidity and Capital Resources -- Collateral
Trust Agreement," the Company announced in April 2000 that there is uncertainty
as to the secured status of certain senior debt with principal aggregating
$1.1 billion. It is not known when the uncertainty will be resolved.
Accordingly, the effects of this contingency, if any, have not been reflected in
the Company's Interim Consolidated Financial Statements.

RESULTS OF OPERATIONS

Detailed below are the Company's operating results for the three months
ended March 31, 2000 and 1999, expressed in dollar amounts as well as relevant
percentages. The operating results are presented as a percentage of revenue,
except income taxes which are presented as a percentage of earnings before
income taxes.

19
<PAGE>
The Company's operations are comprised of three businesses: funeral homes,
cemeteries and insurance. Additional segmented information is provided in
Note 8 to the Interim Consolidated Financial Statements.

<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31 MARCH 31
--------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(IN MILLIONS) (PERCENTAGES)
<S> <C> <C> <C> <C>
Revenue
Funeral............................................... $161.1 $174.3 62.7 56.8
Cemetery.............................................. 71.2 108.8 27.7 35.5
Insurance............................................. 24.6 23.7 9.6 7.7
------ ------ ----- -----
Total............................................... $256.9 $306.8 100.0 100.0
====== ====== ===== =====
Gross margin
Funeral............................................... $ 54.8 $ 67.5 34.0 38.7
Cemetery.............................................. 19.6 30.1 27.5 27.6
Insurance............................................. 5.4 4.5 22.2 19.2
------ ------
Total............................................... 79.8 102.1 31.1 33.3

Expenses
General and administrative............................ 17.7 26.3 6.9 8.6
Depreciation and amortization......................... 14.6 15.7 5.7 5.1
------ ------
Earnings from operations.............................. 47.5 60.1 18.5 19.6
Interest on long-term debt............................ 3.3 44.8 1.3 14.7
Reorganization costs.................................. 6.9 -- 2.7 --
Dividends on preferred securities of subsidiary....... -- 1.8 -- 0.6
Other expenses........................................ 1.7 0.2 0.6 --
Income taxes.......................................... 12.8 6.4 36.0 48.0
------ ------
Net earnings.......................................... $ 22.8 $ 6.9 8.9 2.3
====== ======
</TABLE>

THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999

Consolidated revenue decreased 16.3% to $256.9 million for the three months
ended March 31, 2000 from $306.8 million in 1999. Management believes that the
revenue decline in the funeral business was in part due to the bankruptcy
filings on June 1, 1999. Cemetery revenue was significantly affected by the
disposition of 124 properties at March 31, 1999 and pre-need sales contract term
changes effected in the second quarter of 1999. These contract changes included
shorter terms and larger down payments that are less attractive to certain
customers but are designed to improve cash flow. Consolidated gross margin
decreased 21.8%, to $79.8 million for the three months ended March 31, 2000 from
$102.1 million in 1999, primarily due to the decline in funeral and cemetery
revenues. As a percentage of revenue, consolidated gross margin decreased to
31.1% for the three months ended March 31, 2000 from 33.3% in 1999.

Funeral revenue decreased 7.6% to $161.1 million for the three months ended
March 31, 2000 from $174.3 million in 1999, primarily due to fewer funeral
services and a reduced average revenue per funeral service, partly, management
believes, attributable to consumer concerns caused by the bankruptcy filings. At
locations in operation for all of the three months ended March 31, 1999 and 2000
("Established Locations") the average revenue per funeral service decreased by
0.7%, while the number of funeral services performed decreased by 6.2%. Overall
funeral gross margin, as a percentage of funeral revenue, decreased to 34.0% for
the three months ended March 31, 2000 from 38.7% in 1999, principally as a
result of lower revenue and significant fixed operating costs. The Company's
previously-announced program to

20
<PAGE>
dispose of 201 funeral home locations that are considered non-strategic assets
will result in a significant reduction in future funeral revenue.

Cemetery revenue decreased 34.5% to $71.2 million for the three months ended
March 31, 2000 from $108.8 million in 1999, primarily due to the disposition of
124 cemetery properties at March 31, 1999. In addition, revenues were negatively
impacted by pre-need sales contract term changes effected in the second quarter
of 1999. These contract changes included shorter terms and larger down payments
that are less attractive to certain customers but are designed to improve cash
flow and, management believes, by consumer concerns caused by the bankruptcy
filings in June 1999. Overall cemetery gross margin, as a percentage of cemetery
revenue, decreased slightly to 27.5% for the three months ended March 31, 2000
from 27.6% in 1999. The Company's previously announced program to dispose of 170
cemetery locations that are considered non-strategic assets will result in a
significant reduction in future cemetery revenue.

Insurance revenue increased 3.4% to $24.6 million for the three months ended
March 31, 2000 from $23.7 million in 1999. Overall insurance gross margin as a
percentage of insurance revenue increased to 22.2% for the three months ended
March 31, 2000 from 19.2% in 1999, primarily due to the continuing effort to
expand the sale of pre-need funeral insurance through Company-owned funeral
homes.

General and administrative expenses were reduced 32.5%, or $8.6 million, to
$17.7 million for the three months ended March 31, 2000 from $26.3 million in
1999. The decrease in general and administrative expenses for the three months
ended March 31, 2000 is primarily due to the closure of the Trevose corporate
office in the second quarter of 1999, the termination of various strategic
initiatives subsequent to the bankruptcy filing on June 1, 1999, and the
Company's continuing program to operate more efficiently. General and
administrative expenses, as a percentage of revenue, decreased to 6.9% for the
three months ended March 31, 2000 from 8.6% in 1999.

Depreciation and amortization expenses decreased to $14.6 million for the
three months ended March 31, 2000 from $15.7 million in 1999, primarily due to
dispositions made in 1999. As a percentage of revenue, depreciation was 5.7% for
the three months ended March 31, 2000 compared to 5.1% in 1999, primarily due to
the decline in revenue.

Interest expense on long-term debt decreased by $41.5 million to
$3.3 million for the three months ended March 31, 2000 from $44.8 million in
1999. The decrease is primarily a result of the suspension of post-Petition Date
interest expense and payments for under-secured and unsecured debt obligations
resulting from the Company's bankruptcy filings. Contractual interest expense
not recorded on certain pre-Petition Date debt obligations amounted to
$43.1 million for the three months ended March 31, 2000.

Reorganization costs were $6.9 million for the three months ended March 31,
2000, primarily for professional fees for accounting, legal and consulting
services provided to the Company and the Official Unsecured Creditors'
Committee, costs applicable to the Company's Key Employee Retention Plan, and
other costs and fees incurred while the Company reorganizes under Chapter 11 and
CCAA. Total reorganization costs since the Petition Date applicable to the
Company's reorganization under Chapter 11 and CCAA amounted to $99.7 million as
at March 31, 2000.

Income tax expense consisting of current and deferred tax was
$12.8 million, and the tax rate was 36% for the three months ended March 31,
2000, compared to income tax expense of $6.4 million, and a tax rate of 48% in
1999. The decrease in tax rate is primarily due to a partial utilization of
valuation allowances which were placed against certain of the Company's tax
assets at December 31, 1999. However, future income and losses, and the
disposition of certain locations, may require the Company to record a change in
the valuation allowance of tax assets that were taken into account in
determining the net amount of the Company's liability for future income taxes
recorded on its balance sheet at March 31, 2000. If this occurs, the resulting
change in the valuation allowance, which could be significant, would generally
be treated as an additional income tax expense or benefit in the period in which
it arises. The Company expects that its

21
<PAGE>
effective income tax rate for fiscal year 2000 and beyond may vary significantly
from the Canadian and United States statutory rates.

The Company had net earnings of $22.8 million for the three months ended
March 31, 2000 compared to net earnings of $6.9 million in 1999. Basic earnings
per share was $0.28 for the three months ended March 31, 2000 compared to $0.06
in 1999. The increase in earnings for the three months ended March 31, 2000 was
primarily due to the suspension of interest expense applicable to under-secured
and unsecured debt obligations as a result of the bankruptcy filings, and lower
general and administrative expense, partially offset by lower funeral and
cemetery gross margins, reorganization costs, and increased income tax expense.

The Company's statement of cash flows for the three months ended March 31,
2000 reflects cash provided from operations of $53.1 million, compared to cash
applied of $39.1 million in 1999, primarily due to the suspension of interest on
under-secured and unsecured debt obligations as a result of the bankruptcy
filings and the improved cash flow from cemetery operations.

DISPOSITIONS

In December 1999, the Company announced its intention to dispose of 201
funeral homes and 170 cemeteries in the United States that do not meet the
Company's future geographic and strategic objectives. In January 2000, the
Bankruptcy Courts approved the Company's disposition process for the locations
identified. The Company received over 250 letters of intent for various groups
of these properties, and now has formal bids for the majority of the properties
offered for sale. Potential buyers have commenced due diligence and initial
negotiations. A further 54 locations are anticipated to be merged with existing
locations.

In March 1999, the Company completed the sale of 124 cemeteries and three
funeral homes. The Company received gross proceeds of $193.0 million, before
purchase price adjustments and transaction costs.

LIQUIDITY AND CAPITAL RESOURCES

Over the past few years, the Company's strategic growth plan had emphasized
cemetery acquisitions, as compared to its historical emphasis on funeral home
acquisitions. Acquisition and the integration of cemeteries required significant
cash due to the pre-need sales of cemetery interment rights, products and
services and related interest costs on debt incurred.

On June 1, 1999, Loewen and most of its subsidiaries voluntarily filed a
petition for creditor protection under Chapter 11 and CCAA. The Company will
continue to conduct business in the ordinary course as debtors-in-possession
under the protection of the Bankruptcy Courts while a plan of reorganization is
developed.

Loewen, LGII and all of its U.S. debtor subsidiaries, as
debtors-in-possession, are parties to the $200 million revolving credit
agreement (the "DIP Facility"). The DIP Facility was approved by the U.S.
Bankruptcy Court in July 1999 and when amended in December 1999. The DIP
Facility has a term of two years and is secured by a perfected security interest
in substantially all of the existing and future assets of LGII and its U.S.
debtor subsidiaries (subject only to valid and perfected pre-Petition Date
liens). The lenders under the DIP Facility also have the benefit of a
"super-priority" administrative expense claim in LGII's bankruptcy proceedings.
The DIP Facility will be used primarily to fund LGII's working capital needs
during the course of the bankruptcy proceedings. Use of the DIP Facility for
letters of credit is limited to a maximum of $50 million.

The DIP Facility Agent has proposed further amendments to the DIP Facility
based upon the reduced credit requirements indicated in the Company's business
plan presented to the Official Unsecured

22
<PAGE>
Creditors' Committee in February 2000. See Note 3 of the Interim Consolidated
Financial Statements for further information.

Loans made under the amended DIP Facility bear interest at floating rates of
U.S. Prime plus 1.25% (LIBOR plus 2.75% for Eurodollar advances). A fee of 2.75%
is charged on letters of credit under the amended DIP Facility. A commitment fee
of 0.50% is charged on the unused portion of the amended DIP Facility. Related
debt issue costs have been deferred and are being amortized over the two-year
life of the amended DIP Facility. The Company believes that sufficient cash
resources currently exist to satisfy its near-term obligations. As at March 31,
2000, the borrowings under the DIP Facility were nil and the letters of credit
outstanding were $20.2 million.

In addition, the Company has taken steps to improve profitability and cash
flow throughout the organization, including a review of its cemetery pre-need
sales strategy. To improve cash flow, the Company implemented changes to the
terms and conditions of cemetery pre-need sales in the second quarter of 1999.
These changes included: setting contract term thresholds; adjusting sales force
compensation for sales with certain terms; and eliminating certain types of
contracts in jurisdictions with poor cash flow characteristics after trusting
obligations are considered.

As detailed below under "Collateral Trust Agreement," the Company announced
in April 2000 that there is uncertainty as to the secured status of certain
senior debt with aggregate principal of $1.1 billion. The Company has treated
the related debt as secured under the collateral trust agreement, as
described below.

In March 1999, the Company deferred future dividends applicable to the MIPS.
Since June 1, 1999, as a result of the bankruptcy filings, the Company was in
default of its bank and term credit agreements, senior amortizing notes and
senior notes and, accordingly, has not made interest, principal or dividend
payments when due on secured, unsecured and under-secured debt obligations.

The Company's balance sheet at March 31, 2000 as compared to December 31,
1999, reflects changes from ongoing operating activities.

COLLATERAL TRUST AGREEMENT

In 1996, Loewen, LGII and their senior lenders entered into a collateral
trust agreement pursuant to which the senior lenders share certain collateral
and guarantees on a pari passu basis (the "Collateral Trust Agreement"). The
security for lenders under the Collateral Trust Agreement consists of (i) all of
LGII's right, title and interest in and to all rights to receive payment under
or in respect of accounts, contracts, contractual rights, chattel paper,
documents, instruments and general intangibles, (ii) a pledge of the shares of
capital stock of substantially all of the subsidiaries in which Loewen directly
or indirectly holds more than a 50% voting or economic interest, and (iii) a
guarantee by each subsidiary that is pledging stock. The security is held by a
trustee for the equal and ratable benefit of the senior lending group. This
senior lending group consists principally of the lenders under the senior
amortizing notes, senior notes and bank and term credit agreements, as well as
the holders of certain letters of credit. At the Petition Date,

23
<PAGE>
the indebtedness owed to the senior lending group subject to the Collateral
Trust Agreement, including the holders of certain letters of credit, aggregated
approximately $2.0 billion.

In April 2000, the Company announced that under the Collateral Trust
Agreement, there is uncertainty as to the secured status of the Company's
Series 3, 4, 6 and 7 Senior Notes and the Pass-through Asset Trust Securities
(the "Subject Debt"). The aggregate principal amount outstanding of the Subject
Debt is $1.1 billion. In accordance with the terms of the Collateral Trust
Agreement, holders of future indebtedness or their representatives were to
effect registration by delivering to the collateral trustee Additional Secured
Indebtedness Registration Statements. Pursuant to the agreements with lender
representatives in connection with financings subsequent to the establishment of
the Collateral Trust Agreement, the Company and LGII have treated the Subject
Debt as secured.

It is not known when the uncertainty regarding the secured status of the
Subject Debt will be resolved. Accordingly, the effects of this contingency, if
any, have not been reflected in the Company's Interim Consolidated Financial
Statements.

RESTRICTIONS

The DIP Facility, as amended, contains various financial and other
restrictive covenants including, among other things, limitations on asset sales,
additional indebtedness, capital expenditures, and minimum levels of operating
cash flow, gross margin and revenue. Under the terms of the DIP Facility, the
cash of the Company, LGII and the subsidiaries which have filed under Chapter
11, is generally restricted for use within this group of filed companies. In
December 1999, the Company favorably renegotiated certain covenants and received
approval from the lenders for initiative expenditures not contemplated when the
original DIP Facility was obtained. These amendments received Bankruptcy Court
approval in December 1999. The DIP Facility Agent has proposed amendments to the
DIP Facility based upon the reduced credit requirements indicated in the
Company's business plan presented to the Official Unsecured Creditors' Committee
in February 2000. These changes include the elimination of certain financial
covenants and approval of asset sales that are proposed as part of the
disposition program approved by the U.S. Bankruptcy Court. The DIP Facility
Agent is currently seeking approval of a reduced bank syndicate to the
recommended changes to the DIP Facility. As at April 28, 2000, there were no
funded advances under the DIP Facility.

The Company's insurance subsidiaries, which have not filed for protection
under Chapter 11, are also subject to certain state regulations that restrict
distributions, loans and advances from such subsidiaries to the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company used derivatives, prior to filing for bankruptcy, primarily in
the form of interest rate swaps, cross-currency interest rate swaps, and both
Canadian and United States dollar borrowings. The objective was to manage the
mix of floating and fixed rate debt and to substantially hedge the Company's net
investment in foreign assets. The Company's major market risk exposures are to
changing interest rates, equity prices and foreign currency fluctuations. The
Company's exposure to interest rate fluctuations and equity prices primarily
reside in the United States, while the Company's exposure to foreign currency
fluctuations primarily resides in Canadian dollar investments. All derivative
and other financial

24
<PAGE>
instruments described were non-trading and were stated in U.S. dollars. The
Company's derivative contracts were entered into with major financial
institutions, thereby minimizing the risk of credit loss. Fluctuations in
interest and currency rates that affected the swaps were generally offset by
corresponding movements in the assets or debt being hedged. The Company's market
risk exposure, discussed below, provides information about the Company's market
sensitive financial instruments and constitutes "forward-looking statements"
which involve risks and uncertainties. Actual results could differ materially
from those projected in the forward-looking statements.

As a result of the Company's bankruptcy filings on the Petition Date,
virtually all of the Company's fixed and floating rate debt instruments are in
default. Such obligations have been reclassified as liabilities subject to
compromise and will not be settled until a plan of reorganization is confirmed
by the Bankruptcy Courts. These material limitations restrict the Company's
ability to fully reflect the net market risk exposure of these instruments.
Accordingly, information about fair values and scheduled repayments of the debt
obligations has been omitted. In addition, all interest rate derivatives
previously held by the Company have been terminated and a liability has been
recorded if necessary. Comparative information for the prior year has similarly
been omitted as the information is no longer meaningful due to the bankruptcy
proceedings.

The Company's sensitivity to floating interest rates is primarily
attributable to borrowings under the DIP Facility. Accordingly, changes in U.S.
interest rates affect the interest paid on the Company's debt.

The Company has foreign operations in the United Kingdom (34 locations) and
Mexico (one location). These countries are generally stable politically and
economically, and are not highly inflationary.

EQUITY-PRICE RISK MANAGEMENT

The sale of pre-arranged funeral services, pre-need cemetery merchandise and
insurance products results in the Company having significant investment in, or
managing trusts that have significant investment in, mutual funds and equity
securities which are sensitive to current market prices. Fluctuations in
interest and equity market rates on investments held in pre-arranged funeral
trusts do not result in significant current income fluctuation as the income is
not realized until services are performed. Investments in pre-need cemetery
merchandise trusts and insurance invested assets predominately hold fixed income
securities. These investments are generally not sold prior to maturity.
Accordingly, any unrealized gains or losses created by fluctuations in interest
rates will not be realized. The Company manages the mix of equities and fixed
income securities in accordance with policies set by the Investment Committee
which is comprised of members of senior management. The Investment Committee
sets and modifies the mix of investments with the assistance of independent
professional financial advisors. The policy emphasizes a conservative approach
while maintaining acceptable levels of income and capital appreciation.

25
<PAGE>
PART II

ITEM 1. LEGAL PROCEEDINGS

On June 1, 1999, the Company, 869 U.S. subsidiaries and one European
subsidiary voluntarily filed a petition for creditor protection and to
reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). The filings
subsequently were consolidated for joint administration (IN RE: LOEWEN GROUP
INTERNATIONAL, INC., ET AL., No. 99-1244). On the same day, the Company and 116
Canadian subsidiaries voluntarily filed an application for creditor protection
under the Companies' Creditors Arrangement Act in the Ontario Superior Court of
Justice in Toronto (File No. 99-CL-3384). Subsequent to the Petition Date, three
additional subsidiaries of the Company voluntarily filed for creditor protection
and seven subsidiaries were voluntarily deleted. The Company's United Kingdom
subsidiaries, which generate approximately 1% of the Company's revenues, along
with the Company's insurance and certain funeral and cemetery subsidiaries, were
excluded from the filings. See Notes 1, 3 and 5 to the Interim Consolidated
Financial Statements for additional information.

The Company and its subsidiaries under creditor protection are presently
operating their businesses as debtors-in-possession. An Official Unsecured
Creditors' Committee has been appointed by the United States trustee in the
bankruptcy proceedings. On July 16, 1999, the U.S. Bankruptcy Court approved the
DIP Facility. See Note 3 to the Interim Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for further information about the DIP Facility.

As a result of the bankruptcy filings, litigation against the Company and
its filing subsidiaries was stayed as of June 1, 1999, and any additional
liabilities related thereto will be subject to compromise, unless the stay is
lifted by the supervising court. There were no material changes to previously
reported litigation as described in the Company's Annual Report on Form 10-K/A
for the year ended December 31, 1999.

ITEM 3. DEFAULTS ON SENIOR SECURITIES

The amounts in default and arrears on the Company's senior debt obligations,
including dividends in arrears, are provided in Note 3 to the Interim
Consolidated Financial Statements.

ITEM 5. OTHER INFORMATION

STOCK EXCHANGE LISTINGS

The Common shares of Loewen trade on The Toronto Stock Exchange ("TSE")
under the symbol "LWN." Until March 3, 2000, the Common shares were also listed
on The New York Stock Exchange ("NYSE").

During 1999, new standards for continued listing of securities on the NYSE
were adopted. The new continued listing standards are: (i) total market
capitalization and shareholders' equity of not less than $50 million;
(ii) total market capitalization of not less than $15 million over a 30-day
trading period; and (iii) minimum share price of $1.00 over a 30-day trading
period.

The Company was unable to meet the required minimum $1.00 criterion, and
trading of its Common shares and MIPS were suspended by the NYSE on March 3,
2000. On April 13, 2000, the NYSE delisted the Company's Common shares and the
MIPS.

26
<PAGE>
RECENT ACCOUNTING STANDARDS

In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 provides the staff's views on the application of existing
generally accepted accounting principles to revenue recognition in financial
statements. In March 2000, the SEC deferred the implementation date of SAB 101,
as applicable to the Company, to the second quarter of 2000.

Industry discussions with the SEC continue, in an effort to clarify the
application of SAB 101. The Company has taken the position that it would be
preferable to amend certain of its accounting policies to better match pre-need
revenue recognition with the delivery of goods and services and, generally align
revenue recognition more closely with cash flows.

Currently, the Company anticipates its proposed pre-need revenue recognition
policies would:

- Recognize sales of pre-arranged funerals and pre-need cemetery merchandise
and services at time of delivery or performance of services, including
amounts not required to be trusted;

- Recognize sales of pre-need cemetery spaces proportionally as cash is
received; and

- Expense immediately selling expenses incurred in connection with sales of
pre-arranged funerals and pre-need cemetery merchandise, services,
and spaces.

These proposed policies reflect the Company's best understanding of
acceptable accounting policies under SAB 101 at this time. Accordingly, these
policies are subject to change as the SEC clarifies its position and the Company
completes further analysis. The Company plans to adopt revised pre-need revenue
recognition policies in the second quarter of 2000 retroactive to
January 1, 2000.

FORWARD-LOOKING STATEMENTS

Certain statements made in this Form 10-Q, including certain statements made
in the section entitled "Quantitative and Qualitative Disclosures about Market
Risk," in other filings made with the SEC and elsewhere (including oral
statements made on behalf of the Company) are forward-looking statements within
the meaning of Section 27A(i) of the Securities Act of 1933 and
Section 21E(i) of the Securities Exchange Act of 1934. Shareholders and
potential investors are hereby cautioned that certain events or circumstances
could cause actual results to differ materially from those estimated, projected
or predicted. The Company undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.

CAUTIONARY STATEMENTS

In addition to other information in this Form 10-Q, including the
information that appears in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Financial
Condition," the following important factors, among others, could cause future
results to differ materially from estimates, predictions or projections.

27
<PAGE>
1. ABILITY TO CONTINUE AS A GOING CONCERN. The Company's Interim
Consolidated Financial Statements have been prepared on a "going concern" basis
in accordance with Canadian GAAP. The "going concern" basis of presentation
assumes that the Company will continue in operation for the foreseeable future
and will be able to realize its assets and discharge its liabilities and
commitments in the normal course of business. There is substantial doubt about
the appropriateness of the use of the "going concern" assumption because of the
Chapter 11 and CCAA bankruptcy proceedings and circumstances relating to this
event, including the Company's current debt structure, recent losses and cash
flow. As such, realization of assets and discharge of liabilities are subject to
significant uncertainty.

The Interim Consolidated Financial Statements do not reflect adjustments
that would be necessary if the "going concern" basis was not appropriate. If the
"going concern" basis was not appropriate for the Interim Consolidated Financial
Statements, then significant adjustments would be necessary in the carrying
value of assets and liabilities, the reported revenues and expenses, and the
balance sheet classifications used. Additionally, the amounts reported could
materially change because of a plan of reorganization, since the reported
amounts in the Interim Consolidated Financial Statements do not give effect to
adjustments to the carrying value of the underlying assets or amounts of
liabilities that may ultimately result. The appropriateness of the "going
concern" basis is dependent upon, among other things, confirmation of a plan of
reorganization, future profitable operations, the ability to renegotiate and
comply with terms of a debtor-in-possession revolving credit facility and the
ability to generate sufficient cash from operations and financing arrangements
to meet obligations.

2. BANKRUPTCY PROCEEDINGS. The Company is reorganizing its affairs under
the protection of Chapter 11 and CCAA and will propose a plan of reorganization
for itself and other filing subsidiaries, which will be submitted to the
Bankruptcy Courts overseeing the Chapter 11 and CCAA proceedings for
confirmation after submission to any vote and approval required by affected
parties. If the plan of reorganization receives all requisite approvals, the
Company will be required, under Canadian and U.S. GAAP, to adopt "fresh start"
accounting. Fresh start accounting requires that assets and liabilities be
recorded at fair value, based on the values determined in connection with the
plan of reorganization. If the reorganization plan is approved and the Company
emerges from bankruptcy, the carrying value of assets and liabilities recorded
in the Company's financial statements after the adoption of fresh start
accounting could differ materially from the amounts reported in the consolidated
balance sheet at March 31, 2000.

During the pendency of the reorganization proceedings, the Company is
implementing operational and system improvements. In particular, a new cemetery
contract management system is being implemented in the cemetery operations on a
location by location basis to improve the recording and tracking of individual
pre-need contracts. Management believes the new cemetery contract management
system will: (i) improve the timeliness of and access to operational and
financial information; (ii) reduce administrative costs; (iii) provide for
improved trust efficiencies, and (iv) improve the estimation of merchandise and
service liabilities. Further adjustments may be made to the estimation of
cemetery merchandise and service liabilities as the cemetery contract management
system is implemented.

In April 2000, the Company announced that under the collateral trust
agreement among the Company, LGII and their senior lenders (the "Collateral
Trust Agreement"), there is uncertainty as to the secured status of the
Company's Series 3, 4, 6 and 7 Senior Notes and the Pass-through Asset Trust
Securities (the "Subject Debt"). The aggregate principal amount outstanding of
the Subject Debt is $1.1 billion (see Note 3 to the Interim Consolidated
Financial Statements for additional information regarding the terms of the
Subject Debt). Under the Collateral Trust Agreement, senior lenders share
certain collateral and guarantees on a pari passu basis. In accordance with the
terms of the Collateral Trust Agreement, holders of future indebtedness or their
representatives were to effect registration by delivering to the collateral
trustee Additional Secured Indebtedness Registration Statements. Pursuant to the
agreements with lender representatives in connection with financings subsequent
to the establishment of the Collateral Trust Agreement, the Company and LGII
have treated the Subject Debt as secured.

28
<PAGE>
The Company was recently advised that Additional Secured Indebtedness
Registration Statements relating to the Subject Debt were either not entered
into the collateral trustee's register or were entered with an incorrect
outstanding amount. Under the terms of the Collateral Trust Agreement, these
circumstances give rise to uncertainty as to the secured status of the Subject
Debt. The Company has confirmed that it satisfied its obligations under the
financing agreements to adopt appropriate corporate resolutions and to deliver
to lender representatives, in connection with closing, Additional Secured
Indebtedness Registration Statements relating to the Subject Debt.

3. REVENUE AND MARGINS. Revenue is affected by the volume of services
rendered and the mix and pricing of services and products sold and actual
pre-need contract cancellation experience. Margins are affected by the volume of
services rendered, the mix and pricing of services and products sold and related
costs. Further, revenue and margins may be affected by fluctuations in the
number of deaths (which may be significant from period to period), competitive
pricing strategies, pre-need sales and other sales programs implemented by the
Company and the ability to hire and retain the necessary level of sales staff.
Revenue is also affected by the level of dispositions and acquisitions. The
Company's intention to dispose of 201 funeral homes and 170 cemeteries
identified as probable for sale in December 1999, will result in a significant
reduction in future revenue. Revenue may also be affected by the negative
implications associated with the bankruptcy proceedings.

4. DISPOSITIONS. In December 1999, the Company identified 371 locations as
probable for sale. In January 2000, the U.S. Bankruptcy Court for the District
of Delaware approved the Company's proposed disposition process. Although the
Company may consummate additional asset sales, it is not committed to sell and
has not identified any other properties for which a material sale is probable.
When properties are sold, gains or losses could be small or significant
depending upon the type of property, location, cash flow and prevailing market
conditions.

5. TAX RATE. Prior to the year ended December 31, 1998, the Company's
financing structures allowed it to achieve an effective tax rate well below the
Canadian statutory rate of 45%. These structures are not expected to produce
similar benefits in the future due to uncertainty as to when, if ever, the tax
benefit of deducting the Company's losses and future interest expense will be
realized. As a result, the Company expects that its effective income tax rate
for 2000 and beyond will likely vary significantly from the Canadian statutory
rate.

Future income and losses, and the disposition of certain locations may
require the Company to record a change in the valuation allowance of certain tax
assets that were taken into account in determining the net amount of the
Company's liability for future income taxes recorded on its balance sheet at
March 31, 2000. If this occurs, the resulting change in the valuation allowance,
which could be significant, would generally be treated as an additional income
tax expense or benefit in future periods.

6. OTHER. Consolidated financial results also may be affected by (i) the
ability of the Company to successfully develop and implement a plan of
reorganization pursuant to bankruptcy proceedings that provides for achieving
profitable operations and obtaining appropriate financing, among other things,
(ii) the ability of the Company to retain and motivate its employees, including
senior management and critical staff, (iii) the continued availability of
operating cash flow and debtor-in-possession financing, (iv) dispositions and
the related valuation of assets, (v) the number of Common shares outstanding,
(vi) competition, (vii) the level of the Company's general and administrative
costs, and (viii) changes in applicable governmental regulations.

29
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
3 CHARTER DOCUMENTS

3.1 Certificate of Incorporation of The Loewen Group Inc.
("Loewen") issued by the British Columbia Registrar of
Companies ("Registrar") on October 30, 1985(1)

3.2 Altered Memorandum of Loewen, filed with the Registrar on
June 21, 1996(2)

3.3 Articles of Loewen, restated, filed with the Registrar on
March 1, 1988, as amended on March 30, 1988, April 21,
1988, May 19, 1989, May 28, 1992, May 20, 1993, June 29,
1994, December 21, 1995 and February 7, 1996(3)

4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES

4.1.1 Note Agreement, dated for reference September 1, 1993, by
and between Loewen and LGII re 9.62% Senior Guaranteed
Notes, Series D, due September 11, 2003, issued by Loewen
("Series D Notes"), as amended on June 10, 1994(1)

4.1.2 Second Amendment, dated for reference May 15, 1996, to Note
Agreement, dated for reference September 1, 1993, among
Loewen, LGII and institutions named therein, re Series D
Notes(4)

4.1.3 Summary of Terms and Conditions, dated March 30, 1999,
amending certain credit agreements to which Loewen is a
party(5)

4.2 Guaranty Agreement by LGII re Series D Notes, dated for
reference April 1, 1993(1)

4.3.1 Note Agreement by LGII and Loewen re 6.49% Senior Guaranteed
Notes, Series E, due February 25, 2004, issued by LGII
("Series E Notes"), dated for reference February 1,
1994(1)

4.3.2 Second Amendment, dated for reference May 15, 1996, to Note
Agreement, dated for reference February 1, 1994, among
Loewen, LGII and Teachers Insurance and Annuity
Association of America, re Series E Notes(4)

4.3.3 Summary of Terms and Conditions, dated March 30, 1999,
amending certain credit agreements to which Loewen is a
party (see Exhibit 4.1.3)

4.4 Guaranty Agreement by Loewen re Series E Notes, dated for
reference February 1, 1994(1)

4.5.1 Amended and Restated 1994 MEIP Credit Agreement, dated as of
June 14, 1994, amended and restated as of May 15, 1996
(the "MEIP Credit Agreement"), by and between Loewen
Management Investment Corporation, in its capacity as
agent for LGII ("LMIC"), Loewen and the banks listed
therein (the "MEIP Banks") and Wachovia Bank of Georgia,
N.A., as agent for the MEIP Banks ("MEIP Agent")(6)

4.5.2 First Amendment to the MEIP Credit Agreement, dated as of
December 2, 1996(7)

4.5.3 Second Amendment to the MEIP Credit Agreement, dated as of
April 30, 1997(7)

4.5.4 Third Amendment to the MEIP Credit Agreement, dated as of
May 21, 1997(8)
</TABLE>

30
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
4.5.5 Fourth Amendment to the MEIP Credit Agreement, dated as of
September 29, 1997(8)

4.5.6 Summary of Terms and Conditions, dated March 30, 1999,
amending certain credit agreements to which Loewen is a
party (see Exhibit 4.1.3)

4.6 Security Agreement, dated as of June 14, 1994, by and
between LMIC and the MEIP Agent(1)

4.7 Guaranty dated as of June 14, 1994, by LGII in favor of the
MEIP Agent for the ratable benefit of the MEIP Banks(1)

4.8 Guaranty dated as of June 14, 1994, by Loewen in favor of
the MEIP Agent for the ratable benefit of the MEIP
Banks(1)

4.9 Exchange Acknowledgment by Loewen, with respect to the 1994
Exchangeable Floating Rate Debentures due July 1, 2001
issued by LGII, dated June 15, 1994(1)

4.10 Indenture, dated as of August 15, 1994, by and between LGII,
as issuer, Loewen, as guarantor, and State Street Bank and
Trust Company, as trustee with respect to 9.45% Junior
Subordinated Debentures, Series A, due 2024, issued by
LGII and guaranteed by Loewen(9)

4.11 MIPS Guarantee Agreement, dated August 15, 1994(9)

4.12 Indenture, dated as of March 20, 1996, by and between LGII,
as issuer, Loewen, as guarantor of the obligations of LGII
under the Indenture, and Fleet National Bank as Trustee,
with respect to Series 1 and 2 Senior Guaranteed Notes of
LGII(3)

4.13 Form of Senior Guarantee of LGII's Series 1 and 2 Notes
(included in Exhibit 4.12)

4.14 Form of Global Series 1 and 2 Exchange Notes of LGII(4)

4.15 Form of Physical Series 1 and 2 Exchange Notes of LGII(4)

4.16 Form of Senior Guarantee of LGII's Series 1 and 2 Exchange
Notes (included in Exhibits 4.14 and 4.15)

4.17.1 Amended and Restated Credit Agreement, dated as of
March 27, 1998 ("BMO Credit Agreement"), among LGII, as
borrower, Loewen, as a guarantor, the lenders named
therein, as the lenders, Goldman, Sachs & Co., as the
documentation agent, and Bank of Montreal, as issuer,
swingline lender and administrative and syndication
agent(8)

4.17.2 Summary of Terms and Conditions, dated March 30, 1999,
amending certain credit agreements to which Loewen is a
party (see Exhibit 4.1.3)

4.18 Collateral Trust Agreement, dated as of May 15, 1996, among
Bankers Trust Company, as trustee, Loewen, LGII and
various other pledgors(4)

4.19 Indenture, dated as of October 1, 1996, by and between LGII,
Loewen and Fleet National Bank, as trustee, with respect
to the Series 3 and 4 Notes(6)
</TABLE>

31
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
4.20 Form of Senior Guarantee of LGII's Series 3 and 4 Notes
(included in Exhibit 4.19)

4.21 Form of Global Series 3 and 4 Exchange Notes of LGII(10)

4.22 Form of Physical Series 3 and 4 Exchange Notes of LGII(10)

4.23 Form of Senior Guarantee of LGII's Series 3 and 4 Exchange
Notes (included in Exhibits 4.21 and 4.22)

4.24 Indenture, dated as of September 26, 1997, between Loewen,
as issuer, LGII, as guarantor, and The Trust Company of
Bank of Montreal, as trustee, with respect to the
Series 5 Guaranteed Notes(11)

4.25 Form of Series 5 Guaranteed Notes of LGII(11)

4.26 Form of Loewen Guarantee of LGII's Series 5 Notes(11)

4.27 Indenture, dated as of September 30, 1997, between LGII, as
issuer, Loewen, as guarantor, and State Street Bank and
Trust Company, as trustee, with respect to the Series 5
Senior Guaranteed Notes due 2009(11)

4.28 Form of Global "PATS" Senior Guaranteed Notes due 2009 of
LGII(11)

4.29 Form of Physical "PATS" Senior Guaranteed Notes due 2009 of
LGII(11)

4.30 Form of Senior Guarantee of LGII's "PATS" Senior Guaranteed
Notes due 2009(11)

4.31 Shareholder Protection Rights Plan, dated as of April 20,
1990, as amended on May 24, 1990 and April 7, 1994 and
reconfirmed on May 17, 1995(1)

4.32 Form of Indenture by and between LGII, as issuer, Loewen, as
guarantor, and Fleet National Bank, as trustee, relating
to the Debt Securities that may be issued pursuant to
Registration Statement No. 333-29443(12)

4.33 Indenture dated as of May 28, 1998, between LGII, as issuer,
Loewen, as guarantor, and State Street Bank and Trust
Company, as trustee, with respect to the Series 6 and 7
Notes(13)

4.34 Form of Senior Guarantee of Series 6 and 7 Notes of LGII
(included in Exhibit 4.33)

4.35 Form of Global Series 6 and 7 Exchange Notes of LGII(14)

4.36 Form of Physical Series 6 and 7 Exchange Notes of LGII(14)

4.37 Form of Senior Guarantee of LGII's Series 6 and 7 Exchange
Notes (included in Exhibits 4.35 and 4.36)

4.38.1 Debtor-In-Possession Credit Agreement, dated as of June 1,
1999 (the "DIP Agreement"), by and among LGII, as debtor
and debtor-in-possession, each of LGII's subsidiaries
listed on the signature pages thereof, each as debtor and
debtor-in-possession, Loewen, the Lenders named therein,
as the initial Lenders, and First Union National Bank, as
the L/C Issuer and as the Administrative Agent for the
Lenders(15)

4.38.2 First Amendment to the DIP Agreement, dated as of July 16,
1999(15)
</TABLE>

32
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
4.38.3 Second Amendment to the DIP Agreement, dated as of
August 25, 1999(16)

4.38.4 Third Amendment to the DIP Agreement, dated as of
October 21, 1999(16)

4.38.5 Fourth Amendment to the DIP Agreement, dated as of
December 21, 1999(16)

4.39 Loewen and LGII hereby agree to furnish to the Commission,
upon request, a copy of the instruments which define the
rights of holders of long-term debt of Loewen and LGII.
None of such instruments not included as exhibits herein
collectively represents long-term debt in excess of 10% of
the consolidated total assets of Loewen or LGII.

10 MATERIAL CONTRACTS

10.1 Receipt Agreement, dated as of January 3, 1996, for the
Cumulative Redeemable Convertible First Preferred Shares,
Series C, of Loewen ("Series C Shares")(3)

10.2 Undertaking by Raymond L. Loewen and Anne Loewen, dated as
of January 3, 1996, to vote in favor of the motion to
subdivide the Series C Shares(3)

10.3* Form of Indemnification Agreement with Outside Directors(17)

10.4* Form of Indemnification Agreement with Officers(17)

10.5.1* The Loewen Group Inc. Corporate Incentive Plan(16)

10.5.2* The Loewen Group Inc. Operations Incentive Plan(16)

10.5.3* The Loewen Group Inc. Basic Employee Severance Plan(16)

10.5.4* The Loewen Group Inc. Executive and Other Specified Employee
Severance Plan(16)

10.5.5* The Loewen Group Inc. Confirmation Incentive Plan(16)

10.5.6* The Loewen Group Inc. Retention Incentive Plan(16)

10.5.7* Form of Employment and Release Agreement for Corporate and
Country Management(16)

10.5.8* Form of Employment and Release Agreement for Employees Other
Than Corporate and Country Management(16)

10.6* 1994 Management Equity Investment Plan (the "MEIP")(17)

10.7* Form of Executive Agreement executed by participants in the
MEIP(9)

10.8* 1994 Outside Director Compensation Plan, as restated and
amended as at January 9, 1997, and further amended as at
June 25, 1998(5)

10.9* Employee Stock Option Plan (International), as restated and
amended as at September 17, 1998(5)

10.10* Employee Stock Option Plan (Canada), as restated and amended
as at September 17, 1998(5)

10.11* Form of Stay Put Bonus Plan Letters, dated February 26,
1999(5)
</TABLE>

33
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
10.12* Employment Agreement, dated April 12, 1991, by and between
Loewen and Dwight Hawes(1)

10.13* Consulting Agreement, dated July 18, 1994, by and between
Loewen and Charles B. Loewen, LGII, and Corporate Services
International Inc.(1)

10.14* Resignation and Release Agreement, effective June 10, 1996,
by and between Loewen, LGII and Robert O. Wienke(6)

10.15* Employment Agreement, dated October 31, 1997, by and between
Loewen and Michael G. Weedon(8)

10.16* Employment Agreement, dated January 30, 1998, by and between
Loewen and Brad Stam(8)

10.17* Employment Agreement, dated October 26, 1998, by and between
Loewen and Peter S. Hyndman(5)

10.18.1* Employment Agreement, dated November 30, 1998, by and
between Loewen and Robert Lundgren(5)

10.18.2* Indemnification Agreement, dated February 3, 1999, by and
between Loewen and Robert Lundgren(5)

11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS

27 FINANCIAL DATA SCHEDULE

99 ADDITIONAL EXHIBITS

99.1 Stock Purchase Agreement, dated as of June 14, 1996, by and
among Prime Succession, Inc. the other individuals or
entities listed on the signature pages thereof, Loewen and
Blackhawk Acquisition Corp.(18)

99.2 Put/Call Agreement, dated as of August 26, 1996, by and
among Blackstone, Blackstone Offshore Capital Partners II
L.P. ("Blackstone Offshore"), Blackstone Family Investment
Partnership II L.P. ("Blackstone Family"), PSI Management
Direct L.P. ("PSI"), LGII and Loewen(19)

99.3 Stockholders' Agreement, dated as of August 26, 1996, by and
among Prime Succession, inc. (to be renamed Prime
Succession Holdings, Inc.), Blackstone, Blackstone
Offshore, Blackstone Family, PSI and LGII(18)

99.4 Subscription Agreement, dated as of November 19, 1996, by
and among Rose Hills Holdings Corp. ("Rose Hills"),
Blackstone, Blackstone Rose Hills Offshore Capital
Partners L.P. ("Blackstone Rose Hills"), Blackstone
Family, Roses Delaware, Inc. ("RDI"), Loewen, LGII and RHI
Management Direct, L.P. ("RHI")(20)

99.5 Put/Call Agreement, dated as of November 19, 1996, by and
among Blackstone, Blackstone Offshore, Blackstone Family,
Blackstone Rose Hills, LGII, RDI, Loewen and RHI(20)

99.6 Stockholders' Agreement, dated as of November 19, 1996, by
and among Rose Hills, Blackstone, Blackstone Rose Hills,
Blackstone Family, RDI, LGII and RHI(20)
</TABLE>

34
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
99.7 Form of Letter of Transmittal(21)

99.8 Form of Notice of Guaranteed Delivery(21)
</TABLE>

- ------------------------

* Compensatory plan or management contract

(1) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1994, filed on March 31, 1995 (File No. 0-18429)

(2) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed on August 14, 1996 (File
No. 0-18429)

(3) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1995, filed on March 28, 1996, as amended (File
No. 0-18429)

(4) Incorporated by reference from the Registration Statement on Form S-4 filed
by Loewen on May 3, 1996, as amended by the Registration Statement on
Form S-4/A filed by Loewen on June 20, 1996 and the Registration Statement
on Form S-4/A filed by Loewen on August 26, 1996 (File No. 333-03135)

(5) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1998, filed on April 15, 1999 (File No. 1-12163)

(6) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, filed on November 14, 1996 (File
No. 1-12163)

(7) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, filed on May 13, 1997 (File No. 1-12163)

(8) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1997, filed on March 30, 1998 (File No. 1-12163)

(9) Incorporated by reference from the combined Registration Statement on
Form F-9/F-3 filed by LGII and Loewen on July 1, 1994, as amended (File Nos.
33-81032 and 33-81034)

(10) Incorporated by reference from the Registration Statement on Form S-4 filed
by LGII and Loewen on November 18, 1996, as amended (File Nos. 333-16319 and
333-16319-01)

(11) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997, filed on November 14, 1997 (File
No. 1-12163)

(12) Incorporated by reference from the Registration Statement on Form S-3 filed
by Loewen and LGII on March 21, 1997, as amended (File Nos. 333-23747 and
333-23747-01)

(13) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q/A for
the quarter ended June 30, 1998, filed on August 13, 1998 (File
No. 1-12163)

(14) Incorporated by reference from the Registration Statement on Form S-4 filed
by LGII and Loewen on August 26, 1998, as amended (File No. 333-62239-01)

(15) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999, filed on August 13, 1999 (File
No. 1-12163)

(16) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1999, filed on March 16, 2000 (File No. 1-12163)

(17) Incorporated by reference from Loewen's Solicitation/Recommendation
Statement on Schedule 14D-9, filed on October 10, 1996, as amended

35
<PAGE>
(18) Incorporated by reference from Loewen's Periodic Report on Form 8-K, dated
August 26, 1996, filed October 11, 1996, as amended October 29, 1996 (File
No. 1-12163)

(19) Incorporated by reference from Loewen's Periodic Report on Form 8-K/A
No. 1, dated August 26, 1996, filed October 29, 1996 (File No. 1-12163)

(20) Incorporated by reference from Loewen's Periodic Report on Form 8-K, dated
November 19, 1996, filed December 27, 1996 (File No. 1-12163)

(21) Incorporated by reference from Amendment No. 1 to the Registration
Statement on Form S-4 filed by LGII and Loewen on September 21, 1998 (File
No. 333-62239-01)

(B) REPORTS ON FORM 8-K

The following Current Reports on Form 8-K were filed by Loewen during the
first quarter of fiscal 2000:

<TABLE>
<CAPTION>
FILING DATE ITEM NUMBER DESCRIPTION
----------- -------------------- ------------------------------------------
<S> <C> <C>
January 25, 2000 (dated Item 5. Other Events Press release announcing the United States
January 24, 2000) Bankruptcy Court's approval of Loewen's
proposed asset disposition program
February 11, 2000 (dated Item 5. Other Events Press release announcing the appointment
February 9, 2000) of two new directors
February 25, 2000 (dated Item 5. Other Events Press release announcing 1999 financial
February 21, 2000) results
</TABLE>

36
<PAGE>
SIGNATURES

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

THE LOEWEN GROUP INC.

Dated: May 11, 2000 /s/ MICHAEL A. CORNELISSEN
--------------------------------------------------
Michael A. Cornelissen
SENIOR VICE-PRESIDENT, CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)

Dated: May 11, 2000 /s/ DWIGHT K. HAWES
--------------------------------------------------
Dwight K. Hawes
SENIOR VICE-PRESIDENT, CORPORATE CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
</TABLE>

<PAGE>

EXHIBIT 11
For 10 Q

THE LOEWEN GROUP INC.

COMPUTATION OF PER SHARE EARNINGS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS

<TABLE>
<CAPTION>
Three months ended
March 31
---------------------
2000 1999
------- ----------
<S> <C> <C>
BASIC
Net earnings (loss) $22,799 $ 6,927
Less: Provision for preferred share dividends 2,270 2,182
------- -------
Net earnings (loss) attributable to Common shareholders 20,529 4,745
======= =======

Weighted average shares outstanding 74,145 74,061

Basic earnings (loss) per share $ 0.28 $ 0.06
======= =======

FULLY DILUTED
Net earnings (loss) attributable to Common shareholders $20,529 $ 4,745
Add: imputed earnings from dilutive options, net of tax effect 299 0
------- -------
Fully diluted net earnings (loss) $20,828 $ 4,745
======= =======

Weighted average shares outstanding 74,145 74,061
Shares issuable upon assumed conversion of dilutive options 3,978 10
------- -------
Fully diluted shares 78,123 74,071
======= =======

Fully diluted earnings (loss) per share $ 0.27 $ 0.06
======= =======
</TABLE>

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 88,794
<SECURITIES> 0
<RECEIVABLES> 249,503
<ALLOWANCES> 51,729
<INVENTORY> 34,404
<CURRENT-ASSETS> 333,138
<PP&E> 1,033,258
<DEPRECIATION> 245,202
<TOTAL-ASSETS> 4,119,947
<CURRENT-LIABILITIES> 116,237
<BONDS> 58,362
0
157,146
<COMMON> 1,276,384
<OTHER-SE> (967,073)
<TOTAL-LIABILITY-AND-EQUITY> 4,119,947
<SALES> 256,857
<TOTAL-REVENUES> 256,857
<CGS> 177,015
<TOTAL-COSTS> 177,015
<OTHER-EXPENSES> 40,921
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,298
<INCOME-PRETAX> 35,623
<INCOME-TAX> 12,824
<INCOME-CONTINUING> 22,799
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,799
<EPS-BASIC> 0.28
<EPS-DILUTED> 0.27

</TABLE>