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The Lowen Group, Inc., and its hundreds of affiliated entities operates the second-largest number of funeral homes and cemeteries in North America (Service Corporation International is number-one). In addition to providing services at the time of need, the Company also makes funeral, cemetery and cremation arrangements on a pre-need basis. Today, the Company operates 1,116 funeral homes and 429 cemeteries throughout North America. During 1997, the Company expanded into the United Kingdom and now operates 32 funeral homes there. As of March 31, 1999, the Company also operated three insurance subsidiaries that principally sell a variety of life insurance products to fund funeral services purchased through a pre-need arrangement. The Loewen Group, Inc., serves as the holding company for all operations of the Company, which are contained in subsidiary and associated companies. Loewen was incorporated under the Company Act of British Columbia on October 30, 1985.

GROWTH BY ACQUISITION. Loewen pursued an aggressive growth strategy based primarily upon acquisitions. In the past three years the Company's growth strategy emphasized cemetery acquisitions, as compared to the historical emphasis on funeral home acquisitions. Since 1995, the Company has grown by 651 locations to 1,701 at December 31, 1998, including 348 additional cemeteries.

RECENT DIFFICULTIES. Loewen's recent financial results have been disappointing. Beginning in the second half of 1998, as part of its strategy to improve its results, liquidity and financial condition the Company virtually eliminated its acquisition program in order to concentrate on improving existing operations. This strategy focuses upon emphasizing cash flow from operations and, in particular, cash flow from cemetery operations. Also, efforts to reduce costs have been made, including the closure of the Company's Cincinnati and Trevose offices and consolidation of substantially all management functions in Burnaby.

MANAGEMENT CHANGES. Significant management changes occurred beginning in the fourth quarter of 1998. On October 8, 1998, Robert L. Lundgren was appointed President and Chief Executive Officer replacing Raymond L. Loewen who resigned on the same date. On December 17, 1998, the Company named three new outside directors, Thomas M. Taylor, John S. Lacey and William R. Riedl, to the Company's Board of Directors, replacing three inside directors who simultaneously retired from the Board. On January 22, 1999, the Company's Board of Directors appointed John S. Lacey as Chairman, replacing Co-Chairmen Robert L. Lundgren and Raymond L. Loewen. Through actions taken on March 30, 1999 and April 12, 1999, the Board of Directors was reduced from 14 to seven members.

RECENT ASSET SALES. On March 31, 1999, the Company completed the sale of 124 cemeteries and three funeral homes for gross proceeds of $193 million, of which $126.5 million was required to be paid to certain lenders, to an investor group led by McCown De Leeuw & Co., a private investment firm. The Company has two smaller groups of properties which are considered probable for sale.

BUSINESS OPERATIONS. The Company's operations are comprised of three businesses: funeral homes, cemeteries and insurance. The Company maintains a regional management structure for both funeral home and cemetery businesses that is organized in several geographic regions in the United States, Canada and Europe. Management believes that this recently implemented organizational structure will enable the Company to better manage local profit centers.

(1) FUNERAL HOMES. The Company's funeral homes offer a full range of funeral services, including the collection of remains, registration of death, professional embalming, use of funeral home facilities, sale of caskets and other merchandise, and transportation to a place of worship, funeral chapel, cemetery or crematorium. To provide the public with the opportunity to choose the...
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