ALDERWOODS GROUP INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-Q

(MARK ONE)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the 12 weeks ended March 22, 2003

OR

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

COMMISSION FILE NUMBER 000-33277

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ALDERWOODS GROUP, INC.
(Exact name of registrant as specified in its charter)

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DELAWARE 52-1522627

(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)

311 ELM STREET, SUITE 1000, CINCINNATI, OHIO 45202
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 513-768-7400

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 / /

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes /X/ No / /

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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 /X/ No / /

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APPLICABLE ONLY TO CORPORATE ISSUERS

At April 19, 2003, there were 39,970,931 shares of Common Stock outstanding.

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ALDERWOODS GROUP, INC.

i

PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALDERWOODS GROUP, INC.

CONSOLIDATED BALANCE SHEETS

EXPRESSED IN THOUSANDS OF DOLLARS
EXCEPT NUMBER OF SHARES OUTSTANDING

COMMITMENTS AND CONTINGENCIES (NOTES 5 AND 7)

SEE ACCOMPANYING NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1

ALDERWOODS GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

EXPRESSED IN THOUSANDS OF DOLLARS
EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES OUTSTANDING

SEE ACCOMPANYING NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2

ALDERWOODS GROUP, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)

EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT NUMBER OF SHARES

SEE ACCOMPANYING NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

3

ALDERWOODS GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

EXPRESSED IN THOUSANDS OF DOLLARS

SEE ACCOMPANYING NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

4

ALDERWOODS GROUP, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 1. NATURE OF OPERATIONS

Alderwoods Group, Inc., a Delaware corporation, together with its
subsidiaries (collectively, the "Company") is the second-largest operator of
funeral homes and cemeteries in North America. As at March 22, 2003, the Company
operated 759 funeral homes and 185 cemeteries and 62 combination funeral homes
and cemeteries throughout North America and 39 funeral homes in the United
Kingdom.

The Company's funeral operations encompass making funeral and cremation
arrangements on an at-need or pre-need basis. The Company's funeral operations
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.

The Company's cemetery operations assist families in making burial
arrangements and offer a complete line of cemetery products (including a
selection of burial spaces, burial vaults, lawn crypts, caskets, memorials,
niches, mausoleum crypts and other merchandise), the opening and closing of
graves and cremation services.

The Company's insurance operations sell a variety of life insurance
products, primarily to fund pre-need funeral services.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The interim consolidated financial statements include the accounts of the
Company, its subsidiary companies and operations controlled by the Company
through sales and management agreements. All subsidiaries are wholly owned,
except for a few companies with small minority interests. The interim
consolidated financial statements have been prepared using the U.S. dollar and
are presented in accordance with United States generally accepted accounting
principles ("GAAP").

The interim consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, which in management's opinion
are necessary for a fair presentation of the financial results as of March 22,
2003 and for the 12 weeks ended March 22, 2003, and March 23, 2002. The interim
consolidated financial statements have been prepared on a basis consistent with
the accounting policies described in the Company's Annual Report on Form 10-K
for the 52 weeks ended December 28, 2002, as filed with the U.S. Securities and
Exchange Commission ("SEC") and should be read in conjunction therewith.

The results of operations for interim periods are not necessarily indicative
of the results that may be expected for the full fiscal year or for any other
interim period.

USE OF ESTIMATES

The preparation of the interim consolidated financial statements in
accordance with GAAP 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 amounts could significantly differ
from those estimates.

5

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK OPTION PLAN

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("FAS No. 123"), and Statement of Financial Accounting
Standards No. 148, "Accounting for Stock-Based Compensation -- Transition and
Disclosure -- an Amendment of FASB Statement No. 123," ("FAS No. 148"),
established accounting and disclosure requirements using a fair value-based
method of accounting for stock-based employee compensation plans. However, as
allowed by FAS No. 123, the Company has elected to continue to apply the
intrinsic value-based method of accounting described below, and has adopted the
disclosure requirements of FAS No. 123 and FAS No. 148.

The Company applies the intrinsic value-based method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations, including FASB Interpretation No. 44, "Accounting
for Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion No. 25," to account for its fixed plan stock options. Under this method,
compensation expense is recorded on the date of grant only if the current market
price of the underlying stock exceeds the exercise price. Any compensation
expense recorded is charged against operations over the service period, which
generally matches the option vesting period. No stock-based employee
compensation cost was recorded for the 12 weeks ended March 22, 2003, and
March 23, 2002, as all options granted under the Company's stock option plan had
an exercise price equal to or greater than the market value of the underlying
Common stock on the grant date. The following table illustrates the effect on
net income and net income per share, if the Company had applied the fair value
recognition provisions of FAS No. 123 to stock-based employee compensation using
the Black-Scholes option pricing methodology.

COMPARABILITY

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

RECENT ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations" ("FAS No. 143"). FAS No. 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs.
FAS No. 143 requires that the fair value

6

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of a liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part of the carrying amount
of the long-lived asset. FAS No. 143 is effective for financial statements
issued for fiscal years beginning after June 15, 2002. The adoption of
FAS No. 143 on December 29, 2002, had no impact on the Company's financial
condition or results of operations.

In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13 and Technical Corrections" ("FAS No. 145"). As a result of the
rescission of Statement of Financial Accounting Standards No. 4 and 64, gains
and losses from extinguishments of debt are to be accounted for under the
provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations -- Reporting the Effect of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions."
FAS No. 145 also rescinds Statement of Financial Accounting Standards No. 44,
"Accounting for Intangible Assets of Motor Carriers." FAS No. 145 amends
Statement of Financial Accounting Standards No. 13, "Accounting for Leases," to
eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. FAS
No. 145 also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings or describe their applicability under
changed conditions. FAS No. 145 is effective for fiscal years beginning after
May 15, 2002. The adoption of FAS No. 145 on December 29, 2002, had no impact on
the Company's financial condition or results of operations.

In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
("FAS No. 146"). FAS No. 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues
Task Force Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." FAS No. 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized when the
liability is incurred. FAS No. 146 also establishes that fair value is the
objective for initial measurement of the liability. FAS No. 146 is effective for
exit or disposal activities that are initiated after December 31, 2002. The
adoption of FAS No. 146 on December 29, 2002, had no impact on the Company's
financial condition or results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an interpretation of FASB Statements
No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34" ("FIN No. 45").
FIN No. 45 clarifies the requirements of Statement of Financial Accounting
Standards No. 5, "Accounting for Contingencies," relating to the guarantor's
accounting for, and disclosure of, the issuance of certain types of guarantees.
The disclosure provisions of FIN No. 45 are effective for financial statements
of interim or annual periods that end after December 15, 2002. The provisions of
FIN No. 45 for initial recognition and measurement are effective on a
prospective basis for guarantees that are issued or modified after December 31,
2002, irrespective of a guarantor's year-end. The adoption of FIN No. 45 on
December 29, 2002, had no impact on the Company's financial condition or results
of operations.

7

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN No. 46"),
"Consolidation of Variable Interest Entities." FIN No. 46 clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN No. 46 applies
immediately to variable interest entities created after January 31, 2003, and to
variable interest entities in which an enterprise obtains an interest after that
date. FIN No. 46 applies in the first fiscal year or interim period beginning
after June 15, 2003, to variable interest entities in which an enterprise holds
a variable interest that it acquired before February 1, 2003. FIN No. 46 applies
to public enterprises as of the beginning of the applicable interim or annual
period. The adoption of FIN No. 46 on February 1, 2003, had no impact on the
Company's financial condition or results of operations.

NOTE 3. PRE-NEED FUNERAL ACTIVITIES

The balance in pre-need funeral contracts represents customer receivables,
amounts due from trust funds and third-party insurance companies related to
unperformed, price-guaranteed, pre-need funeral contracts. The components of
pre-need funeral contracts in the consolidated balance sheets are as follows:

For pre-need funeral contract sales, an allowance for cancellations and
refunds is provided at the date of sale based on management's best estimates and
is offset by an allowance against deferred pre-need funeral contract revenue.

8

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 3. PRE-NEED FUNERAL ACTIVITIES (CONTINUED)
The activities in deferred pre-need funeral contract revenue were
as follows:

Amounts receivable from funeral trusts represent a portion of the proceeds
from the sale of pre-need funeral services, deposited in accordance with state
and provincial trusting laws with various financial institutions, together with
accrued earnings. The Company will recognize and generally receive these amounts
when the funeral service is performed.

NOTE 4. PRE-NEED CEMETERY ACTIVITIES

PRE-NEED CEMETERY CONTRACTS

The balance in pre-need cemetery contracts represents customer receivables
for cemetery interment rights, and cemetery merchandise and services, and
amounts due from trust funds related to unfulfilled, price-guaranteed, pre-need
cemetery contracts. The components of pre-need cemetery contracts in the
consolidated balance sheets are as follows:

For pre-need cemetery contract sales, other than sales of pre-need cemetery
interment rights, which are recognized in accordance with the retail land sales
provisions of Statement of Financial Accounting Standards No. 66, "Accounting
for Sales of Real Estate," an allowance for cancellations and refunds is

9

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 4. PRE-NEED CEMETERY ACTIVITIES (CONTINUED)
provided at the date of sale based on management's best estimates and is offset
by an allowance against deferred pre-need cemetery contract revenue. For sales
of pre-need cemetery interment rights, an allowance is provided at the time of
sale.

The activities in deferred pre-need cemetery contract revenue were
as follows:

Amounts receivable from cemetery trusts represents a portion of the proceeds
from the sale of pre-need merchandise and services, deposited in accordance with
state and provincial trusting laws with various financial institutions, together
with accrued earnings. The Company will recognize and generally receive these
amounts when the merchandise is delivered or service is performed.

PERPETUAL CARE TRUSTS

The perpetual care trust funds are not included in the Company's
consolidated balance sheets, as the principal of these trusts cannot be
withdrawn by the Company. The carrying value of the trust investments was
$265,934,000 and $266,890,000, at March 22, 2003, and December 28, 2002,
respectively.

Investment earnings of perpetual care trust funds are recognized in cemetery
revenue when realized and are used to help defray the maintenance costs of
cemeteries, which are expensed as incurred.

10

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 5. LONG-TERM DEBT

Long-term debt consists of the following:

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(a) On January 2, 2002, the Company entered into an exit financing facility
(the "Credit Facility"). The Credit Facility has a maximum availability
of the lesser of $75,000,000 (including $35,000,000 in the form of
letters of credit) or an amount (determined pursuant to a borrowing base
calculation) equal to the sum of (a) 80% of eligible accounts receivable
plus (b) the lesser of (i) 50% of the value of eligible inventory and
(ii) $15,000,000 plus (c) the lesser of (i) 25% of the book value of real
property on which the collateral agent for the lenders has a first
priority mortgage and (ii) $40,000,000. The Credit Facility is used
primarily to fund the Company's working capital needs and as more fully
described below, may be used to repay the subsidiary credit agreement
described below, and bears interest at a rate per annum equal to the
J.P. Morgan Chase & Co. prime rate (4.25% at March 22, 2003, and
December 28, 2002), plus 1% or, at the Company's option, LIBOR (1.29% at
March 22, 2003, and 1.4% at December 28, 2002), plus 2.5%. A fee of 2.5%
is charged on letters of credit and a commitment fee of 0.50% is charged
on the unused portion of the Credit Facility. Material covenants include
a requirement to maintain a minimum tangible net worth, required earnings
before interest, taxes, and depreciation and amortization to a fixed
charge coverage ratio, and a yearly maximum on capital expenditures. The
Credit Facility is secured by specified real property, and substantially
all personal property of the Company and specified subsidiaries.

On November 14, 2002, the expiry date of the Credit Facility was
extended to January 2, 2004. On February 14, 2003, the terms of the
Credit Facility were further amended to allow the Company to draw up to
$30,000,000 (the "Rose Hills Special Advance") from the Credit Facility
for the purpose of assisting in the

11

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 5. LONG-TERM DEBT (CONTINUED)
repayment of the principal amount of $52,642,000 then outstanding under
Rose Hills Company's ("Rose Hills") bank credit agreement (as discussed
below in (b)). In addition, the amendment provided that until the Rose
Hills Special Advance is repaid, the Company requires lender approval to
borrow any other amount from the Credit Facility, the aggregate amount
outstanding under letters of credit may not exceed $14,000,000 and the
Credit Facility will be additionally secured by specified personal and
real property of Rose Hills and its subsidiaries. Also, on February 14,
2003, the expiry date of the Credit Facility was further extended to
April 30, 2004. As of March 22, 2003, the Company's borrowing
base was approximately $68,969,000 (December 28, 2002 -- $70,074,000),
less approximately $12,798,000 (December 28, 2002 -- $12,088,000) in
outstanding letters of credit. On April 1, 2003, the Company drew
$30,000,000 of the Rose Hills Special Advance to repay the Rose Hills
bank credit agreement. On April 8, 2003, the Company repaid $10,000,000
of the Rose Hills Special Advance and on April 28, 2003, repaid the
remaining balance of $20,000,000.

(b) Subsidiary credit agreement which provided for (1) a senior secured
amortization extended term loan facility in an aggregate original
principal amount of $75,000,000, and (2) a senior secured revolving
credit facility in a maximum aggregate principal amount of $10,000,000,
which remained undrawn at March 22, 2003, and December 28, 2002. The
subsidiary was required to maintain certain defined financial ratios and
there were restrictions on the payment of dividends to the Company. The
credit agreement bore interest, at the Company's option, at the reference
rate of the agent acting on behalf of the financial institutions, plus
2%, or under a Eurodollar option, at a reserve adjusted Eurodollar rate,
plus 3%. As of March 22, 2003, interest was charged at a rate of 4.34%
(December 28, 2002 -- 4.94%) on outstanding borrowings under the term
loan facility. The Company paid a commitment fee of 0.50% on the unused
portion of the revolving credit facility. The subsidiary credit agreement
was payable, subject to certain conditions, in the principal amount of
approximately $26,321,000 in May 2003, and approximately $26,321,000 in
November 2003. On April 1, 2003, the Company repaid all outstanding
principal amounts and accrued interest under, and terminated, the
subsidiary credit agreement.

(c) On January 2, 2002, the Company issued 11.00% Senior secured notes, due
in 2007. Interest is payable semi-annually on June 15 and December 15.
The notes are secured by all personal property (subject to certain
restrictions) of the Company and specified subsidiaries, and specified
funeral home real property assets of the Company and specified
subsidiaries, subordinated to the security interests securing the Credit
Facility. The notes are redeemable at any time at the option of the
Company at 100% of the stated principal amount, plus accrued and unpaid
interest to (but not including) the redemption date. Furthermore, the
notes are subject to mandatory redemption in the principal amount of
$20,000,000, $30,000,000, $40,000,000 and $135,000,000, if such amounts
are outstanding on January 2, 2004, January 3, 2005, January 2, 2006 and
January 2, 2007, respectively. On July 25, 2002, the Company completed an
optional redemption of $15,000,000 in principal amount, plus accrued
interest and, on January 2, 2003, completed a mandatory redemption of
$10,000,000 in principal amount, plus accrued interest.

(d) The indenture for the subsidiary 9.5% Senior subordinated notes, due
November 15, 2004, with an effective annual interest rate of 11.13%,
limits the subsidiary's payment of dividends and repurchase of its common
stock, and includes certain other restrictions and limitations on its
indebtedness. Interest is payable semi-annually on May 15 and
November 15. Prior to April 1, 2003, the notes were subordinate to the
prior claims of the bank credit agreement described in note (b), above.
Upon repayment of the bank credit agreement described in note (b) above
on April 1, 2003, the notes became subordinate to the prior claims of the
Credit Facility. The carrying amount is net of an unamortized discount of
$2,028,000 (December 28, 2002 -- $2,200,000).

12

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 5. LONG-TERM DEBT (CONTINUED)
(e) On January 2, 2002, the Company issued 12.25% Senior unsecured notes,
due in 2009. Interest is payable semi-annually on March 15 and
September 15. The notes are redeemable on and after January 2, 2005, at
the option of the Company, in whole or in part, at a price equal to
106.25% of the stated principal amount if redeemed from January 2, 2005
to January 1, 2006, at a price equal to 103.125% of the stated principal
amount if redeemed from January 2, 2006 to January 1, 2007, and at a
price equal to 100% of the stated principal amount if redeemed on or
after January 2, 2007, plus accrued and unpaid interest to (but not
including) the applicable redemption date.

(f) On January 2, 2002, the Company issued 12.25% Convertible subordinated
notes, due in 2012, with an effective annual interest rate of 8.6%.
Interest is payable semi-annually on March 15 and September 15. The notes
are convertible at the holder's option at any time into the Company's
Common stock at an initial conversion rate of $17.17 per share, adjusted
for subsequent dividends, stock splits and issuance of rights, options
and warrants. At March 22, 2003, and December 28, 2002, the conversion
rate was $17.17 per share. The carrying amount includes unamortized
premium of $7,892,000 (December 28, 2002 -- $8,100,000). The notes are
redeemable at the option of the Company, in whole or in part, at 100% of
the stated principal amount, plus accrued and unpaid interest to (but not
including) the applicable redemption date, provided however, that prior
to January 2, 2004, the Company may not optionally redeem the notes
unless the then-market price of the Company's Common stock is at least
15% greater than the then-applicable conversion price.

The Credit Facility, 11% Senior secured notes due in 2007, 12.25% Senior
unsecured notes due in 2009, and 12.25% Convertible subordinated notes due in
2012, are guaranteed by substantially all of Alderwoods Group's wholly-owned
U.S. subsidiaries, other than Alderwoods Group's insurance subsidiaries and
other specified excluded subsidiaries. Alderwoods Group, the parent company, has
no independent assets or operations, and the guarantees of its guarantor
subsidiaries are full and unconditional, and joint and several.

In certain change of control situations, the Company is required to make an
offer to purchase the then-outstanding 11% Senior unsecured notes due in 2007
and 12.25% Convertible subordinated notes due in 2012, at a price equal to 100%
of their stated principal amount, and for the 12.25% Senior unsecured notes due
in 2009, at a price equal to 101% of their stated principal amount, plus in each
case, accrued and unpaid interest to the applicable repurchase date.

The Credit Facility and the indentures governing the 11% Senior unsecured
notes due in 2007, 12.25% Senior unsecured notes due in 2009 and 12.25%
Convertible subordinated notes due in 2012 prohibit the Company from
consummating certain asset sales unless: (a) consideration at least equal to
fair market value is received; and (b) except with respect to specified assets,
not less than 75% of the consideration for the asset sale is paid in cash.
Within 270 days of the receipt of net proceeds from any such asset sale, the
Company will be obligated to apply such net proceeds at its option (or as
otherwise required) as follows: (a) to pay the Credit Facility and permanently
reduce commitments with respect thereto, or (b) to make capital expenditures or
acquisitions of other assets in the same line of business as the Company or
specified subsidiaries or businesses related thereto. To the extent the Company
receives net proceeds from any such asset sale not applied in accordance with
the immediately preceding sentence in excess of certain thresholds, the Company
must offer to purchase 11% Senior unsecured notes due in 2007, 12.25% Senior
unsecured notes due in 2009 or 12.25% Convertible subordinated notes due in 2012
(in that order) with such excess proceeds.

13

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 5. LONG-TERM DEBT (CONTINUED)
Material covenants under the indentures governing the 11% Senior unsecured
notes due in 2007, 12.25% Senior unsecured notes due in 2009 and 12.25%
Convertible subordinated notes due in 2012 include restrictions placed on the
Company and specified subsidiaries to incur additional indebtedness, pay
dividends, repay subordinate or junior indebtedness, and encumber property or
assets.

NOTE 6. IMPAIRMENT OF ASSETS

In accordance with Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS
No. 144"), the Company reviews its long-lived assets for impairment when changes
in circumstances indicate that the carrying amount of the asset may not be
recoverable. FAS No. 144 requires that long-lived assets to be held and used be
recorded at the lower of carrying amount or fair value. Long-lived assets to be
disposed of are to be recorded at the lower of carrying amount or fair value,
less estimated costs to sell.

During the 12 weeks ended March 22, 2003, the Company identified four
additional funeral homes and 15 additional cemeteries as held for sale, but not
sold as at March 22, 2003, as they do not meet the Company's future geographic
and strategic objectives. The carrying amount of these four funeral homes and
15 cemeteries was $15,236,000, and the fair market value, less estimated costs
to sell, was $7,010,000. The fair market value was determined by specific offer
or bid, or an estimate based on comparable recent sales transactions. As a
result, a pre-tax long-lived asset impairment provision of $8,226,000 was
recorded during the 12 weeks ended March 22, 2003 (March 23, 2002 -- nil). For
the 12 weeks ended March 22, 2003, these funeral homes had revenues and costs of
$247,000 and $317,000 (March 23, 2002 -- $274,000 and $276,000), respectively,
and these cemeteries had revenues and costs of $917,000 and $1,306,000
(March 23, 2002 -- $1,062,000 and $1,310,000), respectively. In addition, during
the 12 weeks ended March 22, 2003, an additional pre-tax long-lived asset
impairment provision of $1,244,000 was recorded for funeral homes and cemeteries
previously identified as held for sale. This additional impairment provision
resulted from changes in previously estimated proceeds, net asset values and
closing costs.

The asset impairment provisions were based on management estimates. As a
result, actual results could differ significantly from these estimates.

NOTE 7. LEGAL CONTINGENCIES

THE LOEWEN GROUP INC. ET AL. V. THE UNITED STATES OF AMERICA

In October 1998 prior to reorganization proceedings, The Loewen Group Inc.,
which was the Company's predecessor, and Raymond L. Loewen, the then-Chairman
and Chief Executive Officer of The Loewen Group Inc., filed a claim against the
United States government for damages under the arbitration provisions of the
North American Free Trade Agreement ("NAFTA"). The claimants contend that they
were damaged as a result of breaches by the United States of its obligations
under NAFTA in connection with certain litigation in the State of Mississippi
entitled O'KEEFE VS. THE LOEWEN GROUP INC. Specifically, the plaintiffs allege
that they were subjected to discrimination, a denial of justice, a denial of the
fair and equitable treatment and full protection and security guaranteed by
NAFTA and an uncompensated expropriation, all in violation of NAFTA. The NAFTA
claims are currently the subject of a pending proceeding before an arbitration
panel (the "Arbitration Tribunal") appointed pursuant to the rules of the

14

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 7. LEGAL CONTINGENCIES (CONTINUED)
International Centre for Settlement of Investment Disputes. In January 2001, the
Arbitration Tribunal issued a ruling rejecting certain of the U.S. government's
jurisdictional challenges and scheduled a hearing on the merits of the NAFTA
claims, held on October 15-19, 2001. A motion relating to the jurisdiction of
this matter was heard on June 5, 2002. The matter is now pending before the
Arbitration Tribunal.

Pursuant to the Fourth Amended Joint Plan of Reorganization of Loewen Group
International, Inc., its Parent Corporation and certain of their Debtor
Subsidiaries, as modified (the "Plan"), The Loewen Group Inc., through a series
of transactions, transferred to the Company all of its assets, excluding legal
title to the NAFTA claims, and transferred to the Company the right to any and
all proceeds from the NAFTA claims. In addition, pursuant to the Plan, an
undivided 25% interest in the proceeds, if any, of the NAFTA claims as such
proceeds may be adjusted as a result of the arbitration contemplated by the
letter agreement between The Loewen Group Inc. and Raymond L. Loewen, dated
May 27, 1999 (the "NAFTA Arbitration Agreement"), less (a) any amounts payable
under paragraph 3 of the NAFTA Arbitration Agreement and (b) any amounts payable
pursuant to the contingency fee letter agreement between Jones, Day, Reavis &
Pogue and The Loewen Group Inc., dated July 25, 2000, was transferred to a
liquidating trust for the benefit of creditors of The Loewen Group Inc. Although
the Company believes that these actions should not affect the NAFTA claims, the
government of the United States, respondent in the NAFTA proceeding, has
asserted that these actions have divested the Arbitration Tribunal of
jurisdiction over some or all of the claims. The Company does not believe that
it is possible at this time to predict the final outcome of this proceeding or
to establish a reasonable estimate of the damages, if any, that may be awarded,
or the proceeds, if any, that may be received in respect of the NAFTA claims.

OTHER

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

15

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 8. CHANGES IN OTHER NON-CASH BALANCES

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

16

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 9. SUPPLEMENTARY FINANCIAL INFORMATION

A summary of certain balance sheet accounts is as follows:

17

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 9. SUPPLEMENTARY FINANCIAL INFORMATION (CONTINUED)

NOTE 10. SEGMENT REPORTING

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 for the 52 weeks ended December 28, 2002, as filed with the SEC.

The Company sells primarily to external customers, though any intersegment
sales or transfers occur at market price. The Company evaluates performance
based on income from operations of the respective businesses.

18

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 10. SEGMENT REPORTING (CONTINUED)

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

NOTE 11. EARNINGS PER SHARE

The basic and diluted earnings per share computations for net income were as
follows:

Employee and director stock options to purchase 3,470,000 shares of Common
stock, and shares reserved for issuance pursuant to the 12.25% Convertible
subordinated notes, due in 2012, were not included in the computation of diluted
earnings per share, because they were anti-dilutive.

19

ALDERWOODS GROUP, INC.

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

(TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

NOTE 12. SUBSEQUENT EVENTS

(a) On April 1, 2003, the Company repaid the outstanding principal amount of
$52,642,000, plus accrued interest, under, and terminated, the Rose Hills'
bank credit agreement. The Company drew $30,000,000 of the Rose Hills
Special Advance from the Credit Facility on April 1, 2003, for the purpose
of repaying the Rose Hills bank credit agreement. On April 8, 2003, the
Company repaid $10,000,000 of the Rose Hills Special Advance and on
April 28, 2003, repaid the remaining balance of $20,000,000.

(b) The Company's effective tax rate for the 12 weeks ended March 22, 2003,
varied from the statutory tax rate, primarily because the Company received
notification in April 2003, that the Congressional Joint Committee on
Taxation ("Joint Committee") completed its consideration of the conclusions
reached by the Internal Revenue Service in connection with the audit of the
predecessor's 1993 through 1998 federal income tax returns and that the
Joint Committee took no exception to those conclusions. Accordingly, the
Company recognized a tax benefit of $9,675,000 for the 12 weeks ended
March 22, 2003.

20

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

OVERVIEW

Alderwoods Group, Inc. (the "Company" or "Alderwoods Group") is the second
largest operator of funeral homes and cemeteries in North America. As of
March 22, 2003, the Company operated 759 funeral homes, 185 cemeteries and 62
combination funeral homes and cemeteries throughout North America and 39 funeral
homes in the United Kingdom. The Company provides funeral and cemetery services
and products on both an at-need (time of death) and pre-need basis. In support
of its pre-need business, the Company operates insurance subsidiaries that
provide customers with a funding mechanism for the pre-arrangement of funerals.

CRITICAL ACCOUNTING POLICIES

Accounting policies that the Company believes are both most important to the
portrayal of the Company's financial condition and results, and require
management's most difficult, subjective or complex judgements are described
under Item 7. "-- Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Alderwoods Group's Annual Report on Form 10-K for
the 52 weeks ended December 28, 2002, as filed with the U.S. Securities and
Exchange Commission ("SEC").

BASIS OF PRESENTATION

The Company's accounting information contained in this Quarterly Report on
Form 10-Q is presented on the basis of United States generally accepted
accounting principles ("GAAP"). This discussion and analysis of financial
condition and results of operations of the Company are based upon and should be
read in conjunction with the Company's interim consolidated financial statements
included in Item 1 of this Quarterly Report on Form 10-Q (including the
notes thereto).

RESULTS OF OPERATIONS

Detailed below are the operating results of the Company for the 12 weeks
ended March 22, 2003, and March 23, 2002. The operating results are expressed in
dollar amounts as well as relevant percentages, presented as a percentage of
revenue, except for income taxes, which are presented as a percentage of
earnings before income taxes.

The operations of the Company comprise three businesses: funeral homes,
cemeteries and insurance. Additional segment information is provided in Note 10
of the Company's interim consolidated financial statements.

21

Other information for the 12 weeks ended March 22, 2003, and March 22, 2002,
is summarized in the following table.

22

12 WEEKS ENDED MARCH 22, 2003 COMPARED TO 12 WEEKS ENDED MARCH 23, 2002

Consolidated revenue for the Company of $197.7 million for the 12 weeks
ended March 22, 2003, decreased slightly by $1.9 million, or 1.0%, compared to
$199.6 million for the corresponding period in 2002, primarily as a result of a
reduction of $2.6 million related to 64 funeral and 31 cemetery locations sold
or closed since January 1, 2002, and a $1.5 million decrease in insurance
revenue, partially offset by an increase of $2.2 million from locations in
operation for all of the current fiscal year and corresponding prior year period
("Same Site"). Consolidated gross margin for the 12 weeks ended March 22, 2003,
was $34.5 million, a decline of $8.0 million, or 18.8%, from $42.5 million for
the corresponding period in 2002. As a percentage of consolidated revenue,
consolidated gross margin of the Company similarly declined from 21.3% to 17.5%.
The percentage decrease in consolidated gross margin is primarily attributed to
increases in Same Site funeral and cemetery costs.

Funeral revenue for the Company of $131.0 million for the 12 weeks ended
March 22, 2003, decreased slightly by $0.9 million, or 0.7%, compared to
$131.9 million for the corresponding period in 2002. The increase in Same Site
funeral revenue of $1.0 million, or 0.8%, was offset by a decrease of
$1.9 million of funeral revenue related to the 64 funeral locations sold or
closed since January 1, 2002. The increase of $130, or 3.6%, in Same Site
average revenue per funeral service performed, partially offset by a decrease of
956, or 2.6%, of the number of Same Site funeral services performed, contributed
to the increase in Same Site funeral revenue.

Funeral costs for the 12 weeks ended March 22, 2003, increased by
$5.4 million for the 12 weeks ended March 22, 2003, compared to the
corresponding period in 2002, primarily as a result of an increase of
$8.1 million for Same Site funeral costs, which was offset by a reduction of
$2.7 million related to the 64 funeral locations sold or closed since
January 1, 2002. The increase in Same Site funeral costs was primarily due to
higher insurance and benefit costs and earlier payment of property taxes during
the 12 weeks ended March 22, 2003, than in the corresponding period in 2002.

Funeral gross margin as a percentage of revenue declined to 22.2% for the 12
weeks ended March 22, 2003, compared to 26.8% for the corresponding period in
2002. Similarly, for Same Site funeral operations, funeral gross margin as a
percentage of revenue declined to 22.2% for the 12 weeks ended March 22, 2003,
compared to 27.8% for the corresponding period in 2002, primarily due to the
increase in funeral Same Site costs discussed above.

Pre-need funeral contracts written by the Company for the 12 weeks ended
March 22, 2003, were $40.6 million, compared to $38.7 million for the
corresponding period in 2002. The increase in pre-need funeral contracts written
of $1.9 million was primarily related to an increase of $2.1 million in Same
Site funeral operations, due to the Company's continuing efforts to increase
pre-need sales, offset by a decrease of $0.2 million related to the 64 funeral
locations sold or closed since January 1, 2002. For the 12 weeks ended
March 22, 2003, 25% of funeral volume was derived from backlog, compared to 28%
from the corresponding period in 2002.

Cemetery revenue for the Company of $39.7 million for the 12 weeks ended
March 22, 2003, was $0.5 million, or 1.1%, higher than cemetery revenue for the
corresponding period in 2002, primarily due to an increase of $1.2 million of
revenue from Same Site cemetery operations, partially offset by a decrease of
$0.7 million related to the 31 cemetery locations sold or closed since
January 1, 2002. The increase in Same Site cemetery revenue was primarily due to
higher at-need and pre-need revenue, partially offset by lower finance income
from customer pre-need receivables.

Cemetery costs for the 12 weeks ended March 22, 2003, increased by
$1.4 million, or 4.0%, for the 12 weeks ended March 22, 2003, compared to the
corresponding period in 2002, primarily as a result of an increase of
$2.5 million for Same Site cemetery costs, which was partially offset by a
reduction of $1.1 million related to the 31 cemetery locations sold or closed
since January 1, 2002. Higher Same Site costs were primarily due to higher
insurance and benefit costs, utilities, and maintenance costs.

23

Cemetery gross margin as a percentage of revenue declined to 5.9% for the 12
weeks ended March 22, 2003, compared to 8.5% for the corresponding period in
2002, primarily due to the increase in cemetery Same Site costs discussed above.

Pre-need cemetery contracts written by the Company during the 12 weeks ended
March 22, 2003, were $18.2 million, $0.8 million lower than the corresponding
period in 2002. Although Same Site cemetery pre-need contracts written increased
by $4.2 million, this amount was more than offset by a decrease of $5.0 million
related to the 31 cemetery locations sold since January 1, 2002. For the 12
weeks ended March 22, 2003, 80% of interments were at-need and 20% were pre-need
fulfillments.

Insurance revenue for the Company for the 12 weeks ended March 22, 2003,
decreased $1.5 million, or 5.3%, compared to the corresponding period in 2002,
primarily due to lower premiums and investment income. Insurance costs decreased
by $0.8 million for the 12 weeks ended March 22, 2003, compared to the
corresponding period in 2002. The decrease in insurance policy benefit reserve
change and commission costs was offset by increases in benefit claims and other
net operating costs. As a result of lower revenue, overall insurance gross
margin for the Company for the 12 weeks ended March 22, 2003, decreased to
11.5%, compared to 13.5% for the corresponding period in 2002.

General and administrative expenses for the Company for the 12 weeks ended
March 22, 2003, were $7.2 million, or 3.7% of consolidated revenue,
substantially lower than the $11.3 million, or 5.7% of consolidated revenue for
the comparable period in 2002. General and administrative expenses were reduced
primarily by a $5.0 million decrease in accrued legal expenses as a result of a
legal claim settlement.

During the 12 weeks ended March 22, 2003, the Company identified four
additional funeral homes and 15 additional cemeteries, as held for sale, but not
sold as at March 22, 2003, as they do not meet the Company's future geographic
and strategic objectives. The carrying amount of these four funeral homes and 15
cemeteries was approximately $15.2 million, and the fair market value, less
estimated costs to sell, was $7.0 million. The fair market value was determined
by specific offer or bid, or an estimate based on comparable recent sales
transactions. As a result, a pre-tax long-lived asset impairment provision of
$8.2 million was recorded during the 12 weeks ended March 22, 2003. In addition,
during the 12 weeks ended March 22, 2003, an additional pre-tax long-lived asset
impairment provision of $1.3 million was recorded for funeral homes and
cemeteries previously identified as held for sale. This additional impairment
provision resulted from changes in previously estimated proceeds, net asset
values and closing costs.

Interest expense for the Company on long-term debt for the 12 weeks ended
March 22, 2003, was $18.9 million, a decrease of $2.0 million compared to the
comparable period in 2002, primarily reflecting the effect of debt repayments
made by the Company during the 52 weeks ended December 28, 2002, and during the
12 weeks ended March 22, 2003.

Income tax benefit for the 12 weeks ended March 22, 2003, was $8.1 million
compared to $3.7 million of income tax for the comparable period in 2002. The
Company's effective tax rate for the 12 weeks ended March 22, 2003, varied from
the statutory tax rate, primarily because the Company received notification in
April 2003, that the Congressional Joint Committee on Taxation ("Joint
Committee") completed its consideration of the conclusions reached by the
Internal Revenue Service in connection with the audit of the predecessor's 1993
through 1998 federal income tax returns, and that the Joint Committee took no
exception to those conclusions. Accordingly, the Company recognized a
$9.7 million tax benefit for the 12 weeks ended March 22, 2003, and expects to
receive the tax refund during the second quarter of 2003. Future income and
losses 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
liability for deferred income taxes recorded on its balance sheet at March 22,
2003. If this occurs, any resulting increase in the valuation allowance would
generally be treated as an additional income tax expense in the period in which
it arises, while any resulting decrease reflecting realization of the benefits
of tax assets that had a corresponding

24

valuation allowance established on January 2, 2002, would be treated as a
reduction of goodwill established on January 2, 2002, with any excess over the
value assigned to such goodwill recognized as a capital transaction.

The Company's increase in cash and cash equivalents of $12.1 million from
December 28, 2002, to March 22, 2003, is primarily due to operating cash flow of
$28.9 million for the 12 weeks ended March 22, 2003, partially offset by
$11.5 million of debt repayments, including the $10.0 million mandatory
redemption of the 11% Senior secured notes, due in 2007, made in January 2003.
In addition, the Company had net proceeds on asset sales of $3.6 million,
purchases of property and equipment of $3.8 million and net insurance asset
purchases of $5.1 million.

At December 31, 2001, the Company had accrued $57.1 million of
reorganization costs related to costs incurred during the predecessor company's
reorganization, as well as costs incurred in connection with the actual
emergence and various activities related thereto. Of this amount, the Company
has paid or adjusted accruals of $34.3 million. Although the Company expected to
pay the $57.1 million during 2002, delays experienced in the completion of the
reorganization process has resulted in a remaining balance of $22.8 million at
March 22, 2003. Though emergence occurred on January 2, 2002, it is the
Company's continuing responsibility to resolve allowed amounts for unresolved
claims. The unresolved claims relate to the allocation of payments approved by
the United States Bankruptcy Court for the District of Delaware and do not
impact the Company's obligations under the settlement process. Although actual
payments were set aside at emergence, the continuing costs, primarily legal
fees, legal reorganization costs and adversary proceeding costs, continue to be
incurred to complete the remaining reorganization procedures. The Company
expects to pay the remainder during fiscal year 2003. A reconciliation of
changes in the reorganization accrual is included in Note 9 to the interim
consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

INTRODUCTION

For information regarding debt securities, see Item 7. "-- Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's Annual Report on Form 10-K for the 52 weeks ended December 28, 2002,
as filed with the SEC. There have been no material changes to the disclosure on
debt securities made in such Form 10-K, except as described below.

As of March 22, 2003, the Company's borrowing base was approximately
$69.0 million under its primary credit facility (the "Credit Facility"), less
approximately $12.8 million in outstanding letters of credit. On April 1, 2003,
the Company drew $30.0 million from the Credit Facility to repay the amount
outstanding under and terminate the bank credit agreement of its subsidiary,
Rose Hills Company. On April 8, 2003, the Company repaid $10.0 million of the
Credit Facility and on April 28, 2003, repaid the remaining balance
of $20.0 million.

The Credit Facility, 11% Senior secured notes due in 2007 (the "Five-Year
Secured Notes"), 12.25% Senior unsecured notes due in 2009 (the "Seven-Year
Unsecured Notes") and 12.25% Convertible subordinated notes due in 2012 (the
"Convertible Subordinated Notes"), are guaranteed by substantially all of the
Company's wholly-owned U.S. subsidiaries, other than the Company's insurance
subsidiaries and certain other excluded subsidiaries. Alderwoods Group, Inc.,
the parent company, has no independent assets or operations, and the guarantees
of its guarantor subsidiaries are full and unconditional, and joint and several.

On January 2, 2003, the Company completed a mandatory redemption of
$10.0 million in principal amount, plus accrued interest, of the Five-Year
Secured Notes.

Although the Company will continue to be substantially leveraged, the
Company believes that the Credit Facility, together with existing cash and cash
flow from operations, will be sufficient to meet the

25

Company's anticipated capital expenditures and working capital requirements
through at least January 3, 2004, including payment obligations under the
indebtedness described above.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table details the Company's amounts of payments due under
various contractual obligations with terms greater than one year as of
March 22, 2003.

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

(a) Long-term debt excludes unamortized premium and discount. Long-term debt and
promissory notes and capitalized obligations are included in long-term debt
in Note 5 to the Company's interim consolidated financial statements.

(b) Promissory notes and capitalized obligations include non-competition
agreements and capitalized lease obligations.

(c) Operating leases are primarily for premises and automobiles, and expire over
the next one to 23 years.

In addition to the operating leases noted in the table above, as at
March 22, 2003, the Company leased approximately 1,200 vehicles under a master
operating lease agreement, which has a minimum lease term of 12 months. The
Company's practice is to continue these leases on a month-to-month basis after
the expiry of the minimum lease term. Lease payments for these vehicles are
projected to be $8.0 million over the next 12 months.

The following table details the Company's amounts of commercial commitments
as of March 22, 2003.

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

(a) Relates to the Company's Credit Facility, which has a borrowing base of
$69.0 million at March 22, 2003, less outstanding letters of credit and a
Rose Hills Company secured revolving credit facility of $10.0 million,
described more fully in Note 5 to the interim consolidated financial
statements. Except for outstanding letters of credit described in
(b) below, there were no outstanding balances under the Credit Facility as
of April 28, 2003. On November 14, 2002, the expiry date of the Credit
Facility was extended to January 2, 2004, and on February 14, 2003, the
expiry date was further extended to April 30, 2004. The Rose Hills Company
secured revolving credit facility expired on April 1, 2003, and was
not renewed.

26

(b) Standby letters of credit primarily relate to a court ordered legal claim,
surety bonds for various pre-need sales trusting requirements and security
for certain automobile operating leases and cash management services.

OTHER INFORMATION

The Company's earnings before interest, taxes, depreciation and
amortization, and provision for asset impairment ("EBITDA") for the 12 weeks
ended March 22, 2003, and March 23, 2002, are presented in the table below and
reconciled to the Company's earnings from operations. EBITDA is presented,
because it is a widely accepted financial indicator of a company's ability to
incur and service debt and it is the basis on which compliance with the
financial covenants under the Company's debt agreements is determined. EBITDA is
not a term that has specific meaning in accordance with GAAP and may be
calculated differently by other companies. EBITDA should not be considered in
isolation, as a substitute for earnings from operations or cash flow data
calculated in accordance with GAAP, or as a measure of a company's profitability
or liquidity.

DISPOSITIONS

During the 12 weeks ended March 22, 2003, the Company closed five funeral
homes. At March 22, 2003, the Company had eight funeral homes and 20 cemeteries
under signed agreements for sale, with net assets and expected proceeds of
approximately $2.7 million.

RESTRICTIONS

The Credit Facility and the indentures governing the Five-Year Secured
Notes, the Seven-Year Unsecured Notes and the Convertible Subordinated Notes
prohibit the Company from consummating certain asset sales unless
(a) consideration at least equal to fair market value is received and
(b) except with respect to specified assets, not less than 75% of the
consideration for the asset sale is paid in cash or cash equivalents. Within
270 days of the receipt of net proceeds from any such asset sale, the Company
will be obligated to apply such net proceeds at its option (or as otherwise
required) as follows: (a) to pay the Credit Facility and permanently reduce
commitments with respect thereto, or (b) to make capital expenditures or
acquisitions of other assets in the same line of business as the Company or
certain of its subsidiaries or businesses related thereto. To the extent the
Company receives net proceeds from any such asset sale not applied in accordance
with the immediately preceding sentence in excess of certain thresholds, the
Company must offer to purchase Five-Year Secured Notes, Seven-Year Unsecured
Notes or Convertible Subordinated Notes (in that order) with such excess
proceeds.

The Company's insurance subsidiaries are subject to certain state
regulations that restrict distributions, loans and advances from such
subsidiaries to the Company and its other subsidiaries. The cash flow from
operations of the insurance subsidiaries for the 12 weeks ended March 22, 2003,
was approximately $5.2 million.

The Company is not expecting to pay any dividends on the Common stock in the
foreseeable future. In addition, covenants in the respective indentures
governing the Five-Year Secured Notes, the Seven-Year

27

Unsecured Notes and the Convertible Subordinated Notes and in the Credit
Facility restrict the Company's ability to pay dividends and may prohibit the
payment of dividends and certain other payments.

RECENT ACCOUNTING STANDARDS

See Note 2 to the Company's interim consolidated financial statements
included in Item 1.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information regarding the Company's exposure to certain market risks,
see Item 7A
"-- Quantitative and Qualitative Disclosures About Market Risk" in the Company's
Annual Report on Form 10-K for the 52 weeks ended December 28, 2002, as filed
with the SEC. As of March 22, 2003, there were no material changes in such
matters disclosed in the Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains a set of disclosure controls and procedures designed
to ensure that information required to be disclosed by the Company in reports
that it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time period specified in SEC rules
and forms. Within the 90-day period prior to the filing of this report, an
evaluation was carried out, under the supervision and with the participation of
the Company's management, including the Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO"), of the effectiveness of the Company's
disclosure controls and procedures. Based on that evaluation, the CEO and CFO
have concluded that the Company's disclosure controls and procedures are
effective.

Subsequent to the date of their evaluation, there have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect these controls.

28

PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For information regarding the Company's legal proceedings, see Note 7 to the
Company's interim consolidated financial statements included in Part I of this
Quarterly Report on Form 10-Q, which Note 7 is incorporated herein by reference.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

In accordance with the Fourth Amended Joint Plan of Reorganization of Loewen
Group International, Inc., its Parent Corporation and certain of their Debtor
Subsidiaries, as modified (the "Plan"), the Company issued in respect of holders
of certain unsecured claims 21,140 shares of Common Stock on January 31, 2003.

Section 1145(a)(1) of Chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code") exempts the offer and sale of securities under a plan of
reorganization from registration under the Securities Act of 1933 (the
"Securities Act") and state securities laws if three principal requirements are
satisfied: (a) the securities must be offered and sold under a plan of
reorganization and must be securities of the debtor, an affiliate participating
in a joint plan with the debtor or a successor to the debtor under the plan;
(b) the recipients of the securities must hold a pre-petition or administrative
expense claim against the debtor or an interest in the debtor; and (c) the
securities must be issued entirely in exchange for the recipient's claim against
or interest in the debtor, or principally in such exchange and partly for cash
or property. Alderwoods Group believes that the offer and sale of the Common
Stock under the Plan satisfies the requirements of section 1145(a)(1) of the
Bankruptcy Code and, therefore, are exempt from registration under the
Securities Act and state securities laws.

ITEM 5. OTHER INFORMATION

On May 1, 2003, John Lacey, Chairman of the Board, and Paul Houston,
President and Chief Executive Officer, of the Company entered into Amended and
Restated Employment Agreements, which extended the term of their employment with
the Company to December 31, 2005.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q,
including, but not limited to, information regarding the status and progress of
the Company's operating activities, the plans and objectives of the Company's
management, assumptions regarding the Company's future performance and plans,
and any financial guidance provided, as well as certain information in other
filings with the SEC and elsewhere are forward-looking statements within the
meaning of Section 27A(i) of the Securities Act of 1933 and Section 21E(i) of
the Securities and Exchange Act of 1934. The words "believe," "may," "will,"
"estimate," "continues," "anticipate," "intend," "expect" and similar
expressions identify these forward-looking statements. These forward-looking
statements are made subject to certain risks and uncertainties that could cause
actual results to differ materially from those stated, including the following:
uncertainties associated with future revenue and revenue growth; the impact of
the Company's significant leverage on its operating plans; the ability of the
Company to service its debt; outcomes in pending legal and tax claims; the
Company's ability to attract, train and retain an adequate number of sales
people; the impact of changes to federal, state and local laws and regulations
affecting revenues from trust funds; uncertainties associated with the volume
and timing of pre-need sales of funeral and cemetery services and products;
variances in death rates; variances in the use of cremation; the impact of
environmental laws; future tax rates; and various other uncertainties associated
with the funeral service industry and the

29

Company's operations in particular which are referred to in the Company's
periodic reports filed with the SEC. The Company undertakes no obligation to
publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

RISK FACTORS

In addition to other information in this Quarterly Report on Form 10-Q, the
following important factors, among others, could cause future results to differ
materially from estimates, predictions or projections.

FUTURE REVENUES ARE UNCERTAIN

1. VOLUME, MIX AND MARGINS ARE UNCERTAIN. Revenue is significantly
affected by the volume of services rendered and the mix and pricing of services
and products sold. Cemetery revenues are also significantly affected by the
fulfillment of previously sold pre-need cemetery contracts and the writing of
pre-need cemetery contracts for interment rights. Margins are affected by
changes in revenue, their related costs and the level of fixed costs in
operating our funeral homes and cemeteries. Further, revenue and margins may be
affected by competitive pricing strategies.

2. NUMBER OF PRE-NEED CONTRACTS WRITTEN IS DEPENDENT UPON AN ADEQUATE
SALESFORCE. The level of pre-need contracts written is dependent upon
maintaining an adequate salesforce. Accordingly, the future success of the
Company is dependent upon the Company's ability to attract, train and retain an
adequate number of salespeople.

3. TRUST INCOME IS SUBJECT TO MARKET CONDITIONS. Cemetery revenue is
impacted by the trust income on perpetual care trust funds which is recognized
when the trust income is earned. Trust income on funeral and cemetery
merchandise and service trust funds is deferred and revenue is recognized when
the underlying merchandise and service obligations are fulfilled. The level of
trust income is largely dependent on yields available in connection with the
investment of the balances held in such trust funds. Available yields may be
subject to significant fluctuations in response to conditions in the economy in
general.

4. THE DEATH RATE MAY DECREASE. The death rate in the United States is
estimated to have declined by approximately 1% in 1997 and approximately 2% in
1998, reversing a trend of an approximate 1% increase per year since 1980.
However, for the combined two-year period from 1998 to 2000, the death rate is
estimated to have declined by less than 1%. Industry studies indicate that the
average age of the population is increasing. The financial results of the
Company may be affected by any decline in the death rate.

5. THE RATE OF CREMATION IS INCREASING. There is an increasing trend in
the United States toward cremation. According to the latest industry studies
available, cremations represented approximately 27% of the burials performed in
the United States in 2001, as compared with approximately 10% in 1980, and this
percentage increased by approximately 1% annually from 1997 to 2001. Compared to
traditional funeral services, cremations have historically generated similar
gross profit percentages but lower revenues. A substantial increase in the rate
of cremations performed by the Company could have a material adverse effect on
the results of operations of the Company.

6. DISPOSITIONS MAY ADVERSELY AFFECT REVENUES. Revenue is affected by the
level of dispositions, which may or may not be significant.

THE COMPANY HAS SUBSTANTIAL DEBT

1. SUBSTANTIAL LEVERAGE WILL CONTINUE. The Company's total carrying value
of long-term indebtedness (including the current portion thereof) is
$748.2 million as of March 22, 2003. While the Company believes that future
operating cash flow, together with financing arrangements, will be sufficient

30

to finance operating requirements under the Company's business plan, the
Company's leverage and debt service requirements could make it more vulnerable
to economic downturns in the markets the Company intends to serve or in the
economy generally. The Company's indebtedness could restrict its ability to
obtain additional financing in the future and, because the Company may be more
leveraged than certain of its competitors, could place the Company at a
competitive disadvantage.

2. DEBT INSTRUMENTS CONTAIN RESTRICTIVE COVENANTS THAT MAY LIMIT LIQUIDITY
AND CORPORATE ACTIVITIES. The Credit Facility and the indentures governing the
Five-Year Secured Notes, the Seven-Year Unsecured Notes, the Convertible
Subordinated Notes and the 9.5% Senior subordinated notes due in 2004 contain
covenants that impose operating and financial restrictions on the Company. For
example, these covenants restrict the ability of Alderwoods Group, and most of
its subsidiaries, to incur additional indebtedness, prepay indebtedness, allow
liens on assets, sell stock or other assets without using proceeds thereof to
reduce the indebtedness of the Company, engage in mergers or acquisitions, make
investments or pay dividends or distributions (other than to Alderwoods Group or
certain of its subsidiaries). These covenants could prohibit the Company from
making acquisitions and adversely affect the Company's ability to finance future
operations by limiting the incurrence of additional indebtedness or requiring
equity issuance proceeds to be applied to reduce indebtedness. In addition, the
Company is required to achieve specified earnings to fixed charges ratios and
specified levels of tangible net worth. Adverse operating results could cause
the Company to be unable to achieve these financial ratios and tests, in which
event, unless the Company were able to obtain appropriate waivers with respect
to non-compliance, certain of the Company's long-term debt would be in default
and the holders thereof could accelerate the maturities of such debt.

3. SUBSIDIARY STOCK IS SUBJECT TO SECURITY INTERESTS. The capital stock of
subsidiaries directly owned by Alderwoods Group or a subsidiary guarantor of the
Credit Facility is subject to various liens and security interests, subject to
percentage limitations in the case of foreign subsidiaries. If a holder of a
security interest becomes entitled to exercise its rights as a secured party, it
would have the right to foreclose upon and sell or otherwise transfer the
collateral subject to its security interest, and the collateral accordingly
would be unavailable to Alderwoods Group or the subsidiary owning the
collateral, except to the extent, if any, that the value of the affected
collateral exceeds the amount of indebtedness in respect of which such
foreclosure rights are exercised.

4. THE SECURITY FOR THE FIVE-YEAR SECURED NOTES MAY NOT BE SUFFICIENT TO
SECURE PAYMENTS. The Company's obligations under the Five-Year Secured Notes
Indenture is secured by collateral which consists of (i) substantially all
personal property (other than capital stock) and (ii) the material funeral home
real property assets pledged under the Credit Facility of the Company and
certain of its wholly owned subsidiaries. The rights of the holders of the
Five-Year Notes to this collateral will be subordinate to those of the lenders
under the Credit Facility. The proceeds from the sale of this collateral may not
be sufficient to satisfy amounts due on the Five-Year Secured Notes.

If, upon a foreclosure on the collateral, the proceeds from the sale of such
collateral is insufficient to satisfy the entire amount due on the Five-Year
Secured Notes, the claim by the holders of the Five-Year Secured Notes against
the Company for this deficiency would rank equally with the claims of the other
general, unsubordinated creditors of the Company. The remaining assets of the
Company may not be sufficient to satisfy this deficiency.

5. CERTAIN DEBT IS EFFECTIVELY SUBORDINATED TO OBLIGATIONS OF
SUBSIDIARIES. Alderwoods Group principally is a holding company, and therefore
its right to participate in any distribution of assets of any subsidiary upon
that subsidiary's dissolution, winding-up, liquidation or reorganization or
otherwise is subject to the prior claims of creditors of that subsidiary, except
to the extent that Alderwoods Group may be a creditor of that subsidiary and its
claims are recognized. There are various legal limitations on the extent to
which some of the subsidiaries of Alderwoods Group may extend credit, pay
dividends or otherwise supply funds to, or engage in transactions with,
Alderwoods Group or its other subsidiaries. The

31

Five-Year Secured Notes, the Seven-Year Unsecured Notes and the Convertible
Subordinated Notes are effectively subordinated to all indebtedness and other
obligations of the subsidiaries except to the extent that those subsidiaries
have guaranteed that obligations of Alderwoods Group to pay amounts due on the
Five-Year Secured Notes, the Seven-Year Unsecured Notes or the Convertible
Subordinated Notes, as applicable.

THE TAX RATE IS UNCERTAIN

EFFECTIVE INCOME TAX RATE MAY VARY. The Company expects that its effective
income tax rate for 2003 and beyond may vary significantly from the statutory
tax rate because (i) income tax benefits may be offset by an increase in the
valuation allowance due to the uncertainty regarding the ability to utilize the
benefits in the future, (ii) the losses incurred in certain jurisdictions may
not offset the tax expense in profitable jurisdictions, (iii) there are
differences between foreign and United States income tax rates, and (iv) many
tax years are subject to audit by different tax jurisdictions.

CAPITAL STOCK: DIVIDENDS NOT ANTICIPATED; ANTI-TAKEOVER EFFECTS

1. VOLATILITY IS POSSIBLE. In January 2002, the Company's Common Stock and
Warrants commenced trading on The NASDAQ Stock Market, Inc. Due to the limited
trading history of the Company's Common Stock and Warrants, there can be no
assurance as to the degree of price volatility in the market for the Common
Stock and Warrants. The market price of the Common Stock and Warrants may be
subject to significant fluctuations in response to numerous factors, including
variations in the Company's annual or quarterly financial results or those of
its competitors, changes by financial analysts in their estimates of the future
earnings of the Company, conditions in the economy in general or in the funeral
industry in particular or unfavorable publicity. Additionally, there can be no
assurance that the market value of the Common Stock will exceed the exercise
price of the Warrants at any time prior to their expiration.

2. DIVIDENDS ARE NOT ANTICIPATED; PAYMENT OF DIVIDENDS IS SUBJECT TO
RESTRICTION. Alderwoods Group is not expecting to pay any dividends on the
Common Stock in the foreseeable future. In addition, covenants in the respective
indentures governing the Five-Year Secured Notes, the Seven-Year Unsecured Notes
and the Convertible Subordinated Notes and in the Credit Facility restrict the
ability of Alderwoods Group to pay dividends and may prohibit the payment of
dividends and certain other payments. Certain institutional investors may only
invest in dividend-paying equity securities or may operate under other
restrictions that may prohibit or limit their ability to invest in the Common
Stock.

3. CERTAIN PROVISIONS IN OUR CHARTER DOCUMENTS AND RIGHTS PLAN HAVE
ANTI-TAKEOVER EFFECTS. Certain provisions of the certificate of incorporation
and bylaws, of Alderwoods Group, as well as the General Corporation Law of the
State of Delaware, may have the effect of delaying, deferring or preventing a
change in control of Alderwoods Group. Such provisions, including those
providing for the possible issuance of preferred stock of Alderwoods Group
without stockholder approval, regulating the nomination of directors and
eliminating stockholder action by written consent may make it more difficult for
other persons, without the approval of the Board of Directors (the "Board of
Alderwoods Group"), to make a tender offer or otherwise acquire substantial
amounts of the Common Stock or to launch other takeover attempts that a
stockholder might consider to be in such stockholder's best interest.
Additionally, the Company's short-term stockholder rights plan, which was
adopted by the Board of Alderwoods Group on March 6, 2002, and became effective
on March 26, 2002, may also delay, defer or prevent a change of control of
Alderwoods Group. Under the rights plan, each outstanding share of Common Stock
has one right attached that trades with the Common Stock. Absent prior action by
the Board of Alderwoods Group to redeem the rights or amend the rights plan,
upon the consummation of certain acquisition transactions, the rights would
entitle the holder thereof (other than the acquiror) to purchase shares of
Common Stock at a discounted price in a manner designed to result in substantial
dilution to the acquiror. The

32

shareholders rights plan will expire in September 2003, and there is presently
no extension or renewal contemplated by the Company.

OTHER RISK FACTORS

1. FEDERAL, STATE AND LOCAL REGULATIONS MAY CHANGE TO THE DETRIMENT OF
ALDERWOODS GROUP. The Company's operations are subject to regulation,
supervision and licensing under numerous federal, state and local laws,
ordinances and regulations, including extensive regulations concerning trust
funds, pre-need sales of funeral and cemetery products and services,
environmental matters and various other aspects of the business. The impact of
such regulations varies depending on the location of funeral homes and
cemeteries. From time to time, states and regulatory agencies have considered
and may enact additional legislation or regulations that could affect the
Company. For example, additional legislation or regulations requiring more
liberal refund and cancellation policies for pre-need sales of products and
services or prohibiting door-to-door or telephone solicitation of potential
customers could adversely impact sales, resulting in lower gross revenues.
Similarly, additional legislation or regulations increasing trust requirements
could reduce the amount of cash available to the Company for other purposes.
Additional legislation or regulations prohibiting the common ownership of
funeral homes and cemeteries in the same market could adversely impact both
sales and costs and expenses in the affected markets. If adopted in the states
in which the Company operates, additional legislation or regulations such as
these could have a material adverse effect on the results of operations of the
Company.

2. ALDERWOODS GROUP PRINCIPALLY IS A HOLDING COMPANY. Alderwoods Group
principally is a holding company, and therefore its right to participate in any
distribution of assets of any subsidiary upon that subsidiary's dissolution,
winding-up, liquidation or reorganization or otherwise is subject to the prior
claims of creditors of that subsidiary, except to the extent that Alderwoods
Group may be a creditor of that subsidiary and its claims are recognized. There
are various legal limitations on the extent to which some of the subsidiaries of
Alderwoods Group may extend credit, pay dividends or otherwise supply funds to,
or engage in transactions with, Alderwoods Group or its other subsidiaries.

3. OUTCOME OF THE NORTH AMERICAN FREE TRADE AGREEMENT ("NAFTA") CLAIMS IS
IMPOSSIBLE TO PREDICT. In October 1998, prior to reorganization proceedings,
The Loewen Group Inc. (the "Predecessor") filed an arbitration matter ICSID Case
No. ARB(AF)/98/3 (the "NAFTA Claims") against the government of the United
States seeking damages under the arbitration provisions of NAFTA. Pursuant to
the Plan, the Predecessor, through a series of transactions, transferred to the
Company all of its assets, excluding legal title to the NAFTA Claims, and
transferred to the Company the right to any and all proceeds from the NAFTA
Claims. In addition, pursuant to the Plan, an undivided 25% interest in the
proceeds, if any, of the NAFTA Claims as such proceeds may be adjusted as a
result of the arbitration contemplated by the letter agreement between the
Predecessor and Raymond L. Loewen, dated May 27, 1999 (the "NAFTA Arbitration
Agreement"), less (a) any amounts payable under paragraph 3 of the NAFTA
Arbitration Agreement and (b) any amounts payable pursuant to the contingency
fee letter agreement between Jones, Day, Reavis & Pogue and the Predecessor,
dated July 25, 2000, was transferred to a liquidating trust. Although the
Company believes that these actions should not affect the NAFTA Claims, the
government of the United States, respondent in the NAFTA proceeding, has
asserted that these actions have divested the Arbitration Tribunal of
jurisdiction over some or all of the claims. The Company does not believe that
it is possible at this time to predict the final outcome of this proceeding or
to establish a reasonable estimate of the damages, if any, that may be awarded,
or the proceeds, if any, that may be received in respect of the NAFTA Claims.

WEB SITE ACCESS TO PERIODIC AND CURRENT REPORTS

The Company makes its periodic and current reports available, free of
charge, through its web site at http://www.alderwoods.com as soon as reasonably
practicable after such material is electronically filed with, or is furnished
to, the SEC.

33

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

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

* Indicates management contract or compensatory plan or arrangement.

** Filed herewith.

(B) REPORTS ON FORM 8-K

The following Current Report on Form 8-K was filed by Alderwoods Group
during the 12 weeks ended March 22, 2003:

38

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

ALDERWOODS GROUP, INC.

By: /s/ KENNETH A. SLOAN
-----------------------------------------
Kenneth A. Sloan
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL
OFFICER (PRINCIPAL FINANCIAL OFFICER AND
Dated: May 1, 2003 CHIEF ACCOUNTING OFFICER)

39

CERTIFICATIONS

I, Paul A. Houston, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Alderwoods
Group, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

By: /s/ PAUL A. HOUSTON
-----------------------------------------
Paul A. Houston
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR
Dated: May 1, 2003 (PRINCIPAL EXECUTIVE OFFICER)

40

I, Kenneth A. Sloan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Alderwoods
Group, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

By: /s/ KENNETH A. SLOAN
-----------------------------------------
Kenneth A. Sloan
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL
OFFICER
(PRINCIPAL FINANCIAL OFFICER AND
Dated: May 1, 2003 CHIEF ACCOUNTING OFFICER)

41

EXHIBIT LIST