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 June 14, 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 July 12, 2003, there were 39,974,237 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 8)

SEE ACCOMPANYING NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1

ALDERWOODS GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

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 (UNAUDITED)

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 June 14, 2003, the Company
operated 753 funeral homes and 167 cemeteries and 61 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 June 14,
2003 and for the 12 and 24 weeks ended June 14, 2003, and June 15, 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 or 24 weeks ended June 14, 2003, and
June 15, 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. During the 12 weeks ended June 14, 2003, the
Company granted an additional 930,000 stock options, with a weighted average
exercise price of $3.65, to certain employees and members of the Company's Board
of Directors. The following table illustrates the effect on net income (loss)
and net income (loss) 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.

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)

RECENT ACCOUNTING STANDARDS

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 Company is in the process of determining the impact, if any, the
adoption of FIN 46 will have on its accounting for its receivables from funeral
and cemetery trusts, as well as other aspects of the business.

In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" (FAS No. 149). FAS No. 149 amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under Statement of Financial
Accounting Standards No. 133 ("FAS No. 133"). FAS No. 149 clarifies under what
circumstances a contract with an initial net investment meets the characteristic
of a derivative as discussed in FAS No. 133. In addition, it clarifies when a
derivative contains a financing component that warrants special reporting in the
statement of cash flows. FAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, except as specifically noted in FAS No. 149.
FAS No. 149 should be applied prospectively. At this time, the adoption of
FAS No. 149 is not expected to impact the Company's financial condition or
results of operations.

In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity" (FAS No. 150). FAS No. 150 changes the accounting
for certain financial instruments that, under previous guidance, were accounted
for as equity. FAS No. 150 affects the issuer's accounting for three types of
freestanding financial instruments: (1) mandatorily redeemable shares, which the
issuer is obligated to buy back in exchange for cash or other assets; (2) put
options and forward purchase contracts that do or may require the issuer to buy
back some of its shares in exchange for cash or other assets; and,
(3) obligations that can be settled with shares, the monetary value of which is
fixed, tied solely or predominantly to a variable such as a market index, or
varies inversely with the value of the issuer's shares. Most of the guidance in
FAS No. 150 is effective for all financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. At this time, the adoption of FAS
No. 150 is not expected to impact 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)

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.

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.

8

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

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
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.

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)
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 cost basis of the trust investments was
$262,021,000 and $266,890,000, at June 14, 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.

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 bears interest
at a rate per annum equal to the J.P. Morgan Chase & Co. prime rate
(4.25% at June 14, 2003, and 4.25% at December 28, 2002), plus 1% or, at
the Company's option, LIBOR (1.09% at June 14, 2003, and 1.4% at
December 28, 2002), plus 2.5%. A fee of 2.5% is

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 (CONTINUED)
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. The
expiry date of the Credit Facility is April 30, 2004.

As of June 14, 2003, the Company's Credit Facility borrowing
base was approximately $64,690,000 (December 28, 2002 -- $70,074,000),
less approximately $12,436,000 (December 28, 2002 -- $12,088,000) in
outstanding letters of credit.

(b) 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.

(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 Company's claims of
the Credit Facility, but not to the Company's 11.00% Senior secured notes
due in 2007 or the 12.25% Senior secured notes, due in 2009. The carrying
amount is net of an unamortized discount of $1,753,000 (December 28,
2002 -- $2,200,000).

(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 June 14, 2003, and December 28, 2002, the conversion
rate was $17.17 per share. The carrying amount includes unamortized
premium of $7,685,000 (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

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)
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 is guaranteed by substantially all of the Alderwoods
Group's wholly-owned U.S. subsidiaries, including Rose Hills. The 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, Rose Hills 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.

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. PROVISION FOR ASSET IMPAIRMENT

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.

12

ALDERWOODS GROUP, INC.

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

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

NOTE 6. PROVISION FOR ASSET IMPAIRMENT (CONTINUED)
Previously, the Company designated certain parcels of surplus real estate as
held for sale, as they do not meet the Company's future geographic and strategic
objectives. During the 12 weeks ended June 14, 2003, the Company determined that
the carrying amounts of certain parcels of the surplus real estate now exceeded
the fair market value, less estimated cost to sell. Accordingly, the Company has
recorded a long-lived asset impairment provision of $3,388,000 for the 12 and
24 weeks ended June 14, 2003.

The fair market value was determined by specific offer or bid, or an
estimate based on comparable recent sales transactions. The asset impairment
provisions include management estimates. As a result, actual results could
differ significantly from these estimates.

NOTE 7. DISCONTINUED OPERATIONS OF ASSETS HELD FOR SALE

The Company continues to assess the markets and businesses in which it
operates, and evaluate the long-term potential of each, to determine whether or
not it fits into the Company's overall business strategy. Over time, the Company
expects to market for disposal additional funeral and cemetery locations that do
not meet the strategic, long-term objectives of the Company. The Company expects
that once a property is added to the disposal list, a firm purchase commitment
will be received within one year.

During the 12 weeks ended June 14, 2003, the Company identified all 39
funeral locations in the United Kingdom for disposal, as they are not strategic
to the Company's long-term objective to focus capital and management resources
in North America. The Company also identified its life insurance operations for
disposal, which is not strategic to the Company's long-term objectives, and is
not in support of the Company's North American pre-need funeral sales efforts.

These are in addition to the 18 funeral, 59 cemetery and one combination
locations remaining from locations previously designated as probable for sale.
As a result, the Company has classified all the locations identified for
disposal as assets held for sale in the balance sheet and recorded any related
operating results, long-lived asset impairment provisions, and gains or losses
recorded on disposition as income from discontinued operations. The Company has
also restated prior periods to reflect any comparative amounts on a similar
basis, including locations sold in 2002.

Discontinued operations consists of long-lived asset impairment provisions,
gains and losses recorded on disposition, and operating results of the
locations. FAS No. 144 requires that long-lived assets to be disposed of are to
be recorded at the lower of carrying amount or fair market value, less estimated
costs to sell. The fair market value was determined by specific offer or bid, or
an estimate based on comparable recent sales transactions. Impairment provisions
on assets previously identified as held for sale resulted from changes in
previously estimated proceeds, net asset values and closing costs. The
long-lived asset impairment provisions are based on management estimates. As a
result, actual results could differ significantly from these estimates.

13

ALDERWOODS GROUP, INC.

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

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

NOTE 7. DISCONTINUED OPERATIONS OF ASSETS HELD FOR SALE (CONTINUED)
The carrying amount, the fair market value, less estimated costs to sell,
revenues and costs and impairment provisions for the locations identified as
held for sale are presented in the following tables.

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. DISCONTINUED OPERATIONS OF ASSETS HELD FOR SALE (CONTINUED)
Details of assets held for sale at June 14, 2003, are as follows:

Details of assets held for sale at December 28, 2002, are as follows:

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. 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 contended 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 alleged
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 were the subject of a proceeding before an arbitration panel (the
"Arbitration Tribunal") appointed pursuant to the rules of the International
Centre for Settlement of Investment Disputes.

In June 2003, the Arbitration Tribunal announced it had ruled in favor of
the United States of America. Previously, as this matter created a contingent
gain for the Company, and as the Company did not believe it was possible to
predict the final outcome of these proceedings or to establish a reasonable
estimate of damages, no adjustment was made to the Company's prior financial
results. Therefore, this decision has no current financial impact on the
Company.

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.

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. CHANGES IN OTHER NON-CASH BALANCES

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

17

ALDERWOODS GROUP, INC.

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

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

NOTE 10. SUPPLEMENTARY FINANCIAL INFORMATION

A summary of certain balance sheet accounts is as follows:

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. SUPPLEMENTARY FINANCIAL INFORMATION (CONTINUED)

NOTE 11. 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.

During the 12 weeks ended June 14, 2003, the Company identified additional
funeral, cemetery, combination and insurance locations for disposal. Pursuant to
FAS No. 144, the Company has classified all the Company's locations identified
for disposal as assets held for sale. The operating results of the locations
identified for disposal are reported in the discontinued operations section of
the consolidated statement of operations. Accordingly, the results from
operations included in the segment reporting below reflect only the Company's
continuing operations.

19

ALDERWOODS GROUP, INC.

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

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

NOTE 11. SEGMENT REPORTING (CONTINUED)
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.

20

ALDERWOODS GROUP, INC.

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

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

NOTE 11. 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 12. EARNINGS PER SHARE

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

Employee and director stock options to purchase 4,400,000 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.

NOTE 13. SUBSEQUENT EVENTS

(a) On June 27, 2003, the Company made an optional redemption of $30,000,000 of
its 11.00% Senior secured notes, due in 2007, for a redemption price of
$30,000,000, plus accrued interest. The Company repaid this amount by
drawing $20,000,000 from its existing Credit Facility and utilizing
$10,000,000 of cash on hand.

(b) Subsequent to June 14, 2003, the Company identified 86 funeral, 30 cemetery
and four combination locations with net assets of approximately $68,217,000,
for disposal, as they do not meet the Company's future geographic and
strategic objectives. These locations are in addition to the locations
previously identified as held for sale. The Company has not yet determined
the estimated proceeds from the expected sale of these funeral homes
and cemeteries, which are still included in continuing operations, however
they will be reclassified to discontinued operations in the third quarter.

21

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
June 14, 2003, the Company operated 753 funeral homes, 167 cemeteries and 61
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 and 24
weeks ended June 14, 2003, and June 15, 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 11
of the Company's interim consolidated financial statements.

22

12 WEEKS ENDED JUNE 14, 2003 COMPARED TO 12 WEEKS ENDED JUNE 15, 2002

Other information for the 12 weeks ended June 14, 2003, and June 15, 2002,
is summarized in the following table.

26

Other information for the 24 weeks ended June 14, 2003, and June 15, 2002,
is summarized in the following table.

DISCUSSION OF CONTINUING OPERATIONS

As there have been no material acquisitions or construction of new locations
in 2003 and 2002, results from continuing operations reflect those of "same
site" locations.

Consolidated revenue of $351.6 million for the 24 weeks ended June 14, 2003,
increased by $8.2 million, or 2.4%, compared to $343.4 million for the
corresponding period in 2002, primarily as a result of increases in cemetery and
insurance revenue, which were partially offset by decreased funeral revenue due
to 2,385 fewer funeral services performed. Consolidated gross margin for the
24 weeks ended June 14, 2003, was $65.5 million, a decline of $8.7 million, or
11.7%, from $74.2 million for the corresponding period in 2002. The percentage
decrease in gross margin is primarily attributed to increases in funeral and
cemetery costs.

Funeral revenue of $242.0 million for the 24 weeks ended June 14, 2003,
decreased by $4.2 million, or 1.7%, compared to $246.2 million for the
corresponding period in 2002, primarily as a result of the decrease of 2,385, or
3.7%, of the number of funeral services performed. The decrease in funeral
revenue was partially offset by the increase of $77, or 2.0%, in average revenue
per funeral service performed.

Funeral costs increased by $9.8 million, or 5.5% for the 24 weeks ended
June 14, 2003, compared to the corresponding period in 2002, primarily as a
result of higher insurance and benefit costs and earlier payment of property
taxes during the 24 weeks ended June 14, 2003, than in the corresponding period
in 2002.

Funeral gross margin as a percentage of revenue declined to 22.3% for the
24 weeks ended June 14, 2003, compared to 27.6% for the corresponding period in
2002. The decline was due to the decrease in funeral revenue and the increase in
funeral costs discussed above.

Pre-need funeral contracts for the 24 weeks ended June 14, 2003, were
$77.7 million, compared to $76.4 million for the corresponding period in 2002.
The increase in pre-need funeral contracts written of $1.3 million was primarily
due to the Company's continuing efforts to increase pre-need sales. For the
24 weeks ended June 14, 2003, 25% of funeral volume was derived from backlog,
compared to 29% from the corresponding period in 2002.

Cemetery revenue of $79.2 million for the 24 weeks ended June 14, 2003, was
$9.6 million, or 13.8%, higher than cemetery revenue for the corresponding
period in 2002, primarily due to higher at-need and pre-need revenue, and a
one-time $3.9 million reversal of accrued perpetual care liabilities.

27

Cemetery costs for the 24 weeks ended June 14, 2003, increased by
$5.0 million, or 7.8%, compared to the corresponding period in 2002, primarily
as a result of higher insurance and benefit costs, cost of goods sold and
selling expenses.

Cemetery gross margin as a percentage of revenue increased to 13.1% for the
24 weeks ended June 14, 2003, compared to 8.3% for the corresponding period in
2002, due to the increase in cemetery revenue more than offsetting the increase
in cemetery costs, discussed above.

Pre-need cemetery contracts during the 24 weeks ended June 14, 2003, were
$39.7 million, $3.6 million higher than the corresponding period in 2002. For
the 24 weeks ended June 14, 2003, 80% of interments were at-need and 20% were
pre-need fulfillments.

Insurance revenue for the 24 weeks ended June 14, 2003, increased
$2.8 million, or 10.4%, compared to the corresponding period in 2002, primarily
due to higher premiums and investment income. Insurance costs increased by
$2.1 million for the 24 weeks ended June 14, 2003, compared to the corresponding
period in 2002. The increase in benefit claims and other net operating costs was
partially offset by a decrease in insurance policy benefit reserve change and
commission costs. As a result of the revenue increase being at a rate higher
than that of the cost increase, overall insurance gross margin for the 24 weeks
ended June 14, 2003, increased to 3.6%, compared to 1.3% for the corresponding
period in 2002.

General and administrative expenses for the Company for the 24 weeks ended
June 14, 2003, were $19.1 million, or 5.4% of consolidated revenue,
substantially lower than the $23.5 million, or 6.8% of consolidated revenue for
the comparable period in 2002. During 2003, general and administrative expenses
were reduced by a $5.0 million decrease in accrued legal expenses as a result of
a legal claim settlement.

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. Although the Company had
expected to pay out the $57.1 million during 2002, delays experienced in the
completion of the reorganization process resulted in a remaining balance of
$26.3 million at December 28, 2002. The Company has paid or adjusted accruals of
$4.5 million for the 24 weeks ended June 14, 2003, leaving a total accrual of
$21.8 million at June 14, 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
expected payments were accrued at emergence, the continuing expenditures,
primarily legal fees, legal reorganization costs and adversary proceeding costs,
continue to be paid and charged against the accrual to complete the remaining
reorganization procedures. The Company expects to pay the remainder during
fiscal year 2003. A reconciliation of changes in the reorganization cost accrual
is included in Note 10 to the interim consolidated financial statements.

Previously, the Company designated certain parcels of surplus real estate as
probable for sale, as they do not meet the Company's future geographic and
strategic objectives. During the 24 weeks ended June 14, 2003, the Company
determined that the carrying amounts of certain parcels of the surplus real
estate now exceeded the fair market value, less estimated costs to sell.
Accordingly, the Company has recorded a long-lived asset impairment provision of
$3.4 million for the 24 weeks ended June 14, 2003.

Interest expense on long-term debt for the 24 weeks ended June 14, 2003, was
$37.3 million, a decrease of $3.8 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 24 weeks ended
June 14, 2003.

Income tax benefit for the 24 weeks ended June 14, 2003, was $7.9 million
compared to $3.0 million of income tax expense for the comparable period in
2002. The Company's effective tax rate for the 24 weeks ended June 14, 2003,
varied from the statutory tax rate, primarily because the Company received

28

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 24 weeks ended June 14, 2003, and expects to
receive the tax refund during 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 June 14, 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 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.

DISCUSSION OF DISCONTINUED OPERATIONS

Throughout the reorganization process, the Company engaged in a strategic
market rationalization assessment to dispose of cemetery and funeral operating
locations that did not fit into the Company's market or business strategies, as
well as under-performing locations and excess cemetery land. This program
continued during 2003. The Company continues to assess the markets in which it
operates, and evaluate the long-term potential of each, to determine whether or
not it fits into the Company's overall business strategy. This evaluation
considers many key factors, including demographics, size, ethnicity, competition
and growth potential. Over time, the Company expects to market for disposal
additional funeral and cemetery locations that do not meet the strategic,
long-term objectives of the Company. The Company expects that once a property is
added to the disposal list, a firm purchase commitment will be received within
one year.

During the 24 weeks ended June 14, 2003, the Company identified 43 funeral
and 15 cemetery locations for disposal. The additional funeral locations
included all 39 funeral locations in the United Kingdom, as they are not
strategic to the Company's long-term objective to focus capital and management
resources in North America. The Company also identified its life insurance
operations for disposal, which is not strategic to the Company's long-term
objectives, and is not in support of the Company's North American pre-need
funeral sales efforts.

These locations are in addition to the 14 funeral, 44 cemetery and one
combination locations remaining from locations previously designated as probable
for sale. As a result, the Company has classified all the locations identified
for disposal as assets held for sale in the balance sheet and recorded any
related operating results, long-lived asset impairment provisions, and gains or
losses recorded on disposition as income from discontinued operations. The
Company has also restated prior periods to reflect any comparative amounts on a
similar basis, including locations sold in 2002.

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.

The Company's decrease in cash and cash equivalents of $2.3 million from
March 22, 2003, to June 14, 2003, is primarily due to operating cash flow from
continuing operations of $61.2 million for the 12 weeks ended June 14, 2003,
offset by a net debt repayment of $55.0 million, which excludes the effects of
premium and discount amortization, as well as the effects, if any, of foreign
exchange. In addition, from continuing operations, the Company had net proceeds
on asset sales of $0.7 million, purchases of property

29

and equipment of $3.9 million, net insurance asset purchases of $6.4 million and
net increase in cash of $1.0 million from discontinued operations.

The Company's increase in cash and cash equivalents of $9.7 million from
December 28, 2002, to June 14, 2003, is primarily due to operating cash flow
from continuing operations of $90.8 million for the 24 weeks ended June 14,
2003, being offset by a net debt repayment of $65.8 million, which excludes the
effects of premium and discount amortization, as well as the effects, if any, of
foreign exchange. In addition, from continuing operations, the Company had net
proceeds on asset sales of $1.4 million, purchases of property and equipment of
$7.1 million, net insurance asset purchases of $11.0 million and net increase in
cash of $1.4 million from discontinued operations.

As of June 14, 2003, the Company's borrowing base was approximately
$64.7 million under its Credit Facility, less approximately $12.4 million in
outstanding letters of credit.

On June 27, 2003, the Company made an optional redemption of $30.0 million
of its 11.0% Senior secured notes, due in 2007, for a redemption price of
$30.0 million, plus accrued interest.

On April 1, 2003, the Company repaid approximately $52.6 million
outstanding, and terminated, the bank credit agreement of its subsidiary, Rose
Hills Company. The $52.6 million repayment was made by drawing $30.0 million
from its Credit Facility, and $22.6 million from cash.

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.

The Credit Facility is guaranteed by substantially all of Alderwoods Group's
wholly-owned U.S. subsidiaries, including Rose Hills. The 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, Rose Hills
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.

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 Company's anticipated
capital expenditures and working capital requirements through at least
January 3, 2004, including payment obligations under the indebtedness
described above. The Company is actively pursuing refinancing options for
portions of its debt in an effort to reduce interest expense.

30

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 June 14,
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
June 14, 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 $8.2 million over the next 12 months.

The following table details the Company's amounts of commercial commitments
as of June 14, 2003.

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

(a) Relates to the Company's Credit Facility, which has a borrowing base of
$64.7 million at June 14, 2003, less outstanding letters of credit,
described more fully in Note 5 to the interim consolidated financial
statements. In addition to the outstanding letters of credit described in
(b) below, $20.0 million was outstanding under the Credit Facility as of
June 27, 2003. The $20.0 million outstanding results from the $30.0 million
optional redemption of the Company's 11.0% Senior secured notes, due in
2007. The expiry date of the Credit Facility is April 30, 2004.

(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.

31

OTHER INFORMATION

The Company's earnings from continuing operations before interest, taxes,
depreciation and amortization, and provision for asset impairment ("EBITDA from
continuing operations") for the 12 and 24 weeks ended June 14, 2003, and
June 15, 2002, are presented in the table below and reconciled to the Company's
net income (loss) from continuing 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 24 weeks ended June 14, 2003, the Company closed six funeral and
one combination locations, and sold five funeral, 17 cemetery and two
combination locations. At June 14, 2003, the Company had four cemeteries under
signed agreements for sale, with net assets and expected proceeds of
approximately $0.1 million.

Subsequent to June 14, 2003, the Company identified 86 funeral, 30 cemetery
and four combination locations with net assets of approximately $68.2 million
for disposal, as they do not meet the Company's future geographic and strategic
objectives. These locations are in addition to the locations previously
identified as held for sale. The Company has not yet determined the estimated
proceeds from the expected sale of these funeral homes and cemeteries, which are
still included in continuing operations, however they will be reclassified to
discontinued operations in the third quarter.

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.

32

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 24 weeks ended June 14, 2003,
was approximately $13.5 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 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 June 14, 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.

33

PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For information regarding the Company's legal proceedings, see Note 8 to the
Company's interim consolidated financial statements included in Part I of this
Quarterly Report on Form 10-Q, which Note 8 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's 2002 annual meeting of stockholders was held on May 1, 2003.
All director nominees were elected. The voting tabulation was as follows: Lloyd
E. Campbell: 21,782,083 votes for, 121,790 votes withheld; Anthony G. Eames:
21,782,107 votes for, 121,766 votes withheld; Charles M. Elson: 19,737,360 votes
for, 2,166,513 votes withheld; David R. Hilty: 19,737,336 votes for, 2,166,537
votes withheld; Paul A. Houston: 19,735,316 votes for, 2,168,557 votes withheld;
Olivia F. Kirtley: 19,737,360 votes for, 2,166,513 votes withheld; John S.
Lacey: 16,232,537 votes for, 5,671,336 votes withheld; William R. Riedl:
21,782,107 votes for, 121,766 votes withheld; W. MacDonald Snow: 19,736,954
votes for, 2,166,919 votes withheld. The proposal to ratify the retention of
KPMG, LLP, as independent auditors for the fiscal year ending January 3, 2004,
was approved. The voting tabulation was as follows: 19,841,090 votes for,
2,057,864 votes against, and 4,919 abstentions.

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

34

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 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.

35

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
significant. While the Company believes that future operating cash flow,
together with financing arrangements, will be sufficient 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

36

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 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
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

37

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 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.

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.

38

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 June 14, 2003:

43

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: July 24, 2003 CHIEF ACCOUNTING OFFICER)

44

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: July 24, 2003 (PRINCIPAL EXECUTIVE OFFICER)

45

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: July 24, 2003 CHIEF ACCOUNTING OFFICER)

46

EXHIBITS FILED HEREWITH