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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q
                             -----------------------

(Mark One)
    [X]           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                               SECURITIES EXCHANGE ACT OF 1934
                        For the quarterly period ended June 30, 1998

                                       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 _____________

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

                             PRIME SUCCESSION, INC.
             (Exact name of registrant as specified in its charter)
                             ---------------------


                          DELAWARE                             13-3904211
               (State or Other Jurisdiction of              (I.R.S. Employer
               Incorporation or Organization)              Identification No.)


                3940 Olympic Blvd., Suite 500                     41018
                 Erlanger, Kentucky, U.S.A.                   (Postal Code)
          (Address of principal executive offices)

                                                      
          (Registrant's telephone number, including area code)(606) 746-6800


         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 ______

         The  number of  outstanding  shares of Common  Stock as of August  10,
1998, was 100.


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


<PAGE>







                                TABLE OF CONTENTS


                                                                          Page
Part I.       FINANCIAL  INFORMATION

              Item 1.      FINANCIAL  STATEMENTS:

              CONSOLIDATED  BALANCE  SHEETS
                  as of June 30, 1998 and December 31, 1997                  1

              CONSOLIDATED  STATEMENTS OF OPERATIONS
                  for the Three Months Ended June 30, 1998 and 1997
                  and the Six Months Ended June 30, 1998 and 1997            3

              CONSOLIDATED  STATEMENTS  of  CASH  FLOWS
                  for the Six Months Ended June 30, 1998 and 1997            4

              NOTES  to INTERIM  CONSOLIDATED  FINANCIAL  STATEMENTS         5

              Item 2.      MANAGEMENT'S  DISCUSSION  and  ANALYSIS
                           of  FINANCIAL  CONDITION  and  RESULTS
                           of OPERATIONS                                     6


Part II.      OTHER  INFORMATION

              Item 5.      OTHER  INFORMATION                               12

              Item 6.      EXHIBITS  and  REPORTS  on  FORM  8-K            12


              SIGNATURES                                                    12



















                                       (i)


<PAGE>


PART I

ITEM 1.   FINANCIAL STATEMENTS

<TABLE>


                     PRIME SUCCESSION, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
<S>                                                                                <C>                         <C>         
                                                                                June 30, 1998             December 31, 1997
                                                                                -------------             -----------------
                                                                                 (unaudited)
                                   Assets

Cash and cash equivalents                                                         $  1,064,953                $  1,555,415
  Receivables:
         Trade, less allowance of $2,421,765 and  $2,647,693                        11,788,697                  13,073,005
         Other                                                                       1,939,776                   4,492,005
                                                                            -------------------          ------------------
                  Total receivables                                                 13,728,473                  17,565,010
Inventories:
         Merchandise                                                                 3,667,637                   3,836,994
         Cemetery lots and mausoleum spaces                                          1,345,211                   1,693,530
                                                                            -------------------          ------------------
                  Total inventories                                                  5,012,848                   5,530,524
                                                                            -------------------          ------------------
Prepaids and other current assets                                                      179,547                     319,000
Deferred income taxes                                                                  723,566                     723,566
                                                                            -------------------          ------------------
                  Total current assets                                              20,709,387                  25,693,515
                                                                            -------------------          ------------------
Property and equipment:
         Land and land improvements                                                 16,343,988                  16,190,801
         Buildings and improvements                                                 47,358,132                  47,313,605
         Equipment, furniture and fixtures                                           9,953,499                   9,051,236
         Accumulated depreciation                                                   (4,505,188)                 (3,165,322)
                                                                            -------------------          ------------------
                  Net property and equipment                                        69,150,431                  69,390,320
                                                                            -------------------          ------------------
Developed cemetery properties                                                       14,341,224                  12,996,135
Undeveloped cemetery properties                                                     31,002,345                  31,902,345
Goodwill, less accumulated amortization of $10,349,700 and $7,482,615              219,619,662                 222,086,427
Other intangible assets, less accumulated amortization of $7,904,708 and
$5,866,178                                                                          21,114,348                  23,147,315
Long-term receivables, less allowance of $3,510,435 and $3,288,268                  14,345,730                   9,318,513
Other assets                                                                           533,180                     571,615
                                                                            -------------------          ------------------
                                                                                  $390,816,307                $395,106,185
                                                                            ===================          ==================

See accompanying notes to interim consolidated financial statements.


</TABLE>







                                                           -1-


<PAGE>

<TABLE>


                     PRIME SUCCESSION, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
<S>                                                                               <C>                         <C>    

                                                                              June 30, 1998              December 31, 1997
                                                                              -------------              -----------------
                                                                               (unaudited)
                    Liabilities and Shareholders' Equity
     
Accounts payable                                                                  $  1,703,040                $  2,679,090
Other accrued expenses                                                               7,592,808                   8,441,985
Current installments of obligations under agreements with former owners              2,490,051                   2,369,684
Current installments of long-term debt                                               1,306,509                   1,389,530
Due to related party                                                                        --                      83,333
                                                                            -------------------           -----------------
                                            Total current liabilities               13,092,408                  14,963,622
                                                                            -------------------           -----------------

Deferred merchandise liabilities and revenues, less trust fund deposits             17,577,294                  17,600,097
Obligations under agreements with former owners, less current installments          13,882,888                  15,259,919
Long-term debt, less current installments                                          200,308,614                 201,580,635
Deferred income taxes                                                               16,770,180                  16,770,180
Other long-term liabilities                                                          4,045,328                   2,690,510

Shareholders' equity:
         Common stock, par value $.01 per share, 1,000 shares authorized;
                  100 issued and outstanding shares                                          1                           1
         Additional paid-in capital                                                129,171,626                 129,047,493
         Accumulated deficit                                                        (4,032,032)                 (2,806,272)
                                                                            -------------------           -----------------
                                            Total shareholders' equity             125,139,595                 126,241,222
                                                                            -------------------           -----------------
                                                                                  $390,816,307                $395,106,185
                                                                            ===================           =================


See accompanying notes to interim consolidated financial statements.


</TABLE>





















                                                            -2-


<PAGE>


<TABLE>


                     PRIME SUCCESSION, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations
                                   (unaudited)

<S>                                           <C>                  <C>                    <C>                   <C>         
                                                    Three Months Ended                             Six Months Ended
                                                         June 30,                                      June 30,
                                                         --------                                      --------
                                                  1998                 1997                   1998                  1997
                                                  ----                 ----                   ----                  ----
Revenues:

  Funeral services                            $ 18,489,610         $ 18,408,473           $ 39,103,822          $ 37,868,384
  Cemetery sales                                 6,623,629            5,955,431             12,593,990            10,690,810
                                              ------------         ------------           ------------          ------------
                                                25,113,239           24,363,904             51,697,812            48,559,194
Costs and expenses:
  Funeral homes                                 12,371,809           11,588,419             25,103,965            23,689,070
  Cemetery                                       4,411,310            4,203,241              8,389,769             7,617,081
                                              ------------         ------------           ------------          ------------ 
                                                16,783,119           15,791,660             33,493,734            31,306,151

Corporate and regional general and
   administrative expenses                         813,101              833,191              1,540,146             1,710,979
Depreciation and amortization                    2,827,393            2,692,261              5,669,448             5,423,920
                                              ------------         ------------           ------------          ------------  
Operating income                                 4,689,626            5,046,792             10,994,484            10,118,144

Other expenses:
  Interest expense, including
  amortization of deferred loan
  costs (see Note 1)                             6,076,670            5,771,936             12,182,744            11,763,684
                                              ------------         ------------           ------------          ------------
Loss before income taxes                        (1,387,044)            (725,144)            (1,188,260)           (1,645,540)
Income tax benefit (expense)                       (20,000)               3,657                (37,500)              (25,685)
                                              ------------         ------------           ------------          ------------
Net loss                                     $  (1,407,044)        $   (721,487)          $ (1,225,760)         $ (1,671,225)
                                             =============         =============          ============          ============

See accompanying notes to interim consolidated financial statements.



</TABLE>

















                                                             -3-


<PAGE>

<TABLE>



                     PRIME SUCCESSION, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
                                   (unaudited)
<S>                                                                          <C>                       <C>       
                                                                                           Six Months Ended
                                                                                               June 30,
                                                                                     1998                    1997
                                                                                     ----                    ----
Cash flows from operating activities:
    
  Net loss                                                                      $ (1,225,760)           $ (1,671,225)
  Adjustments to reconcile net loss to net cash
     provided by (used in) operating activities:
         Depreciation and amortization                                             6,546,394               6,314,790
         Depletion of cemetery property                                              659,552                 944,754
         Loss on sale of assets                                                       21,364                      --
         Gain on sale of business                                                     (7,653)                     --
         Changes in operating assets and liabilities
                  net of effects of acquisition of subsidiaries:
                           Receivables (net)                                      (1,215,629)             (3,438,137)
                           Inventories                                              (677,280)             (2,209,567)
                           Accounts payable and accrued expenses                  (1,931,348)             (1,189,968)
                           Deferred  merchandise   liabilities  and
                           revenue (net)                                              (6,062)              1,031,922
                           Other long-term liabilities                             1,354,818                (876,025)
                           Other                                                      29,138                (206,906)
                                                                                ------------            ------------
Net cash provided by (used in) operating activities                                3,547,534              (1,300,362)
                                                                                ------------            ------------

Cash flows from investing activities:
  Proceeds from the disposal of assets                                               449,144                 175,598
  Purchases of property and equipment                                             (1,735,844)             (1,423,826)
  Net cash received for sale of business                                             250,000                      --
  Net cash paid for purchase of business                                            (400,000)               (506,542)
                                                                                ------------            ------------
Net cash used in investing activities                                             (1,436,700)             (1,754,770)
                                                                                ------------            ------------

Cash flows from financing activities:
  Net proceeds (payments) of bank indebtedness under revolving loan                 (700,000)              3,000,000
  Proceeds from long-term debt                                                            --                 530,223
  Payments on long-term debt                                                        (644,632)             (3,777,183)
  Payments on obligations under agreements with former owners                     (1,256,664)             (2,508,196)
  Decrease in restricted cash                                                             --               4,388,837
                                                                                ------------            ------------
Net cash provided by (used in) financing activities                               (2,601,296)              1,633,681
                                                                                ------------            ------------
Net decrease in cash and cash equivalents                                           (490,462)             (1,421,451)
Cash and cash equivalents at beginning of period                                   1,555,415               2,985,704
                                                                                ------------            ------------
Cash and cash equivalents at end of period                                      $  1,064,953            $  1,564,253
                                                                                ============            ============

See accompanying notes to interim consolidated financial statements.

</TABLE>



                                                             -4-
<PAGE>

                     PRIME SUCCESSION, INC. AND SUBSIDIARIES

               Notes to Interim Consolidated Financial Statements
                                   (unaudited)



 (1)   Interest  expense  includes  amortization  of  deferred  loan costs as
       follows:

                    Three Months Ended                Six Months Ended
                         June 30,                         June 30,
                         --------                         --------    
                    1998            1997              1998          1997
                    ----            ----              ----          ----
                  $438,473        $452,397          $876,946      $890,870

 (2)   Footnote  disclosure which would  substantially  duplicate the disclosure
       contained in the Annual  Report on Form 10-K for the year ended  December
       31,  1997 has not  been  included.  The  unaudited  interim  consolidated
       financial  statements  reflect all  adjustments  which, in the opinion of
       management,  are necessary to reflect a fair statement of the results for
       the periods  presented and to present fairly the  consolidated  financial
       position of Prime Succession,  Inc. and subsidiaries as of June 30, 1998.
       All such adjustments are of a normal recurring nature.

 (3)   Certain reclassifications have been made to the 1997 amounts  to  conform
       to the 1998 presentation.












































                                                              -5-



<PAGE>


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

Overview

         On August 26,  1996 (the  "Closing  Date"),  Prime  Succession,  Inc.'s
(Predecessor   Company)  capital  stock  was  purchased  (the   Acquisition)  by
Blackstone Capital Partners II Merchant Banking Fund L.P. and affiliates, Loewen
Group  International,  Inc. and PSI Management  Direct L.P. A new entity,  Prime
Succession,  Inc.  (Successor  Company),  was formed  and became a  wholly-owned
subsidiary of the Predecessor  Company. In connection with the Acquisition,  all
of the assets and liabilities of the Predecessor Company were transferred to the
Successor Company.  Collectively,  the Predecessor Company and Successor Company
are herein referred to as "the Company".

         The Company provides  merchandise and services in both the funeral home
and  cemetery  segments  of the death care  industry  in the United  States.  In
addition to providing  merchandise and services at the time of need, the Company
also makes funeral,  cemetery and cremation arrangements on a pre-need basis. As
of August 10, 1998, the Company through its subsidiaries owns and operates
143 funeral homes and 21 cemeteries in 20 states,  primarily in non-urban  areas
of the United  States.  The Company  commenced  operations  in 1992 and expanded
rapidly through the aggressive acquisition of funeral homes and cemeteries.  The
Company's consolidated revenues were $51.7 million and $48.6 million for the six
months ended June 30, 1998 and 1997, respectively.  Sales of funeral services of
$39.1 million and cemetery  sales of $12.6 million  accounted for  approximately
75.6% and 24.4%, respectively,  of total net sales for the six months ended June
30, 1998.

         The Company had no funeral  homes when it began  operations in 1992 and
grew to 146 funeral homes in 1996. In order to achieve this rapid growth, former
management was primarily focused on identifying funeral homes to be acquired and
consummating  acquisitions of such homes rather than on maximizing profitability
of the funeral homes and cemeteries which it had acquired.  As a result,  former
management  did not take  advantage  of certain  opportunities  to  improve  the
efficiency  and  performance  of the  funeral  homes  acquired.  New  management
substantially  eliminated the Company's  acquisition  program.  In addition,  in
order to improve the Company's present and long-term operating performance,  new
management took advantage of (i) the quality and size of the Company's portfolio
of properties, (ii) the opportunity to operate more efficiently those properties
located in close  proximity  to one  another,  and (iii) the shift in focus from
acquisitions to profit  maximization at existing locations and (iv) the benefits
at both  local  sites and the  corporate  headquarters  from the  Administrative
Services  Agreement with Loewen. The Company's future results of operations will
depend in large part on the ability of management to  successfully  maintain its
business strategy.

         The Company is a party to a supply  agreement  with  Batesville  Casket
Company,  Inc.  ("BCC"),  The Forethought  Group and Forethought  Life Insurance
Company   ("FLIC"),   pursuant  to  which  the  Company  must  purchase  caskets
exclusively  from BCC and,  in  connection  with its  pre-need  sales of funeral
services  funded by  insurance,  the  Company  must  offer to its  customers  in
specified markets exclusively FLIC insurance products.  The agreement expires on
December 31, 2004,  subject to earlier  termination by any party thereto upon 30
days  notice  following  a  material,  uncured  breach of the  agreement  or the
occurrence of certain insolvency events. Management of the Company believes that
the terms of such supply agreement are favorable to the Company.
















                                                                  -6-


<PAGE>

<TABLE>

Results of Operations

         The Company's  operations  are detailed  below for the three months and
the six  months  ended  June 30,  1998  expressed  in dollar  amounts as well as
relevant  percentages.  Revenue,  gross  margin,  earnings from  operations  and
expenses other than income taxes are presented as a percentage of revenue.

Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997

                                                          Three months ended             Three months ended
                                                               June 30,                       June 30,
                                                               --------                       --------
                                                         1998            1997           1998           1997
                                                         ----            ----           ----           ----
                                                         (millions of dollars)               (percent)
                                                         ---------------------               ---------
Revenue
<S>                                                          <C>             <C>        <C>             <C>  
         Funeral                                             $18.5           $18.4      73.7%           75.4%
         Cemetery                                              6.6             6.0      26.3            24.6
                                                             -----           -----     -----           -----
                  Total                                      $25.1           $24.4     100.0%          100.0%
                                                             =====           =====     =====           =====
Gross Margin
         Funeral                                             $ 6.1           $ 6.8      33.0%           36.9%
         Cemetery                                              2.2             1.8      33.3            30.0
                                                             -----           -----
                  Total                                        8.3             8.6      33.1            35.2
Expenses
         General and administrative                            0.8             0.8       3.2             3.3
         Depreciation and amortization                         2.8             2.7      11.2            11.1
                                                             -----           -----
Earnings From Operations                                       4.7             5.1      18.7            20.9
         Interest on long-term debt                            6.1             5.8      24.3            23.8
                                                             -----           -----
Loss Before Income Taxes                                      (1.4)           (0.7)     (5.6)           (2.9)
         Income taxes                                           --              --        --              --
                                                             -----           -----
Net loss                                                     $(1.4)          $(0.7)     (5.6)%          (2.9)%
                                                             =====           =====
</TABLE>

     Consolidated  revenues increased 2.9% to $25.1 million for the three months
ended June 30, 1998  compared to $24.4 million in the  corresponding  period for
1997, with funeral service revenues increasing 0.5% to $18.5 million compared to
$18.4  million  in the  corresponding  period  in 1997,  and  cemetery  revenues
increasing 10.0% to $6.6 million  compared to $6.0 million in the  corresponding
period for 1997. Funeral revenues  increased  primarily as a result of increased
pricing and enhanced  merchandising of merchandise  display areas. On same-store
business, excluding 1997 acquisitions and dispositions, total calls decreased by
26 from 4,749 calls for the three  months ended June 30, 1997 to 4,723 calls for
the three months ended June 30, 1998 and average  revenue per call  increased by
$39 from $3,876 in 1997 to $3,915 in 1998. Cemetery revenues increased primarily
due to  increased  pre-need  sales  efforts in Alabama,  Florida and  Tennessee.
Consolidated  operating  income decreased from $5.1 million for the three months
ended June 30, 1997, to $4.7 million for the three months ended June 30, 1998.

                                                             -7-


<PAGE>


     Consolidated  contribution  margin of $8.3 million  decreased  3.5% for the
three  months  ended June 30, 1998 from $8.6  million for the three months ended
June 30, 1997,  with funeral  contribution  margin of 33.0% for the three months
ended June 30, 1998  compared to 36.9% for the three  months ended June 30, 1997
and  cemetery  contribution  margin of 33.3% for the three months ended June 30,
1998 compared to 30.0% for the corresponding period in 1997. Contribution margin
is defined as a percentage of funeral revenues or cemetery revenues, as the case
may be, less related cost of sales (including direct operating expenses).

     Corporate  general and  administrative  expense  remained  constant at $0.8
million for the three  months ended June 30, 1998 and 1997.  As a percentage  of
consolidated  revenue,  general and administrative  expense decreased to 3.2% in
1998  from 3.3% for the  corresponding  period in 1997.  Corporate  general  and
administrative  expense  decreased  primarily due to restructured,  upgraded and
more efficient information and accounting systems.

     Depreciation  and  amortization  expense  increased  $0.1  million  to $2.8
million for the three  months  ended June 30, 1998  compared to $2.7 million for
the  corresponding  period in 1997.  This  increase is  primarily  the result of
increased depreciation on capital expenditures.

     Interest  expense of $6.1  million for the three months ended June 30, 1998
increased by $0.3 million compared to $5.8 million for the corresponding  period
in 1997,  primarily as a result of additional  borrowings  to finance  operating
activities of the Company.






































                                                             -8-
<PAGE>

<TABLE>

Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997

                                                           Six months ended               Six months ended
                                                              June 30,                       June 30,
                                                          -----------------              -----------------
                                                         1998            1997           1998           1997
                                                         ----            ----           ----           ----
                                                         (millions of dollars)               (percent)
                                                         ---------------------               ---------
Revenue
<S>                                                          <C>             <C>          <C>            <C>  
         Funeral                                             $39.1           $37.9        75.6%          78.0%
         Cemetery                                             12.6            10.7        24.4           22.0
                                                             -----           -----       -----          -----
                  Total                                      $51.7           $48.6       100.0%         100.0%
                                                             =====           =====       =====          =====
Gross Margin
         Funeral                                             $14.0           $14.1        35.8%          37.2%
         Cemetery                                              4.2             3.1        33.3           29.0
                                                             -----           -----
                  Total                                       18.2            17.2        35.2           35.4
Expenses
         General and administrative                            1.5             1.7         2.9            3.5
         Depreciation and amortization                         5.7             5.4        11.0           11.1
                                                             -----           -----
Earnings From Operations                                      11.0            10.1        21.3           20.8
         Interest on long-term debt                           12.2            11.8        23.6           24.3
                                                             -----           -----
Loss Before Income Taxes                                      (1.2)           (1.7)       (2.3)          (3.5)
         Income taxes                                           --              --          --             -- 
                                                             -----           -----

Net Loss                                                     $(1.2)          $(1.7)       (2.3)%         (3.5)%
                                                             =====           =====
</TABLE>

     Consolidated  revenues  increased  6.4% to $51.7 million for the six months
ended June 30, 1998  compared to $48.6 million in the  corresponding  period for
1997, with funeral service revenues increasing 3.2% to $39.1 million compared to
$37.9  million  in the  corresponding  period  in 1997,  and  cemetery  revenues
increasing 17.8% to $12.6 million compared to $10.7 million in the corresponding
period for 1997. Funeral revenues  increased  primarily as a result of increased
pricing and enhanced  merchandising of merchandise  display areas. On same-store
business, excluding 1997 acquisitions and dispositions, total calls decreased by
104 from 9,974  calls for the six months  ended June 30, 1997 to 9,870 calls for
the six months  ended June 30, 1998 and average  revenue per call  increased  by
$165  from  $3,797  in 1997 to  $3,962  in  1998.  Cemetery  revenues  increased
primarily  due to  increased  pre-need  sales  efforts in  Alabama,  Florida and
Tennessee.  Consolidated  operating  income increased from $10.1 million for the
six months ended June 30, 1997,  to $11.0  million for the six months ended June
30, 1998.

     Consolidated  contribution  margin of $18.2 million  increased 5.8% for the
six months ended June 30, 1998 from $17.2  million for the six months ended June
30,  1997,  with funeral  contribution  margin of 35.8% for the six months ended
June 30,  1998  compared  to 37.2% for the six months  ended  June 30,  1997 and
cemetery  contribution  margin of 33.3% for the six months  ended June 30,  1998
compared to 29.0% for the corresponding  period in 1997.  Contribution margin is
defined as a percentage of funeral  revenues or cemetery  revenues,  as the case
may be, less related cost of sales (including direct operating expenses).

                                                             -9-
<PAGE>


     Corporate general and administrative  expense decreased to $1.5 million for
the six  months  ended June 30,  1998 from $1.7  million  for the  corresponding
period  in  1997.  As  a  percentage  of  consolidated   revenue,   general  and
administrative expense decreased to 2.9% in 1998 from 3.5% for the corresponding
period in 1997. Corporate general and administrative expense decreased primarily
due to  restructured,  upgraded and more  efficient  information  and accounting
systems.

     Depreciation  and  amortization  expense  increased  $0.3  million  to $5.7
million for the six months ended June 30, 1998  compared to $5.4 million for the
corresponding period in 1997. This increase is primarily the result of increased
depreciation on capital expenditures.

     Interest  expense of $12.2  million for the six months  ended June 30, 1998
increased by $0.4 million compared to $11.8 million for the corresponding period
in 1997,  primarily as a result of additional  borrowings  to finance  operating
activities of the Company.


Liquidity and Capital Resources

     The Company's  primary  sources of cash since 1995 have been funds provided
by operating  activities,  proceeds from  additional  long-term debt and capital
contributions.  As of June 30,  1998,  the  Company  had a net  working  capital
surplus of $7.6 million and a current ratio of 1.58:1, compared to a net working
capital  surplus of $10.7  million and a current ratio of 1.72:1 as of December
31, 1997.

     The  primary  uses of cash  since  1995  have been for the  acquisition  of
funeral homes and cemeteries,  including the Acquisition,  principal payments on
long-term debt and capital expenditures.  In the six months ended June 30, 1997,
the Company  purchased two  cemeteries  for an aggregate  purchase price of $0.5
million with the  acquisition  of one funeral home  occurring in the  comparable
period in 1998 for $0.4 million.

     In the six  months  ended June 30,  1998 and 1997,  the  Company  used $1.7
million  and $1.4  million for capital  expenditures,  respectively.  In the six
months ended June 30, 1998, the Company paid $0.6 million in principal  payments
on long-term debt,  principally relating to payment of former owner obligations,
compared to $3.8 million in the corresponding  period in 1997. In the six months
ended June 30, 1997 the Company  borrowed $3.0 million on its revolving  line of
credit compared to a net repayment of $0.7 million for the same period in 1998.

     The Company estimates that capital  expenditures will be approximately $1.5
million in 1998 to be used in part for the repair and  improvement  of  existing
facilities.  The Company  also expects to invest  approximately  $1.0 million in
1998 for cemetery inventory development.

     Contemporaneously  with the  consummation of the  Acquisition,  the Company
entered into senior secured  credit  facilities  (the "Bank Credit  Facilities")
with a syndicate  of  financial  institutions  and The Bank of Nova  Scotia,  as
administrative agent.

     The Bank  Credit  Facilities  provided  the  Company  with  senior  secured
amortization  extended  term loan  facilities  (the "Bank Term  Facility") in an
aggregate  principal  amount of $90 million,  the proceeds of which were used to
finance the  Acquisition  and related  transaction  costs,  to pre-fund  certain
capital expenditures and to refinance existing  indebtedness of the Company, and
a senior secured revolving credit facility (the "Bank Revolving Facility") in an
aggregate  principal amount of up to $25 million,  the proceeds of which will be
used for general  corporate  purposes and a portion of which may be extended (as
agreed  upon) in the form of swing  line  loans or  letters  of  credit  for the
account of the  Company.  The Bank Term  Facility  will mature 7 years after the
Acquisition  Closing Date, and the Bank  Revolving  Facility will mature 5 years
after the  Acquisition  Closing  Date.  The Bank Term  Facility  is  subject  to
amortization,  subject to certain conditions, in semi-annual installments in the
amounts of $1 million in each of the first three years after the  anniversary of
the closing date of the Bank Term Facility (the "Bank  Closing");  $4 million in
the fourth year after the Bank  Closing;  $9 million in the fifth year after the
Bank  Closing;  $12.5 million in the sixth year after the Bank Closing and $61.5
million  upon the  maturity  of the Bank Term  Facility.  The  Revolving  Credit
Facility will be payable in full at maturity, with no prior amortization.


                                                            -10-
<PAGE>

     All  obligations  under the Bank Credit  Facilities  and any interest  rate
hedging  agreements  entered  into  with  the  lenders  or their  affiliates  in
connection  therewith are  unconditionally  guaranteed  (the "Bank  Guarantees")
jointly and  severally,  by the Company and each of the  Company's  existing and
future domestic  subsidiaries  (the "Bank  Guarantors").  All obligations of the
Company  and the  guarantors  under  the  Bank  Credit  Facilities  and the Bank
Guarantees are secured by first priority security  interests in all existing and
future assets (other than real property and vehicles  covered by certificates of
title)  of the  Company  and  the  Guarantors.  In  addition,  the  Bank  Credit
Facilities  are  secured by a first  priority  security  interest in 100% of the
capital stock of the Company and each  subsidiary  thereof and all  intercompany
receivables.

     In connection with the Acquisition, the Company also issued $100 million of
10 3/4% Senior Subordinated Notes due 2004, which were exchanged in January 1997
for $100  million of 10 3/4% Senior  Subordinated  Notes due 2004 (the  "Notes")
that were  registered  under the  Securities  Act of 1933.  The Notes  mature on
August 15, 2004.  Interest on the Notes is payable  semi-annually on February 15
and August 15 at the annual rate of 10 3/4%. The Notes are redeemable in cash at
the option of the Company,  in whole or in part,  at any time on or after August
15, 2000, at prices ranging from 105.375% with annual reductions to 100% in 2003
plus accrued and unpaid  interest,  if any, to the redemption date. The proceeds
of the Notes were used, in part, to finance the Acquisition.

     The  Company  and its  subsidiaries  are  subject  to  certain  restrictive
covenants contained in the Indenture relating to the Notes,  including,  but not
limited to,  covenants  imposing  limitations  on the  incurrence  of additional
indebtedness;   certain  payments,  including  dividends  and  investments;  the
creation  of liens;  sales of assets  and  preferred  stock;  transactions  with
interested persons; payment restrictions affecting subsidiaries;  sale-leaseback
transactions;  and  mergers and  consolidations.  In  addition,  the Bank Credit
Facilities contain certain restrictive covenants that, among other things, limit
the  ability of the  Company and its  subsidiaries  to dispose of assets,  incur
additional  indebtedness,  prepay  other  indebtedness,  pay  dividends  or make
certain  restricted  payments,  create  liens on  assets,  engage in  mergers or
acquisitions or enter into leases or transactions with affiliates.

     As of June 30,  1998,  the  Company  had  approximately  $201.6  million of
indebtedness   outstanding   and   approximately   $10.8  million  of  borrowing
availability  under the Revolving  Credit  Facility.  The Company believes that,
based upon current levels of operations and anticipated  growth and availability
under the Revolving Credit Facility, it can adequately service its indebtedness.
If the Company cannot  generate  sufficient  cash flow from operations or borrow
under the Revolving Credit Facility to meet such  obligations,  then the Company
may  be  required  to  take  certain   actions,   including   reducing   capital
expenditures,  restructuring  its debt,  selling  assets or  seeking  additional
equity in order to avoid an Event of  Default.  There can be no  assurance  that
such actions  could be effected or would be effective in allowing the Company to
meet such obligations.

     In June 1998,  Statement of Financial  Accounting  Standards (FAS) No. 133,
"Accounting  for  Derivative  Instruments  and Hedging" was issued.  FAS No. 133
requires  companies  to record  derivatives  on the  balance  sheet as assets or
liabilities  measured at fair value.  Gains or losses  resulting from changes in
the values of those  derivatives  would be accounted for depending on the use of
the derivative and whether it qualified under the standard hedge accounting. The
Company  is  currently  assessing  the  effect  of this  standard,  but does not
anticipate a material impact on the results of operations.

















                                                                 -11-
<PAGE>


                                 PART II

ITEM 5 - OTHER INFORMATION

Forward-Looking Statements

         Certain  statements  in this  Quarterly  Report  on Form  10-Q  include
"forward-looking  statements"  as  defined  in  Section  21E of  the  Securities
Exchange Act of 1934. All statements  other than statements of historical  facts
included  herein,  including,  without  limitation,  the statements under Item 7
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  regarding  the  Company's  financial  position,  plans to  increase
revenues,  reduce  general  and  administrative  expense and take  advantage  of
synergies,  are forward-looking  statements.  Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to be correct. Important
factors that could cause actual results to differ  materially from the Company's
expectations ("Cautionary Statements") are disclosed herein, including,  without
limitation, in conjunction with the forward-looking  statements included herein.
All subsequent written and oral forward-looking  statements  attributable to the
Company  or  persons  acting on its  behalf  are  expressly  qualified  in their
entirety by the Cautionary Statements.


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

     The Exhibits, as shown in the "Index of Exhibits", attached hereto as pages
13 and 14, are filed as a part of this Report.



SIGNATURES

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

                                                   PRIME SUCCESSION, INC.

                                                   /s/ MYLES S. CAIRNS
                                                   Myles S. Cairns
                                                   Chief Financial Officer,
                                                   Secretary and Treasurer
August 10, 1998

















                                                             -12-


<PAGE>

INDEX OF EXHIBITS

(a) Exhibit
      Number                                   Document Description

      3.1*        Certificate of Incorporation of Blackhawk Acquisition Corp.

      3.2*        Certificate of Amendment of Certificate of  Incorporation  of
                  Blackhawk  Acquisition  Corp.  changing  its  name  to  Prime
                  Succession Acquisition Corp.

      3.3*        Certificate of Amendment  of Certificate  of Incorporation of
                  Prime Succession Acquisition Corp. changing its name to Prime
                  Succession, Inc.

      3.4*        By-Laws of Prime Succession, Inc.

      4.1*        Indenture dated as of August 15, 1996 between Prime Succession
                  Acquisition Corp. and United States Trust Company of New York,
                  as Trustee

      4.2*        Form of 10 3/4% Senior Subordinated Note due 2004 (included in
                  Exhibit 4.1)

      10.1(a)*    Casket  Supply Agreement,  dated  January 1, 1993,  between
                  Batesville Casket Company, Inc. and Prime Succession, Inc.

      10.1(b)*    Amendment Agreement, dated August 1994,  between  Batesville
                  Casket Company, Inc. and Prime Succession, Inc. (with respect
                  to Casket Supply Agreement)

      10.1(c)*    Amendment 2, dated May 22, 1995, between  Batesville  Casket
                  Company,  Inc. and  Prime  Succession, Inc. (with respect to
                  Casket Supply Agreement)

      10.1(d)*    Exclusive  Supply  Agreement,  dated  January 1, 1998  between
                  Batesville  Casket  Company,  Inc.,  The  Forethought  Group,
                  Forethought Life  Insurance Company and Prime Succession, Inc.

      10.2*       Stockholders'  Agreement  dated as of August  26,  1996  among
                  Prime  Succession,   Inc.  (to  be  renamed  Prime  Succession
                  Holdings,  Inc.),  Blackstone  Capital  Partners  II  Merchant
                  Banking Fund L.P.,  Blackstone  Offshore  Capital  Partners II
                  L.P.,  Blackstone Family  Investment  Partnership II L.P., PSI
                  Management Direct L.P. and Loewen Group International, Inc.

      10.3*       Administrative Services Agreement dated as of August 26,  1996
                  between Prime Succession  Acquisition  Corp.  (to  be  renamed
                  Prime Succession, Inc.) and Loewen Group International, Inc.

      10.4*       Credit  Agreement  dated as of August  26,  1996  among  Prime
                  Succession,  Inc. (to be renamed  Prime  Succession  Holdings,
                  Inc.), Prime Succession Acquisition Corp. (to be renamed Prime
                  Succession,  Inc.), Goldman, Sachs & Co., as syndication agent
                  and arranging agent, the financial  institutions  from time to
                  time  parties  thereto as lenders and The Bank of Nova Scotia,
                  as administrative agent for such lenders.

      10.5*       Letter Agreement dated August 1, 1996 between Prime Succession
                  Acquisition Corp. (to be renamed Prime Succession, Inc.)  and 
                  Gary Wright.

      10.6*       Letter Agreement dated August 1, 1996 between Prime Succession
                  Acquisition Corp. (to be renamed Prime Succession, Inc.)  and 
                  Myles Cairns.

      10.7*       Put/Call  Agreement,  dated  as  of  August  26,  1996,  among
                  Blackstone  Capital  Partners II Merchant  Banking  Fund L.P.,
                  Blackstone  Offshore  Capital  Partners  II  L.P.,  Blackstone
                  Family  Investment  Partnership II L.P., PSI Management Direct
                  L.P.,  Loewen  Group  International  Inc. and the Loewen Group
                  Inc.

      10.8*       Stock  Purchase  Agreement,  dated as of June 14, 1996, by and
                  among Prime  Succession,  Inc.,  the  individuals  or entities
                  listed on the signature  pages thereof,  The Loewen Group Inc.
                  and Blackhawk Acquisition Corp.

                                      -13-
<PAGE>

(a)    Exhibit
         Number                                      Document Description

      12          Computation of Ratio of Earnings to Fixed Charges

      21*         Subsidiaries  of  Prime  Succession,  Inc.  (formerly  known
                  as Prime Succession Acquisition Corp.)

      27          Financial Data Schedule

*     Incorporated by reference to the Exhibits  to the  Company's  Registration
      Statement on Form S-4 (Registration No. 333-14599).




(b)     Reports on Form 8-K

                  None




































                                                            -14-
<PAGE>

<TABLE>

          Exhibit 12
          Prime Succession, Inc. and subsidiaries
          Ratio of Earnings to Fixed Charges
          (Dollars in Thousands)

<S>                                                              <C>            <C>         <C>          <C> 
                                                             Three months ended          Six months ended
                                                                  June 30,                   June 30,
                                                        ------------------------------------------------------
                                                            1998           1997         1998         1997
                                                            ----           ----         ----         ----
          Ratio of Earnings to
            Fixed Charges


          Earnings:
           Loss before income taxes                        (1,387)         (725)       (1,188)      (1,645)
           Add:  Fixed charges, net                         6,303         5,981        12,678       12,173
       

          Income before income taxes and
            fixed charges, net                              4,916         5,256        11,490       10,528

          Fixed Charges:
          Total interest expense (1)                        6,077         5,772        12,183       11,764
          Interest factor in rents (2)                        226           209           495          409

                            Total fixed charges             6,303         5,981        12,678       12,173


          Ratio of earnings to fixed charges                 0.78          0.88          0.91         0.86

          Coverage deficiency (3)                           1,387           725         1,188        1,645

          FN

          (1) Total interest  expense for each period includes  amortization of
              loan costs.
          (2) Interest factor in rents represents one-third of rent expense,
              which is considered representative of the interest factor.
          (3) The Company's  earnings are inadequate to cover fixed charges for
              all periods indicated above.  Coverage deficiency  represents the
              excess of fixed charges over income before income taxes and fixed
              charges, net.

</TABLE>