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

                       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 September 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 November  10,
1998, was 100.


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


<PAGE>







                                TABLE OF CONTENTS


                                                                           Page
Part I.     FINANCIAL  INFORMATION

            Item 1.      FINANCIAL  STATEMENTS:

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

            CONSOLIDATED  STATEMENTS OF OPERATIONS
                for the Three Months Ended September 30, 1998 and 1997
                and the Nine Months Ended September 30, 1998 and 1997      3

            CONSOLIDATED  STATEMENTS  of  CASH  FLOWS
                for the Nine Months Ended September 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                             13

              Item 6.      EXHIBITS  and  REPORTS  on  FORM  8-K          13


SIGNATURES                                                                13



















                                       (i)
<PAGE>

<TABLE>

PART I

ITEM 1.   FINANCIAL STATEMENTS



                     PRIME SUCCESSION, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets

                                                                                   September 30, 1998       December 31, 1997
                                                                                       (unaudited)
                                   Assets
<S>                                                                                    <C>                       <C>       
Cash and cash equivalents                                                              $ 1,642,112              $ 1,555,415
  Receivables:
         Trade, less allowance of $2,280,987 and  $2,647,693                            10,954,735               13,073,005
         Other                                                                           1,976,438                4,492,005
                                                                                       -----------              -----------
                                                                                       
                           Total receivables                                            12,931,173               17,565,010
Inventories:                                                                        
         Merchandise                                                                     3,646,968                3,836,994
         Cemetery lots and mausoleum spaces                                              1,252,411                1,693,530
                                                                                       -----------              -----------
                           Total inventories                                             4,899,379                5,530,524
                                                                                       -----------              -----------
Prepaids and other current assets                                                          454,176                  319,000
Deferred income taxes                                                                      749,859                  723,566
                                                                                       -----------              -----------
                  Total current assets                                                  20,676,699               25,693,515
                                                                                       -----------              -----------
Property and equipment:
         Land and land improvements                                                     16,549,402               16,190,801
         Buildings and improvements                                                     47,421,415               47,313,605
         Equipment, furniture and fixtures                                              10,086,756                9,051,236
         Accumulated depreciation                                                       (5,150,885)              (3,165,322)
                                                                                       -----------              -----------
                  Net property and equipment                                            68,906,688               69,390,320
                                                                                       -----------              -----------
Developed cemetery properties                                                           14,745,197               12,996,135
Undeveloped cemetery properties                                                         30,992,379               31,902,345
Goodwill, less accumulated amortization of $11,784,665 and $7,482,615                  219,615,546              222,086,427
Other intangible assets, less accumulated amortization of $8,936,378 and                20,394,493               23,147,315
     $5,866,178
Long-term receivables, less allowance of $3,594,613 and $3,288,268                      15,159,224                9,318,513
Other assets                                                                               534,646                  571,615
                                                                                      ------------             ------------
                                                                                      $391,024,872             $395,106,185
                                                                                      ============             ============


                              See accompanying notes to interim consolidated financial statements.



</TABLE>






                                                            -1-
<PAGE>

<TABLE>


                                          PRIME SUCCESSION, INC. AND SUBSIDIARIES
                                                Consolidated Balance Sheets


                                                                                   September 30, 1998       December 31, 1997
                                                                                       (unaudited)
                       Liabilities and Shareholders' Equity
<S>                                                                                    <C>                      <C>        
Accounts payable                                                                      $  1,400,254             $  2,679,090
Other accrued expenses                                                                   6,365,668                8,441,985
Current installments of obligations under agreements with former owners                  2,601,416                2,369,684
Current installments of long-term debt                                                   1,355,171                1,389,530
Due to related party                                                                            --                   83,333
                                                                                      ------------             ------------
                                                                                  
                                            Total current liabilities                   11,722,509               14,963,622
                                                                                      ------------             ------------

Deferred merchandise liabilities and revenues, less trust fund deposits                 13,819,834               17,600,097
Obligations under agreements with former owners, less current installments              13,310,351               15,259,919
Long-term debt, less current installments                                              208,815,461              201,580,635
Deferred income taxes                                                                   16,770,181               16,770,180
Other long-term liabilities                                                              3,934,206                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                                                    128,918,236              129,047,493
         Accumulated deficit                                                            (6,265,907)              (2,806,272)  
                                                                                       -----------              -----------
                                                                                                                                 
                                            Total shareholders' equity                 122,652,330              126,241,222
                                                                                      ------------             ------------
                                                                                      $391,024,872             $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)


                                                       Three Months Ended                            Nine Months Ended
                                                         September 30,                                 September 30,
                                                         -------------                                 -------------
                                                     1998                1997                   1998                  1997
                                                     ----                ----                   ----                  ----
Revenues:
<S>                                              <C>                <C>                     <C>                  <C>         
  Funeral services                               $17,373,676         $16,920,121            $56,477,498           $54,788,505
  Cemetery sales                                   6,317,333           5,888,749             18,911,323            16,579,559
                                                 -----------         -----------            -----------           -----------
                                                  23,691,009          22,808,870             75,388,821            71,368,064
Costs and expenses:
  Funeral homes                                   11,940,408          11,412,570             37,044,373            35,101,640
  Cemetery                                         4,208,433           4,156,177             12,598,202            11,773,258 
                                                 -----------         -----------            -----------           -----------
                                                                                                                   
                                                  16,148,841          15,568,747             49,642,575            46,874,898
Corporate general and administrative
  expenses                                           927,252             744,784              2,467,398             2,455,763
Depreciation and amortization                      2,810,166           2,865,783              8,479,614             8,289,703
                                                 -----------         -----------            -----------           -----------
                                                                                                                    
Operating income                                   3,804,750           3,629,556             14,799,234            13,747,700
Other expenses:
  Interest expense, including
  amortization of deferred loan
  costs (see Note 1)                               6,005,984           6,082,747             18,188,728            17,846,431
                                                 -----------         -----------            -----------           -----------
Loss before income taxes                          (2,201,234)         (2,453,191)            (3,389,494)           (4,098,731)
Income tax expense                                   (32,641)             (1,323)               (70,141)              (27,008)
                                                 -----------         -----------            -----------           -----------

Net loss                                         $(2,233,875)        $(2,454,514)           $(3,459,635)          $(4,125,739)
                                                 ===========         ===========            ===========           ===========



                                       See accompanying notes to interim consolidated financial statements.








</TABLE>













                                                                  -3-
<PAGE>

<TABLE>



                     PRIME SUCCESSION, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
                                   (unaudited)
                                                                                               Nine Months Ended
                                                                                                 September 30,
                                                                                            1998              1997
                                                                                            ----              ----
<S>                                                                                    <C>               <C>                       
Cash flows from operating activities:
  Net loss                                                                              $(3,459,635)       $(4,125,739)

  Adjustments to reconcile net loss to net cash used in operating activities:
         Depreciation and amortization                                                    9,795,033          9,632,970
         Depletion of cemetery property                                                     909,217          1,308,064
         Loss on sale of assets                                                              14,870                 --
         Gain on sale of business                                                            (7,653)                --
         Changes in operating assets and liabilities
                  net of effects of acquisition of subsidiaries:

                           Receivables (net)                                             (1,217,761)        (3,045,410)
                           Inventories                                                   (1,068,363)        (3,085,904)
                           Accounts payable and accrued expenses                         (3,526,285)        (3,455,099)
                           Deferred merchandise liabilities and revenue (net)            (3,763,523)          (742,612)
                           Other long-term liabilities                                    1,243,696         (1,283,068)
                           Other                                                           (845,237)          (793,368)
                                                                                         ----------        -----------
Net cash used in operating activities                                                    (1,925,641)        (5,590,166) 
                                                                                         ----------        -----------
                                                                                                           

Cash flows from investing activities:
  Proceeds from the disposal of assets                                                      426,023            188,698
  Purchases of property and equipment                                                    (2,100,802)        (2,757,977)
  Net cash received for sale of business                                                    250,000          2,041,033
  Net cash paid for purchase of business                                                   (805,000)        (2,606,951)
                                                                                         ----------        -----------     
Net cash used in investing activities                                                    (2,229,779)        (3,135,197)
                                                                                         ----------        -----------

Cash flows from financing activities:
  Net proceeds of bank indebtedness under revolving loan                                  7,300,000          9,500,000
  Proceeds from long-term debt                                                              113,307          1,309,782
  Payments on long-term debt                                                             (1,342,430)        (4,525,801)
  Payments on obligations under agreements with former owners                            (1,828,760)        (3,040,698)
  Decrease in restricted cash                                                                    --          4,388,837
                                                                                        -----------        -----------
Net cash provided by financing activities                                                 4,242,117          7,632,120
                                                                                        -----------        -----------
Net increase (decrease) in cash and cash equivalents                                         86,697         (1,093,243)
Cash and cash equivalents at beginning of period                                          1,555,415          2,985,704
                                                                                        -----------        -----------
Cash and cash equivalents at end of period                                              $ 1,642,112        $ 1,892,461
                                                                                        ===========        =========== 
                                                                                          

                                  See accompanying notes to interim consolidated financial statements.




</TABLE>

                                                                  -4-
<PAGE>

<TABLE>

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                                 Nine Months Ended
                               September 30,                                      September 30,
                               -------------                                      -------------
<S>                    <C>                       <C>                      <C>                      <C> 
                       1998                      1997                     1998                     1997
                       ----                      ----                     ----                     ----
                     $438,473                  $452,396                $1,315,419               $1,343,266

     (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 September  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.


</TABLE>






                                                                  -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
November 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 $75.4  million and $71.4 million for the
nine months ended  September 30, 1998 and 1997,  respectively.  Sales of funeral
services of $56.5  million and cemetery  sales of $18.9  million  accounted  for
approximately  74.9% and  25.1%,  respectively,  of total net sales for the nine
months ended September 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
nine months ended September 30, 1998 and the  corresponding  period in the prior
year expressed in dollar amounts as well as relevant percentages. Revenue, gross
margin, earnings (loss) from operations and expenses other than income taxes are
presented as a percentage of revenue. Income taxes are presented as a percentage
of losses before income taxes.

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

                                                            Three months ended           Three months ended
                                                               September 30,                September 30,
                                                               -------------                -------------
                                                           1998            1997         1998           1997
                                                           ----            ----         ----           ----
                                                           (millions of dollars)             (percent)
                                                           ---------------------             ---------
                                                            
Revenue
<S>                                                          <C>           <C>          <C>             <C>  
         Funeral                                             $17.4         $16.9        73.4%           74.1%
         Cemetery                                              6.3           5.9        26.6            25.9
                                                             -----         -----       ------          ------
                  Total                                      $23.7         $22.8       100.0%          100.0%
                                                             =====         =====       ======          ======
Gross Margin
         Funeral                                             $ 5.5         $ 5.5        31.6%           32.5%
         Cemetery                                              2.1           1.7        33.3            28.8
                                                             -----         -----
                  Total                                        7.6           7.2        32.1            31.6
Expenses
         General and administrative                            0.9           0.7         3.8             3.1
         Depreciation and amortization                         2.9           2.9        12.2            12.7
                                                             -----         -----
Earnings From Operations                                       3.8           3.6        16.0            15.9
         Interest on long-term debt                            6.0           6.1        25.3            26.8
                                                             -----         -----
Loss Before Income Taxes                                      (2.2)         (2.5)       (9.3)          (11.0)
         Income taxes                                           --            --          --              --
                                                             -----         -----
Net loss                                                     $(2.2)        $(2.5)       (9.3)%         (11.0)%
                                                             =====         =====

</TABLE>

     Consolidated  revenues increased 3.9% to $23.7 million for the three months
ended September 30, 1998 compared to $22.8 million in the  corresponding  period
for  1997,  with  funeral  service  revenues  increasing  3.0% to $17.4  million
compared to $16.9  million in the  corresponding  period in 1997,  and  cemetery
revenues  increasing  6.8% to $6.3  million  compared  to  $5.9  million  in the
corresponding  period for 1997. Funeral revenues increased primarily as a result
of  increased  pricing  and  enhanced  merchandising.  On  same-store  business,
excluding 1997 and 1998 acquisitions and dispositions,  total calls decreased by
2 from 4,357 calls for the three months ended  September 30, 1997 to 4,355 calls
for the three  months  ended  September  30, 1998 and  average  revenue per call
increased  by $106 from  $3,883 in 1997 to  $3,989  in 1998.  Cemetery  revenues
increased primarily due to increased pre-need sales efforts in Alabama,  Florida
and Tennessee. Consolidated operating income increased from $3.6 million for the
three months  ended  September  30,  1997,  to $3.8 million for the three months
ended September 30, 1998.

                                                                  -7-
<PAGE>


     Consolidated  contribution  margin of $7.6 million  increased  5.6% for the
three  months  ended  September  30, 1998 from $7.2 million for the three months
ended  September  30, 1997,  with funeral  contribution  margin of 31.6% for the
three months  ended  September  30, 1998  compared to 32.5% for the three months
ended September 30, 1997 and cemetery contribution margin of 33.3% for the three
months ended September 30, 1998 compared to 28.8% 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 of $0.9 million increased from
$0.7  million for the three  months  ended  September  30,  1998 and 1997.  As a
percentage of consolidated revenue, general and administrative expense increased
to 3.8% in 1998  from  3.1% for the  corresponding  period  in  1997.  Corporate
general and  administrative  expense  increased  primarily  due to adjustment of
accounting accruals in 1998.

     Depreciation and amortization expense remained constant at $2.9 million for
the three months ended September 30, 1998 and 1997.

     Interest  expense of $6.0 million for the three months ended  September 30,
1998  decreased by $0.1 million  compared to $6.1 million for the  corresponding
period in 1997, primarily as a result of repayment of debt.

































                                                                  -8-
<PAGE>


<TABLE>

Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 30, 1997

                                                            Nine months ended              Nine months ended
                                                              September 30,                  September 30
                                                              -------------                  -------------
                                                           1998           1997            1998           1997
                                                           ----           ----            ----           ----
                                                          (millions of dollars)                (percent)
                                                          ---------------------                ---------
Revenue
<S>                                                          <C>             <C>          <C>            <C>  
         Funeral                                           $56.5           $54.8        74.9%          76.8%
         Cemetery                                           18.9            16.6        25.1           23.2
                                                           -----           -----       ------         ------
                  Total                                    $75.4           $71.4       100.0%         100.0%
                                                           =====           =====       ======         ======
Gross Margin
         Funeral                                           $19.5           $19.7        34.5%          35.9%
         Cemetery                                            6.3             4.8        33.3           28.9
                                                           -----           -----
                  Total                                     25.8            24.5        34.2           34.3
Expenses
         General and administrative                          2.5             2.5         3.3            3.5
         Depreciation and amortization                       8.5             8.3        11.3           11.6
                                                           -----           -----
Earnings From Operations                                    14.8            13.7        19.6           19.2
         Interest on long-term debt                         18.2            17.8        24.1           24.9
                                                           -----           -----
Loss Before Income Taxes                                    (3.4)           (4.1)       (4.5)          (5.7)
         Income taxes                                        0.1              --         0.1             --
                                                           -----           -----
Net Loss                                                   $(3.5)          $(4.1)        4.6%          (5.7)%
                                                           =====           =====
</TABLE>

     Consolidated  revenues  increased 5.6% to $75.4 million for the nine months
ended September 30, 1998 compared to $71.4 million in the  corresponding  period
for  1997,  with  funeral  service  revenues  increasing  3.1% to $56.5  million
compared to $54.8  million in the  corresponding  period in 1997,  and  cemetery
revenues  increasing  13.9% to $18.9  million  compared to $16.6  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 and 1998  acquisitions  and  dispositions,
total  calls  decreased  by 106 from  14,331  calls  for the nine  months  ended
September 30, 1997 to 14,225 calls for the nine months ended  September 30, 1998
and average  revenue per call increased by $147 from $3,823 in 1997 to $3,970 in
1998.  Cemetery  revenues  increased  primarily due to increased  pre-need sales
efforts  in  Alabama,  Florida  and  Tennessee.  Consolidated  operating  income
increased  from $13.7  million for the nine months ended  September 30, 1997, to
$14.8 million for the nine months ended September 30, 1998.

     Consolidated  contribution  margin of $25.8 million  increased 5.3% for the
nine months  ended  September  30,  1998 from $24.5  million for the nine months
ended September 30, 1997, with funeral contribution margin of 34.5% for the nine
months  ended  September  30,1998  compared to 35.9% for the nine  months  ended
September 30, 1997 and cemetery contribution margin of 33.3% for the nine months
ended September 30, 1998 compared to 28.9% 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  remained  constant at $2.5
million for the nine months ended  September  30, 1998 and 1997. As a percentage
of consolidated revenue, general and administrative expense decreased to 3.3% 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  $0.2  million  to $8.5
million for the nine months ended  September  30, 1998  compared to $8.3 million
for the  corresponding  period in 1997. This increase is primarily the result of
increased depreciation on capital expenditures.

     Interest  expense of $18.2 million for the nine months ended  September 30,
1998 increased by $0.4 million  compared to $17.8 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 September 30, 1998, the Company had a net working  capital
surplus of $9.0 million and a current ratio of 1.76:1, 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 nine months ended September 30,
1997, the Company purchased three cemeteries and a funeral home for $2.6 million
and sold two funeral homes for $2.0 million with the  acquisition  of a cemetery
and two  funeral  homes  occurring  in the  comparable  period  in 1998 for $0.8
million.

     In the nine months ended September 30, 1998 and 1997, the Company used $2.1
million and $2.8  million for capital  expenditures,  respectively.  In the nine
months  ended  September  30,  1998,  the Company paid $1.3 million in principal
payments on  long-term  debt,  principally  relating to payment of former  owner
obligations,  compared to $4.5 million in the  corresponding  period in 1997. In
the nine months ended  September  30, 1997 the Company  borrowed $9.5 million on
its  revolving  line of credit  compared to $7.3  million for the same period in
1998.

     The Company estimates that capital  expenditures net of estimated disposals
of $0.6 million 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 proceedsof 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 September 30, 1998, the Company had  approximately  $210.2 million of
indebtedness   outstanding   and   approximately   $5.6   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 September 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 result of operations.


Year 2000 Issues

     Overview.  As the Year 2000  approaches,  all companies  that use computers
must address "Year 2000" issues.  Year 2000 issues result from the past practice
in the  computer  industry of using two digits  rather than four to identify the
applicable year. This practice can create  breakdowns or erroneous  results when
computers perform operations involving years later than 1999.

     The Company's State of Readiness.  The Company has devised and commenced an
extensive  compliance  plan with the  objective of bringing all of the Company's
information technology (IT) systems and non-IT systems into Year 2000 compliance
by the end of the second  quarter of fiscal  year 1999.  The Company has divided
its systems  into (i)  critical  systems,  consisting  of IT  systems,  and (ii)
non-critical  systems,  consisting of a mixture of IT and non-IT  systems.  Each
system will be evaluated and brought into compliance in four phases:


                                                                  -11-
<PAGE>


          Phase I    --   Evaluate and assess compliance of the system
          Phase II   --   Identify whether a non-compliant system needs to be
                          retired, replaced or outsourced and estimate the costs
                          involved.
          Phase III  --   Commit and assign resources need to implement
                          compliance plan
          Phase IV   --   Modify or replace non-compliant system

     The Company's systems used to maintain  financial records were either found
to be  compliant  or have  completed  Phases I through IV. As a result,  100% of
these  critical  systems are  currently  compliant.  One hundred  percent of the
Company's other critical  systems have completed Phase I, and fifty percent were
found  to be  compliant.  The  remaining  non-compliant  critical  systems  have
completed Phases II and III and commenced Phase IV, with a scheduled  completion
of the second quarter of fiscal year 1999.

     Seventy-five  percent of the Company's  non-critical systems have completed
Phase I and were either found to be compliant  or made  compliant by  completing
Phases II through IV. The Company  anticipates  that the remaining  non-critical
systems will be evaluated  and brought into  compliance by the end of the second
quarter of fiscal year 1999.

     In  addition,  the Company  has  communicated  with all of its  significant
vendors,  financial  institutions  and insurers to determine the extent to which
these third parties'  failure to resolve their Year 2000 issues could affect the
Company's operations. The Company has indications that its significant suppliers
expect to be in compliance  with Year 2000 issues ranging between fourth quarter
of 1998 and  second  quarter  of 1999.  The  Company  expects  to  complete  its
evaluation  of third  parties'  compliance  by the end of the second  quarter of
fiscal year 1999.

     The Costs Involved. Because all of the Company's computer systems have been
replaced in the past two years as part of the Company's ongoing goal to maintain
state of the art technology,  the Company's Year 2000 compliance costs have been
relatively low. To date, the Company has incurred minor expenses in implementing
its compliance plan.  Management estimates that the total cost to be incurred by
the Company to complete its compliance plan will be insignificant. This estimate
includes the use of both internal and external  resources.  All costs related to
the Year 2000 compliance plan are included in the Information Systems budget and
are based on management's best estimates.  There can be no guarantee that actual
results will not differ from those estimated.

     Risks. If the Company is not successful in its efforts to bring its systems
into Year 2000  compliance,  the Company's  ability to procure  merchandise in a
timely and cost-effective manner may be impaired,  daily business procedures may
be delayed due to the use of manual procedures, and some business procedures may
be interrupted if no  alternative  methodology is available,  which could have a
material adverse effect on the Company's operations.

     The Company has no  guarantee  that the  systems of third  parties  will be
brought into compliance on a timely basis. The non-compliance of a third party's
system could have a material adverse effect on the Company's operations.

     The Company's contingency Plan. Although the Company believes that its Year
2000  compliance  plan is adequate to achieve full system  operation on a timely
basis, the Company is in the process of developing a contingency plan to address
the possibility of the Company's and third parties' non-compliance.  The Company
anticipates  completing its contingency plan by the end of the second quarter of
fiscal year 1999.









                                                                  -12-
<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 14 and 15, 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
November 10, 1998















                                                                 -13-
<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.

      10.4(a)     First Amendment to Credit  Agreement dated September 30, 1998
                  among Prime Succession,  Inc. (formerly known as Prime 
                  Succession  Acquisition Corp.), Prime Holdings, Inc. (formely
                  known as Prime Succession, Inc.), Goldman, Sachs & Co. L.P., 
                  as syndication  agent and arranging agent, The Bank of Nova
                  Scotia, as administrative agent.

      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.


                                                                 -14-
<PAGE>



      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
                                                                -15-
<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           Nine months ended
                                                              September 30,               September 30,
                                                           ------------------------------------------------

                                                            1998          1997           1998        1997
                                                            ----          ----           ----        ----
         Ratio of Earnings to
         Fixed Charges


         Earnings:
          Loss before income taxes                          (2,201)        (2,453)     (3,389)      (4,099)
          Add:  Fixed charges, net                           6,240          6,327      18,918       18,499

         Income before income taxes and fixed
            charges, net                                     4,039          3,874      15,529       14,400

         Fixed Charges:
         Total interest expense (1)                          6,006          6,083      18,189       17,846
         Interest factor in rents (2)                          234            244         729          653

                         Total fixed charges                 6,240          6,327      18,918       18,499

         Ratio of earnings to fixed charges                   0.65           0.61        0.82         0.78

         Coverage deficiency (3)                             2,201          2,453       3,389        4,099

             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>