<PAGE>   1
================================================================================


                       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, 1999

                                       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)
                              ---------------------


<TABLE>
<S>                                                                             <C>
                          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)
</TABLE>

                                 (606) 746-6800
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


         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 October 29,
1999, was 100.


================================================================================

<PAGE>   2


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                      PAGE
PART I.       FINANCIAL  INFORMATION

<S>                                                                                                                   <C>
              ITEM 1.      FINANCIAL  STATEMENTS:

              CONSOLIDATED  BALANCE  SHEETS
                  as of September 30, 1999 and December 31, 1998                                                         1

              CONSOLIDATED  STATEMENTS OF OPERATIONS
                  for the Three Months Ended September 30, 1999 and 1998                                                 3
                  and the Nine Months Ended September 30, 1999 and 1998

              CONSOLIDATED  STATEMENTS  of  CASH  FLOWS
                  for the Nine Months Ended September 30, 1999 and 1998                                                  4

              NOTES  to INTERIM CONSOLIDATED  FINANCIAL  STATEMENTS                                                      5

              ITEM 2.      MANAGEMENT'S  DISCUSSION  AND  ANALYSIS
                           OF  FINANCIAL  CONDITION  AND  RESULTS  OF  OPERATIONS                                        6

              ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                   12


PART II.      OTHER  INFORMATION

              ITEM 5.      OTHER  INFORMATION                                                                           13

              ITEM 6.      EXHIBITS  AND  REPORTS  ON  FORM  8-K                                                        13


SIGNATURES                                                                                                              13
</TABLE>



















                                       (i)
<PAGE>   3

                                     PART I

ITEM 1.   FINANCIAL STATEMENTS



                     PRIME SUCCESSION, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                September 30, 1999        December 31, 1998
                                                                                ------------------        -----------------
                                                                                    (unaudited)
                                   Assets

<S>                                                                                <C>                     <C>
Cash and cash equivalents                                                          $   4,832,272           $   1,146,670
  Receivables:
     Trade, less allowance of $2,669,035 and $2,086,520                               11,949,004              14,718,380
     Other                                                                               791,371                 998,020
                                                                                   -------------           -------------
                  Total current receivables                                           12,740,375              15,716,400
                                                                                   -------------           -------------

Inventories:
     Merchandise                                                                       3,707,887               3,582,912
     Cemetery lots and mausoleum spaces                                                  864,088               1,178,137
                                                                                   -------------           -------------
                 Total current inventories                                             4,571,975               4,761,049
                                                                                   -------------           -------------
Prepaids and other current assets                                                        343,900                 607,407
Deferred income taxes                                                                    588,088                 588,088
                                                                                   -------------           -------------
                  Total current assets                                                23,076,610              22,819,614
                                                                                   -------------           -------------
Property and equipment:
     Land and land improvements                                                       16,841,886              16,447,209
     Buildings and improvements                                                       50,573,751              48,751,390
     Equipment, furniture and fixtures                                                10,622,599              10,221,223
     Accumulated depreciation                                                         (8,120,869)             (5,906,519)
                                                                                   -------------           -------------
                  Net property and equipment                                          69,917,367              69,513,303
                                                                                   -------------           -------------
Developed cemetery properties                                                         14,698,112              14,660,921
Undeveloped cemetery properties                                                       30,992,379              30,992,379
Goodwill, less accumulated amortization of $17,555,095 and $13,222,612               213,733,434             218,065,917
Other intangible assets, less accumulated amortization of $12,619,054 and
    $9,953,60                                                                         15,883,292              19,263,641
Long-term receivables, less allowance of $3,769,007 and $6,205,730                    15,219,352              15,221,081
Other assets                                                                             837,110                 585,439
                                                                                   -------------           -------------
                                                                                   $ 384,357,656           $ 391,122,295
                                                                                   =============           =============
</TABLE>


      See accompanying notes to interim consolidated financial statements.



                                      -1-

<PAGE>   4




                     PRIME SUCCESSION, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                  September 30, 1999      December 31, 1998
                                                                                  ------------------      -----------------

                                                                                      (unaudited)
                      Liabilities and Shareholders' Equity
                      ------------------------------------
<S>                                                                                 <C>                     <C>
Accounts payable                                                                    $   1,914,324           $   2,031,580
Other accrued expenses                                                                  7,051,744               9,708,454
Current installments of obligations under agreements with former owners                 2,697,070               2,732,386
Current installments of long-term debt                                                  4,472,491               1,396,074
Due to related party                                                                      275,000                  83,333
                                                                                    -------------           -------------
                  Total current liabilities                                            16,410,629              15,951,827
                                                                                    -------------           -------------

Deferred merchandise liabilities and revenues, less trust fund deposits                15,908,155              14,384,071
Obligations under agreements with former owners, less current installments             10,362,533              12,537,499
Long-term debt, less current installments                                             209,489,416             208,888,446
Deferred income taxes                                                                  16,523,017              16,523,017
Other long-term liabilities                                                             3,219,434               3,719,511

Shareholders' equity:
     Common stock, par value $.01 per share, 1,000 shares authorized;
        100 issued and outstanding shares                                                       1                       1
     Additional paid-in capital                                                       128,597,624             128,888,394
     Accumulated deficit                                                              (16,153,153)             (9,770,471)
                                                                                    -------------           -------------
                  Total shareholders' equity                                          112,444,472             119,117,924
                                                                                    -------------           -------------
                                                                                    $ 384,357,656           $ 391,122,295
                                                                                    =============           =============
</TABLE>


      See accompanying notes to interim consolidated financial statements.






                                       -2-

<PAGE>   5



                     PRIME SUCCESSION, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED                            NINE MONTHS ENDED
                                                        SEPTEMBER 30,                                SEPTEMBER 30,
                                                        -------------                                -------------

                                                   1999                   1998                   1999                    1998
                                                   ----                   ----                   ----                    ----

<S>                                              <C>                   <C>                     <C>                     <C>
Revenues:
  Funeral services                               $17,591,104          $ 17,373,676            $ 56,518,980            $ 56,477,498
  Cemetery sales                                   3,391,819             6,317,333              12,558,639              18,911,323
                                                ------------          ------------            ------------            ------------
                                                  20,982,923            23,691,009              69,077,619              75,388,821
Costs and expenses:
  Funeral homes                                   11,868,002            11,940,408              36,935,871              37,044,373
  Cemetery                                         2,993,173             4,208,433               8,899,428              12,598,202
                                                ------------          ------------            ------------            ------------
                                                  14,861,175            16,148,841              45,835,299              49,642,575
Corporate general and
     administrative expenses                         880,783               927,252               2,574,630               2,467,398
Depreciation and amortization                      2,968,700             2,810,166               8,762,290               8,479,614
                                                ------------          ------------            ------------            ------------
Operating income                                   2,272,265             3,804,750              11,905,400              14,799,234
Other expenses:
  Interest expense, including
  amortization of deferred loan
  costs (see Note 1)                               6,350,969             6,005,984              18,206,136              18,188,728
                                                ------------          ------------            ------------            ------------
Loss before income taxes                          (4,078,704)           (2,201,234)             (6,300,736)             (3,389,494)
Income tax expense                                   (32,202)              (32,641)                (81,946)                (70,141)
                                                ------------          ------------            ------------            ------------
Net loss                                        $ (4,110,906)         $ (2,233,875)           $ (6,382,682)           $ (3,459,635)
                                                ============          ============            ============            ============
</TABLE>

      See accompanying notes to interim consolidated financial statements.
















                                       -3-

<PAGE>   6



                     PRIME SUCCESSION, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                              NINE MONTHS ENDED
                                                                                                SEPTEMBER 30,
                                                                                           ----------------------
                                                                                           1999              1998
                                                                                           ----              ----
<S>                                                                                      <C>                <C>
Cash flows from operating activities:
  Net loss                                                                               $ (6,382,682)      $ (3,459,635)
  Adjustments to reconcile net loss to net cash
     provided by (used in) operating activities:
          Depreciation and amortization                                                    10,062,099          9,795,033
          Depletion of cemetery property                                                      594,248            909,217
          (Gain) loss on sale of assets                                                       (27,700)             7,217
          Changes in operating assets and liabilities
            net of effects of acquisition of subsidiaries:
                 Receivables (net)                                                          2,977,753         (1,217,761)
                 Inventories                                                                 (442,365)        (1,068,363)
                 Accounts payable and accrued expenses                                     (2,773,966)        (3,526,285)
                 Deferred merchandise liabilities and revenue (net)                         1,219,371         (3,763,523)
                 Other long-term liabilities                                                 (500,077)         1,243,696
                 Other                                                                        201,717           (845,237)
                                                                                        -------------       ------------
Net cash provided by (used in) operating activities                                         4,928,398         (1,925,641)
                                                                                        -------------       ------------

Cash flows from investing activities:
     Proceeds from the disposal of assets                                                     166,377            426,023
     Purchases of property and equipment                                                   (2,862,771)        (2,100,802)
     Net cash received for sale of business                                                        --            250,000
     Net cash paid for purchase of business                                                        --           (805,000)
                                                                                        -------------       ------------
Net cash used in investing activities                                                      (2,696,394)        (2,229,779)
                                                                                        -------------       ------------

Cash flows from financing activities:
     Net proceeds of bank indebtedness under revolving loan                                 5,000,000          7,300,000
     Proceeds from long-term debt                                                                  --            113,307
     Payments on long-term debt                                                            (1,336,120)        (1,342,430)
     Payments on obligations under agreements with former owners                           (2,210,282)        (1,828,760)
                                                                                        -------------       ------------
Net cash provided by financing activities                                                   1,453,598          4,242,117
                                                                                        -------------       ------------
Net increase in cash and cash equivalents                                                   3,685,602             86,697
Cash and cash equivalents at beginning of period                                            1,146,670          1,555,415
                                                                                        -------------       ------------
Cash and cash equivalents at end of period                                              $   4,832,272       $  1,642,112
                                                                                        =============       ============
</TABLE>

      See accompanying notes to interim consolidated financial statements.





                                       -4-

<PAGE>   7



                     PRIME SUCCESSION, INC. AND SUBSIDIARIES

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



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


<TABLE>
<CAPTION>
                 Three Months Ended                                    Nine Months Ended
                    September 30,                                        September 30,
                    -------------                                        -------------
           1999                      1998                       1999                      1998
           ----                      ----                       ----                      ----
<S>                               <C>                        <C>                       <C>
         $412,281                  $438,473                  $1,299,806                $1,315,419
</TABLE>

  (2)    Footnote disclosure which would substantially duplicate the disclosure
         contained in the Annual Report on Form 10-K for the year ended December
         31, 1998 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, 1999. All such adjustments are of a normal recurring
         nature.






















                                       -5-

<PAGE>   8



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 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
September 30, 1999, the Company through its subsidiaries owns and operates 142
funeral homes and 20 cemeteries in 19 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 $69.1 million and $75.4 million for the
nine months ended September 30, 1999 and 1998, respectively. Sales of funeral
services of $56.5 million and cemetery sales of $12.6 million accounted for
approximately 81.8% and 18.2%, respectively, of total net sales for the nine
months ended September 30, 1999.

         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. 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>   9



RESULTS OF OPERATIONS

         The Company's operations are detailed below for the three months and
the nine months ended September 30, 1999 and 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.
Income taxes are presented as a percentage of losses before income taxes.

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998

<TABLE>
<CAPTION>
                                                     Three Months Ended               Three Months Ended
                                                        September 30,                    September 30,
                                                        -------------                    -------------
                                                    1999             1998            1999             1998
                                                    ----             ----            ----             ----
                                                    (millions of dollars)                  (percent)
<S>                                                <C>             <C>              <C>              <C>
REVENUE
     Funeral                                       $17.6           $17.4            83.8%            73.4%
     Cemetery                                        3.4             6.3            16.2             26.6
                                                   -----           -----           -----            -----
         Total                                     $21.0           $23.7           100.0%           100.0%
                                                   =====           =====           =====            =====
GROSS MARGIN
     Funeral                                       $ 5.7           $ 5.5            32.4%            31.6%
     Cemetery                                        0.5             2.1            14.7             33.3
                                                   -----           -----
         Total                                       6.2             7.6            29.5             32.1
EXPENSES
     Corporate general and administrative            0.9             0.9             4.3              3.8
     Depreciation and amortization                   3.0             2.9            14.3             12.2
                                                   -----           -----
EARNINGS FROM OPERATIONS                             2.3             3.8            11.0             16.0
     Interest on long-term debt                      6.4             6.0            30.5             25.3
                                                   -----           -----
LOSS BEFORE INCOME TAXES                            (4.1)           (2.2)          (19.5)            (9.3)
     Income taxes                                     --              --              --               --
                                                   -----           -----
NET LOSS                                           $(4.1)          $(2.2)          (19.5)%           (9.3)%
                                                   =====           =====
</TABLE>

     Consolidated revenues decreased 11.4% to $21.0 million for the three months
ended September 30, 1999 compared to $23.7 million in the corresponding period
for 1998, with funeral service revenues increasing 1.1% to $17.6 million
compared to $17.4million in the corresponding period in 1998, and cemetery
revenues decreasing 46.0% to $3.4 million compared to $6.3 million in the
corresponding period for 1998. Cemetery revenues decreased primarily due to a
restructuring of pre-need commission rates and decline in sales force.
Consolidated operating income decreased from $3.8 million for the three months
ended September 30, 1998, to $2.3 million for the three months ended September
30, 1999.

         Consolidated contribution margin of $6.2 million decreased 18.4% for
the three months ended September 30, 1999 from $7.6 million for the three months
ended September 30, 1998. Consolidated contribution margin decreased primarily
as a result of restructuring of pre-need commission rates and decline in sales
force which decreased cemetery revenues. Funeral contribution margin was 32.4%
for the three months ended September 30, 1999 compared to 31.6% for the three
months ended September 30, 1998 and cemetery contribution margin of 14.7% for
the three months ended September 30, 1999 compared to 33.3% for the


                                       -7-

<PAGE>   10



corresponding period in 1998. 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 $0.9
million for the three months ended September 30, 1999 compared to September 30,
1998. As a percentage of consolidated revenue, general and administrative
expense increased to 4.3% in 1999 from 3.8% for the corresponding period in
1998.

         Depreciation and amortization expense increased $0.1 million to $3.0
million for the three months ended September 30, 1999 compared to $2.9 million
for the corresponding period in 1998. The increase is primarily the result of
increased depreciation on capital expenditures.

         Interest expense of $6.4 million for the three months ended September
30, 1999 increased by $0.4 million compared to $6.0 million for the
corresponding period in 1998, primarily as a result of pricing premiums on
senior debt.

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998


<TABLE>
<CAPTION>
                                                     Nine months ended                Nine months ended
                                                        September 30,                     September 30,
                                                        -------------                     -------------
                                                   1999             1998            1999             1998
                                                   ----             ----            ----             ----
                                                    (millions of dollars)                  (percent)
                                                    ---------------------                  ---------
<S>                                                <C>             <C>              <C>              <C>
REVENUE
     Funeral                                       $56.5           $56.5            81.8%            74.9%
     Cemetery                                       12.6            18.9            18.2             25.1
                                                   -----           -----           -----            -----
          Total                                    $69.1           $75.4           100.0%           100.0%
                                                   =====           =====           =====            =====
GROSS MARGIN
     Funeral                                       $19.6           $19.5            34.7%            34.5%
     Cemetery                                        3.7             6.3            29.4             33.3
                                                   -----           -----
          Total                                     23.3            25.8            33.7             34.2
EXPENSES
     Corporate general and administrative            2.6             2.5             3.7              3.3
     Depreciation and amortization                   8.8             8.5            12.7             11.3
                                                   -----           -----
EARNINGS FROM OPERATIONS                            11.9            14.8            17.2             19.6
     Interest on long-term debt                     18.2            18.2            26.3             24.1
                                                   -----           -----
LOSS BEFORE INCOME TAXES                            (6.3)           (3.4)           (9.1)            (4.5)
     Income taxes                                    0.1             0.1            (1.6)             2.9
                                                   -----           -----
NET LOSS                                           $(6.4)          $(3.5)           (9.3)%            4.6%
                                                   =====           =====
</TABLE>


                                       -8-

<PAGE>   11



         Consolidated revenues decreased 8.4% to $69.1 million for the nine
months ended September 30, 1999 compared to $75.4 million in the corresponding
period for 1998, with funeral service revenues remaining constant at $56.5
million compared to the corresponding period in 1998, and cemetery revenues
decreasing 33.3% to $12.6 million compared to $18.9 million in the corresponding
period for 1998. Cemetery revenues decreased primarily due to a restructuring of
pre-need commission rates and decline in sales force. Consolidated operating
income decreased from $14.8 million for the nine months ended September 30,
1998, to $11.9 million for the nine months ended September 30, 1999.

         Consolidated contribution margin of $23.3 million decreased 9.7% for
the nine months ended September 30, 1999 from $25.8 million for the nine months
ended September 30, 1998. Consolidated contribution margin decreased primarily
as a result of restructuring of pre-need commission rates and decline in sales
force which decreased cemetery revenues. Funeral contribution margin was 34.7%
for the nine months ended September 30, 1999 compared to 34.5% for the nine
months ended September 30, 1998 and cemetery contribution margin of 29.4% for
the nine months ended September 30, 1999 compared to 33.3% for the corresponding
period in 1998. 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 increased to $2.6 million
for the nine months ended September 30, 1999 from $2.5 million for the
corresponding period in 1998. As a percentage of consolidated revenue, general
and administrative expense increased to 3.7% in 1999 from 3.3% for the
corresponding period in 1998. Corporate general and administrative expense
increased primarily due to personnel changes.

         Depreciation and amortization expense increased $0.3 million to $8.8
million for the nine months ended September 30, 1999 compared to $8.5 million
for the corresponding period in 1998. 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, 1999 remained constant compared to the corresponding period in 1998.


LIQUIDITY AND CAPITAL RESOURCES

         The Company's primary sources of cash since 1995 have been funds
provided by operations and proceeds from additional long-term debt and capital
contributions. As of September 30, 1999, the Company had a net working capital
surplus of $6.7 million and a current ratio of 1.41:1, compared to a net working
capital surplus of $6.9 million and a current ratio of 1.43:1 as of December 31,
1998.

         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,
1998, the Company acquired two funeral homes and a cemetery for $0.8 million.
The Company made no acquisitions in the nine months ended September 30, 1999.

          In the nine months ended September 30, 1999 and 1998, the Company used
$2.9 million and $2.1 million for capital expenditures, respectively. In the
nine months ended September 30, 1999, the Company paid $1.3 million in principal
payments on long-term debt compared to $1.3 million in the corresponding period
in 1998. In the nine months ended September 30, 1998, the Company borrowed a net
of $7.3 million on its revolving line of credit. The Company had a net borrowing
on its revolving line of credit of $5.0 million for the same period in 1999.

          The Company estimates that capital expenditures net of estimated
disposals of $2.0 million in 1999 to be used in part for the repair and
improvement of existing facilities. The Company also expects to invest
approximately $0.5 million in 1999 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.





                                       -9-

<PAGE>   12



          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 $90.0 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 $25.0 million, the proceeds of which may 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 $1.0 million in each of the first three years after the anniversary
of the closing date of the Bank Term Facility (the "Bank Closing"); $4.0 million
in the fourth year after the Bank Closing; $9.0 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.

          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 Bank 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 Bank 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 $100.0
million of 10 3/4% Senior Subordinated Notes due 2004, which were exchanged in
January 1997 for $100.0 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, 1999, the Company was in default of certain
negative covenants set forth in the Credit Agreement relating to the Bank Credit
Facilities.  The syndicate of financial institutions and The Bank of Nova
Scotia have granted a conditional waiver of non-compliance that will expire on
January 31, 2000. There can be no assurance that the Company will be able to
secure from its lenders a further waiver at January 31, 2000 if such default
continues or if any other events of default are in existence at such time.

          As of September 30, 1999, the Company had approximately $214.0 million
of indebtedness outstanding and approximately $0.2 million of borrowing
availability under the Revolving Credit Facility. On July 14, 1999, the State of
Florida approved the Company's application to change its method of funding
pre-need merchandise liabilities from trust funds to surety bonds, thus allowing
the Company to replace approximately $6.8 million of trust funds with a surety
bond of $8.5 million. 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

                                      -10-

<PAGE>   13



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 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 five phases:

<TABLE>
<S>                  <C>            <C>
              -      Phase I:       Awareness - Prepare and present comprehensive report to management

              -      Phase II:      Assessment - Identify and evaluate all systems for Year 2000 compliance

              -      Phase III:     Compliance - Complete necessary Year 2000 modifications

              -      Phase IV:      Testing - Test all modified systems for Year 2000 compliance

              -      Phase V:       Implementation - Return Year 2000 compliance systems to daily operation
</TABLE>

         The Company's systems used to maintain financial records were either
found to be compliant or have completed Phases I through V. As a result, 100% of
these critical systems are currently compliant. All of the Company's other
critical and noncritical systems have also completed Phase V.

         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 received indication that its significant
suppliers expected to be Year 2000 compliant prior to the end of the second
quarter of 1999. The Company has completed its evaluation of third parties'
compliance.

         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 has developed a contingency plan to address the
possibility of the Company's and third parties' non-compliance.







                                      -11-

<PAGE>   14



ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


         The market risk inherent in the Company's market risk sensitive
instruments and positions is the potential change arising from increases or
decreases in the prices of interest rates as discussed below. Generally, the
Company's market risk sensitive instruments and positions are characterized as
"other than trading". The Company's exposure to market risk as discussed below
includes "forward-looking statements" and represents an estimate of possible
changes in fair value or future earnings that would occur assuming hypothetical
future movements in interest rates. The Company's views on market risk are not
necessarily indicative of actual results that may occur and do not represent the
maximum possible gains and losses that may occur, since actual gains and losses
will differ from those estimated, based upon actual fluctuations in interest
rates and the timing of transactions.


INTEREST

         The Company has entered into various fixed and variable rate debt
obligations.

         As of September 30, 1999, the carrying value of the company's long-term
fixed-rate debt was approximately $103.5 million, compared to fair value of
$53.5 million. Fair value was determined using quoted market prices, where
applicable, or discounted future cash flows based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements. If
these instruments are held to maturity, no change in fair value will be
realized.

         As of September 30, 1998, the Company had $110.5 million in
variable-rate debt. Each 0.5% change in average interest rates applicable to
such debt would result in a change of approximately $0.5 million in the
Company's pre-tax earnings.

         The Company monitors its mix of fixed and variable rate debt
obligations in light of changing market conditions and from time to time may
alter that mix by, for example, refinancing balances outstanding under its
variable rate revolving credit facilities with fixed-rate debt, or by entering
into interest rate swaps or other interest rate hedging transactions.

                                      -12-

<PAGE>   15



                                     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 2
"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/ ARTHUR J. ANSIN
                                  -------------------
                                  Arthur J. Ansin
                                  Chief Financial Officer,
                                  Secretary and Treasurer
October 29, 1999











                                      -13-

<PAGE>   16



                                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 Succession Holdings, Inc.
                  (formerly known as Prime Succession, Inc.), Goldman Sachs
                  Credit Partners L.P., as syndication agent and arranging
                  agent, and The Bank of Nova Scotia as administrative agent.





                                      -14-

<PAGE>   17





(a)  EXHIBIT
     NUMBER                            DOCUMENT DESCRIPTION
     ------                            --------------------


         10.4(b)  Limited Waiver and Amendment dated November 12, 1999 entered
                  into by and among Prime Succession, Inc. (formerly known as
                  Prime Succession Acquisition Corp.), Prime Succession
                  Holdings, Inc., (formerly known as Prime Succession, Inc.),
                  the Financial Institutions listed therein, Goldman Sachs
                  Credit Partners L.P., as syndication agent and arranging
                  agent, and 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.

         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-