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9-201-082
REV: MARCH 4, 2002
The Loewen Group, Inc. (Abridged)
In March 1999, John Lacey and the management team at the Loewen Group, Inc., had to decide what course of action to take in light of the company's imminent financial difñculties. On January 22,1999, Lacey, a renowned turnaround specialist, was appointed chairman of Loewen, the
second largest death care company in North America. Headquartered in Burnaby, British Columbia,
Loewen owned over 1,100 funeral homes and more than 400 cemeteries in the U.S. and Canadá; it
also owned 32 funeral homes in the United Kingdom. The company had come a long way since its modest
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The Loewen Group, Inc. (Abridged)
201-082
on hand However, this would not be sufficient to meet several large interest and principal payments
Loewen had not yet missed any payments on its debt, and had approximately $30 miliorof-cash
that were due over the coming months. Apayment default would only make negotiations with creditors more difficult, and increase the likelihood of bankruptcy. This possibility would no doubt company's debts.
weigh heavily on the managers' minds as they turned to the important task of restructur.ng the
The Death Care Business
Services; and related producís like cemetery plots, caskets, urns, and gravesite markers Funeral services and cemetery plots can be sold either on an "at-need" basis (i e., at the time of death) or on a "prearranged" or "pre-need" basis. In the latter case, payment for afuneral service or cemetery pío is made in advance, and the proceeds are either held in trust or invested in an insurance policy (that ñames the death care firm as beneficiary).
The primary activities of death care firms include the provisión of funeral, burial, and
The amount of annual revenue allocated to funeral home versus cremation services is quickly evening out, and cremation is predicted by the NFDA to completely overtake burial selection within the next
Public burial sites were intended to serve the whole community and are closely integrated into community history. The sites carry multiple social and political
If you select burial at a private cemetery, you can still claim certain burial benefits. With a private cemetery, you’re eligible for a Presidential Memorial Certificate, a burial flag, and your own headstone. Certain benefits can only be claimed at a national cemetery. For example, a plot, a headstone for your spouse, a grave liner, perpetual care, and opening and closing of the grave are only available for free at a national cemetery.
This is not an attractive industry but it’s a needed industry. Death is inevitable and we all will need this service one day. However, because of the cremation and cheaper alternatives the operating margins are decreasing for funeral homes. People want to celebrate the lives of loved ones in a unique way and they don’t need to spend $10,000 to do
Los Angeles National Cemetery is rumored to be full. They aren’t accepting new burials right now. However, there are a couple of exceptions. Veterans can share a gravesite with a family member. Moreover, spaces open up when a body is exhumed. That being said, exhumations are rare events.
There has always been a death industry but as the industry changes from product based purchases to experience based there is a growing need in the industry to accommodate for how the industry is doing to shift in the upcoming generations. The existing funeral homes are the traditional style interiors that the previous generation got accustom with the product base design, but more funerals are become more personal and deviate from the previous funeral ideas. Just like every funeral service is unique, the grieving process is different from one person to the next. With providing a service that takes into account of different techniques, whether through the space, social interaction or counselling helps process the grief of the individual.
Miscellaneous factors could impact on the possibilities of default. If any events as such bankruptcy, mergers and acquisitions or force majeure happen,
E. F Hutton as a broker and assistant manager, but when that firm merged with Shearson-
He was still faced with the problem of raising close to $10 million on an equity base
(100%) of the assets in the Practice (the "Purchased Interest"). It is intended that the parties proceed with and endeavor to complete this transaction on the following
Will have to worry about having enough cash flow to pay for several different interest payments and
Basically, it is a pot of money set aside just in case something happens that is unforeseen i.e., a job loss or illness.
1. Structural – the company needs to flatten out the management authority for better communication at all levels. The teams are lacking structure to implement TQM and understand of how it can affect quality.
The funeral home is usually the buyers first point of contact, therefore the funeral home has first chance at selling all related services and supplies.
The “pre need” services acted as an advantage, for people who would pay money today for their funeral services in the future. And since the funeral services have almost fixed expenses between today and the future, whatever money Loewen got from this option would be invested in securities and in insurance contracts, thus creating more value, or used as additional cash for day to day operations and investment in the company.