FOCUS-Loewen posts big loss a day after bank deal
(Updates throughout with earnings report, credit rating cut; figures in U.S. dollars unless noted)
By Allan Dowd
VANCOUVER, March 31 (Reuters) - Struggling funeral home firm Loewen Group Inc. (Toronto:LWN.TO - news) belatedly released its earnings on Wednesday, posting a nearly $600 million loss for 1998 despite a slight increase in revenues.
The announcement of a loss, which the company had warned was coming, came a day after Loewen reached a crucial agreement with its banks to ease an immediate credit crunch that many had speculated would force it into bankruptcy.
Although it dodged a bullet with the banking agreement, Loewen officials acknowledged on Wednesday the company faced major financial hurdles that could force it to seek protection from creditors later in the year.
Loewen said the $599 million ($8.22 per share) loss included a $315.2 million charge for write-downs on its Prime Succession and Rose Hills investments and an accrual of losses for potential future purchase obligations.
The loss for the one-time stock market darling compared with a net gain of $41.8 million (48 cents a share) in 1997, and Loewen acknowledged it suffered both ''significant net loss and negative cash flow'' last year.
The company, North America's second-largest funeral home and cemetery operator, has struggled for months with debt and organization problems created by what it now acknowledges was an overly aggressive expansion policy in the 1990s.
Loewen had delayed its 1998 fourth-quarter and year-end earnings reports as it negotiated with its bankers. The delay forced it to release unaudited figures and postpone its planned annual meeting until June 4.
As part of its reorganization, Loewen's directors on Wednesday agreed to reduce the board to seven members from 14, six of whom will be independent. Six members of the board also resigned immediately.
Loewen officials said that despite the poor net earnings, revenues increased in 1998 by 2.1 percent. The increase came through funeral sales rather than cemetery sales, which were down 3.2 percent.
Both funeral and cemetery sales were down significantly in the fourth quarter of 1998, forcing total revenue in the period to drop 10 percent. Other companies in the ''deathcare'' industry also reported weak fourth-quarter results.
The loss announcement came at the end of a day in which Loewen's stock price rebounded slightly on news it had won the reprieve from its bankers. Its shares were up 47 Canadian cents to close at C$2.70 on the Toronto Stock Exchange.
Key to the deal was an agreement by Loewen to use $103 million of the $193 million from the pending sale of 124 U.S. cemeteries to a New York investment group as a permanent paydown on its bank debt.
Despite the deal, Standard and Poor's on Wednesday again cut Loewen's corporate credit rating, this time to CCC from B minus. It remained concerned about Loewen's liquidity and refinancing risks associated with $300 million in pass-through asset (PATS) notes redeemable on Oct. 1. |
