##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended July 31, 2010
 or
 o
    
    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: 1-15449
 
 STEWART ENTERPRISES, INC.
  LOUISIANA
(State or other jurisdiction of incorporation or organization)
    
    72-0693290
(I.R.S. Employer Identification No.)1333 South Clearview Parkway 
Jefferson, Louisiana
(Address of principal executive offices)
    
    70121
(Zip Code)
 
 Registrants telephone number, including area code: (504) 729-1400
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o x




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##### 



PagePart I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings 
Three Months Ended July 31, 2010 and 2009
    
    
    3Condensed Consolidated Statements of Earnings 
Nine Months Ended July 31, 2010 and 2009
    
    
    4Condensed Consolidated Balance Sheets 
July 31, 2010 and October 31, 2009
    
    
    5Condensed Consolidated Statement of Shareholders Equity 
Nine Months Ended July 31, 2010
    
    
    7Condensed Consolidated Statements of Cash Flows 
Nine Months Ended July 31, 2010 and 2009
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    47Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    59Item 4. Controls and Procedures
    
    
    60Part II. Other InformationItem 1. Legal Proceedings
    
    
    60Item 1A. Risk Factors
    
    
    60Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    61Item 6. Exhibits
    
    
    61Signatures
    
    
    63EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
 (Unaudited)
 (Dollars in thousands, except per share amounts)
 Three Months Ended July 31,2010
    
    
    2009(As Adjusted)Revenues:Funeral
    
    $
    67,042
    
    
    $
    66,017Cemetery
    
    
    55,873
    
    
    
    51,735122,915
    
    
    
    117,752Costs and expenses:Funeral
    
    
    52,527
    
    
    
    51,607Cemetery
    
    
    48,188
    
    
    
    46,812100,715
    
    
    
    98,419Gross profit
    
    
    22,200
    
    
    
    19,333Corporate general and administrative expenses
    
    
    (7,686
    )
    
    
    (8,089
    )Hurricane related charges, net
    
    
    (30
    )
    
    
    (46
    )Net impairment losses on dispositions
    
    
    
    
    
    
    (117
    )Other operating income, net
    
    
    607
    
    
    
    397Operating earnings
    
    
    15,091
    
    
    
    11,478Interest expense
    
    
    (6,184
    )
    
    
    (6,597
    )Gain (loss) on early extinguishment of debt
    
    
    (106
    )
    
    
    2,414Investment and other income, net
    
    
    62
    
    
    
    12Earnings before income taxes
    
    
    8,863
    
    
    
    7,307Income taxes
    
    
    2,824
    
    
    
    1,215Net earnings
    
    $
    6,039
    
    
    $
    6,092Net earnings per common share:Basic
    
    $
    .06
    
    
    $
    .07Diluted
    
    $
    .06
    
    
    $
    .07Weighted average common shares outstanding (in thousands):Basic
    
    
    92,207
    
    
    
    91,936Diluted
    
    
    92,499
    
    
    
    92,061Dividends declared per common share
    
    $
    .030
    
    
    $
    .025
  3




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
 (Unaudited)
 (Dollars in thousands, except per share amounts)
 Nine Months Ended July 31,2010
    
    
    2009(As Adjusted)Revenues:Funeral
    
    $
    210,536
    
    
    $
    209,007Cemetery
    
    
    165,138
    
    
    
    154,693375,674
    
    
    
    363,700Costs and expenses:Funeral
    
    
    160,079
    
    
    
    157,817Cemetery
    
    
    143,310
    
    
    
    137,872303,389
    
    
    
    295,689Gross profit
    
    
    72,285
    
    
    
    68,011Corporate general and administrative expenses
    
    
    (20,188
    )
    
    
    (22,601
    )Hurricane related charges, net
    
    
    (62
    )
    
    
    (566
    )Separation charges
    
    
    
    
    
    
    (275
    )Net impairment losses on dispositions
    
    
    
    
    
    
    (215
    )Other operating income, net
    
    
    1,051
    
    
    
    960Operating earnings
    
    
    53,086
    
    
    
    45,314Interest expense
    
    
    (18,531
    )
    
    
    (21,358
    )Gain (loss) on early extinguishment of debt
    
    
    (89
    )
    
    
    5,798Investment and other income, net
    
    
    122
    
    
    
    85Earnings before income taxes
    
    
    34,588
    
    
    
    29,839Income taxes
    
    
    12,671
    
    
    
    10,115Net earnings
    
    $
    21,917
    
    
    $
    19,724Net earnings per common share:Basic
    
    $
    .24
    
    
    $
    .21Diluted
    
    $
    .23
    
    
    $
    .21Weighted average common shares outstanding (in thousands):Basic
    
    
    92,124
    
    
    
    91,883Diluted
    
    
    92,397
    
    
    
    91,926Dividends declared per common share
    
    $
    .090
    
    
    $
    .075
  4




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 (Dollars in thousands, except per share amounts)
 July 31, 2010
    
    
    October 31, 2009(As Adjusted)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    59,673
    
    
    $
    62,808Certificates of deposit and marketable securities
    
    
    15,429
    
    
    
    Receivables, net of allowances
    
    
    57,088
    
    
    
    59,439Inventories
    
    
    36,115
    
    
    
    36,156Prepaid expenses
    
    
    7,760
    
    
    
    6,748Deferred income taxes, net
    
    
    25,472
    
    
    
    21,715Total current assets
    
    
    201,537
    
    
    
    186,866Receivables due beyond one year, net of allowances
    
    
    62,349
    
    
    
    63,011Preneed funeral receivables and trust investments
    
    
    400,378
    
    
    
    389,512Preneed cemetery receivables and trust investments
    
    
    201,071
    
    
    
    193,417Goodwill
    
    
    247,236
    
    
    
    247,236Cemetery property, at cost
    
    
    383,910
    
    
    
    385,977Property and equipment, at cost:Land
    
    
    43,621
    
    
    
    43,677Buildings
    
    
    335,832
    
    
    
    329,685Equipment and other
    
    
    190,884
    
    
    
    187,100570,337
    
    
    
    560,462Less accumulated depreciation
    
    
    278,689
    
    
    
    261,005Net property and equipment
    
    
    291,648
    
    
    
    299,457Deferred income taxes, net
    
    
    96,798
    
    
    
    113,398Cemetery perpetual care trust investments
    
    
    222,368
    
    
    
    205,476Other assets
    
    
    12,694
    
    
    
    14,654Total assets
    
    $
    2,119,989
    
    
    $
    2,099,004
  5




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 July 31, 2010
    
    
    October 31, 2009(As Adjusted)LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5
    
    
    $
    5Accounts payable and accrued expenses
    
    
    20,896
    
    
    
    25,604Accrued payroll and other benefits
    
    
    13,730
    
    
    
    15,200Accrued insurance
    
    
    21,082
    
    
    
    20,504Accrued interest
    
    
    6,243
    
    
    
    4,561Estimated obligation to fund cemetery perpetual care trust
    
    
    13,533
    
    
    
    14,010Other current liabilities
    
    
    14,239
    
    
    
    14,099Income taxes payable
    
    
    1,663
    
    
    
    2,028Total current liabilities
    
    
    91,391
    
    
    
    96,011Long-term debt, less current maturities
    
    
    325,482
    
    
    
    339,721Deferred preneed funeral revenue
    
    
    245,225
    
    
    
    247,825Deferred preneed cemetery revenue
    
    
    261,271
    
    
    
    266,964Deferred preneed funeral and cemetery receipts held in trust
    
    
    533,982
    
    
    
    514,787Perpetual care trusts corpus
    
    
    219,613
    
    
    
    204,168Other long-term liabilities
    
    
    19,803
    
    
    
    20,871Total liabilities
    
    
    1,696,767
    
    
    
    1,690,347Commitments and contingenciesShareholders equity:Preferred stock, $1.00 par value, 5,000,000 shares authorized;
no shares issued
    
    
    
    
    
    
    Common stock, $1.00 stated value:Class A authorized 200,000,000 shares; issued and
outstanding 89,631,002 and 89,128,700 shares at July
31, 2010 and October 31, 2009, respectively
    
    
    89,631
    
    
    
    89,129Class B authorized 5,000,000 shares; issued and
outstanding 3,555,020 shares at July 31, 2010 and
October 31, 2009; 10 votes per share convertible into
an equal number of Class A shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    553,197
    
    
    
    561,063Accumulated deficit
    
    
    (223,208
    )
    
    
    (245,125
    )Accumulated other comprehensive income:Unrealized appreciation of investments
    
    
    47
    
    
    
    35Total accumulated other comprehensive income
    
    
    47
    
    
    
    35Total shareholders equity
    
    
    423,222
    
    
    
    408,657Total liabilities and shareholders equity
    
    $
    2,119,989
    
    
    $
    2,099,004
  6




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
(Dollars in thousands, except per share amounts)
 Additional
    
    
    
    
    
    
    Unrealized
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Accumulated
    
    
    Appreciation
    
    
    ShareholdersStock(1)
    
    
    Capital
    
    
    Deficit
    
    
    of Investments
    
    
    EquityBalance October 31, 2009,
as previously reported
    
    $
    92,684
    
    
    $
    526,062
    
    
    $
    (227,897
    )
    
    $
    35
    
    
    $
    390,884Adoption of convertible
debt standard (See Note 2)
    
    
    
    
    
    
    35,001
    
    
    
    (17,228
    )
    
    
    
    
    
    
    17,773Balance October 31, 2009,
as adjusted
    
    $
    92,684
    
    
    $
    561,063
    
    
    $
    (245,125
    )
    
    $
    35
    
    
    $
    408,657Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    21,917
    
    
    
    
    
    
    
    21,917Other comprehensive income:Unrealized
appreciation of
investments, net of
deferred tax expense
of
($6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    12Total other comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    12Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    21,917
    
    
    
    12
    
    
    
    21,929Restricted stock activity
    
    
    281
    
    
    
    319
    
    
    
    
    
    
    
    
    
    
    
    600Issuance of common stock
    
    
    140
    
    
    
    509
    
    
    
    
    
    
    
    
    
    
    
    649Stock options exercised
    
    
    81
    
    
    
    305
    
    
    
    
    
    
    
    
    
    
    
    386Stock option expense
    
    
    
    
    
    
    805
    
    
    
    
    
    
    
    
    
    
    
    805Tax benefit associated
with stock activity
    
    
    
    
    
    
    (57
    )
    
    
    
    
    
    
    
    
    
    
    (57
    )Retirement of call
options, net of tax
expense of $830
    
    
    
    
    
    
    1,540
    
    
    
    
    
    
    
    
    
    
    
    1,540Retirement of common stock
warrants
    
    
    
    
    
    
    (2,118
    )
    
    
    
    
    
    
    
    
    
    
    (2,118
    )Repurchase of convertible
notes, net of tax benefit
of $442
    
    
    
    
    
    
    (785
    )
    
    
    
    
    
    
    
    
    
    
    (785
    )Dividends ($.09 per share)
    
    
    
    
    
    
    (8,384
    )
    
    
    
    
    
    
    
    
    
    
    (8,384
    )Balance July 31, 2010
    
    $
    93,186
    
    
    $
    553,197
    
    
    $
    (223,208
    )
    
    $
    47
    
    
    $
    423,222
 
 (1)
    
    Amount includes 89,631 and 89,129 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of July 31, 2010 and October 31, 2009, respectively,
and includes 3,555 shares (in thousands) of Class B common stock.  7




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Nine Months Ended July 31,2010
    
    
    2009(As Adjusted)Cash flows from operating activities:Net earnings
    
    $
    21,917
    
    
    $
    19,724Adjustments to reconcile net earnings to net cash provided by operating activities:Net impairment losses on dispositions
    
    
    
    
    
    
    215(Gain) loss on early extinguishment of debt
    
    
    89
    
    
    
    (5,798
    )Depreciation and amortization
    
    
    19,822
    
    
    
    20,798Non-cash interest and amortization of discount on senior convertible notes
    
    
    4,549
    
    
    
    5,532Provision for doubtful accounts
    
    
    3,065
    
    
    
    6,610Share-based compensation
    
    
    1,970
    
    
    
    1,732Excess tax benefits from share-based payment arrangements
    
    
    (37
    )
    
    
    Provision for deferred income taxes
    
    
    11,082
    
    
    
    7,350Estimated obligation to fund cemetery perpetual care trust
    
    
    31
    
    
    
    3,222Other
    
    
    (557
    )
    
    
    146Changes in assets and liabilities:(Increase) decrease in receivables
    
    
    (2,059
    )
    
    
    6,602Increase in prepaid expenses
    
    
    (1,011
    )
    
    
    (1,962
    )(Increase) decrease in inventories and cemetery property
    
    
    2,107
    
    
    
    (639
    )Federal income tax refunds
    
    
    1,600
    
    
    
    12,134Decrease in accounts payable and accrued expenses
    
    
    (5,880
    )
    
    
    (8,068
    )Net effect of preneed funeral production and maturities:Decrease in preneed funeral receivables and trust investments
    
    
    11,313
    
    
    
    16,245Increase (decrease) in deferred preneed funeral revenue
    
    
    (2,600
    )
    
    
    229Decrease in deferred preneed funeral receipts held in trust
    
    
    (11,690
    )
    
    
    (13,288
    )Net effect of preneed cemetery production and deliveries:Decrease in preneed cemetery receivables and trust investments
    
    
    287
    
    
    
    7,530Decrease in deferred preneed cemetery revenue
    
    
    (5,692
    )
    
    
    (10,620
    )Increase (decrease) in deferred preneed cemetery receipts held in trust
    
    
    765
    
    
    
    (5,222
    )Increase in other
    
    
    74
    
    
    
    1,118Net cash provided by operating activities
    
    
    49,145
    
    
    
    63,590Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    250
    
    
    
    250Purchases of certificates of deposit and marketable securities
    
    
    (15,661
    )
    
    
    (199
    )Proceeds from sale of assets
    
    
    388
    
    
    
    494Purchase of subsidiaries and other investments, net of cash acquired
    
    
    
    
    
    
    (1,923
    )Additions to property and equipment
    
    
    (11,564
    )
    
    
    (15,029
    )Other
    
    
    136
    
    
    
    37Net cash used in investing activities
    
    
    (26,451
    )
    
    
    (16,370
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (18,423
    )
    
    
    (39,901
    )Retirement of common stock warrants
    
    
    (2,118
    )
    
    
    (4,981
    )Issuance of common stock
    
    
    621
    
    
    
    225Retirement of call options
    
    
    2,370
    
    
    
    5,111Purchase and retirement of common stock
    
    
    
    
    
    
    (52
    )Debt refinancing costs
    
    
    (38
    )
    
    
    (2,029
    )Dividends
    
    
    (8,278
    )
    
    
    (6,953
    )Excess tax benefits from share-based payment arrangements
    
    
    37
    
    
    
    Net cash used in financing activities
    
    
    (25,829
    )
    
    
    (48,580
    )Net decrease in cash
    
    
    (3,135
    )
    
    
    (1,360
    )Cash and cash equivalents, beginning of period
    
    
    62,808
    
    
    
    72,574Cash and cash equivalents, end of period
    
    $
    59,673
    
    
    $
    71,214Supplemental cash flow information:Cash paid (received) during the period for:Income taxes, net
    
    $
    97
    
    
    $
    (8,168
    )Interest
    
    $
    12,686
    
    
    $
    15,647Non-cash investing and financing activities:Issuance of common stock to executive officers and directors
    
    $
    414
    
    
    $
    305Issuance of restricted stock, net of forfeitures
    
    $
    879
    
    
    $
    22
  8




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis of Presentation
 The Company
  Principles of Consolidation
  Interim Disclosures
    Use of Estimates
  Share-Based Compensation
  9




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis of Presentation(Continued)
    Number of Shares
    
    Weighted AverageGrant Type
    
    Granted
    
    Price per Share
    
    Vesting Period
    
    Vesting ConditionStock options
    
    
    960,750
    
    
    $
    5.08
    
    
    Equal one-fourth portions over 4 years
    
    Service conditionRestricted stock
    
    
    324,500
    
    
    $
    5.09
    
    
    Equal one-third portions over 3 years
    
    Market conditionRestricted stock
    
    
    7,500
    
    
    $
    4.89
    
    
    Equal one-third portions over 3 years
    
    Service condition
  Goodwill
  Reclassifications
  10




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2) New Accounting Principles
     11




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2) New Accounting Principles(Continued)
  Effects of theAdoption ofOctober 31, 2009
    
    
    Convertible Debt
    
    
    October 31, 2009As Reported
    
    
    Guidance
    
    
    As AdjustedBalance Sheet:Deferred tax assets
    
    $
    145,110
    
    
    $
    (9,997
    )
    
    $
    135,113Long-term debt
    
    
    367,496
    
    
    
    (27,770
    )
    
    
    339,726Additional paid-in capital
    
    
    526,062
    
    
    
    35,001
    
    
    
    561,063Accumulated deficit
    
    
    (227,897
    )
    
    
    (17,228
    )
    
    
    (245,125
    )
 Three Months
    
    
    Effects of the
    
    
    Effects of
    
    
    Three MonthsEnded
    
    
    Adoption of
    
    
    Adoption of
    
    
    EndedJuly 31, 2009
    
    
    Convertible Debt
    
    
    Participating Share
    
    
    July 31, 2009As Reported
    
    
    Guidance
    
    
    Guidance
    
    
    As AdjustedStatement of earnings:Interest expense
    
    $
    5,299
    
    
    $
    1,298
    
    
    
    
    
    
    $
    6,597Gain on early extinguishment of debt
    
    
    8,533
    
    
    
    (6,119
    )
    
    
    
    
    
    
    2,414Income taxes
    
    
    3,886
    
    
    
    (2,671
    )
    
    
    
    
    
    
    1,215Net earnings
    
    
    10,838
    
    
    
    (4,746
    )
    
    
    
    
    
    
    6,092Basic earnings per share
    
    $
    .12
    
    
    $
    (.05
    )
    
    
    
    
    
    $
    .07Diluted earnings per share
    
    $
    .12
    
    
    $
    (.05
    )
    
    
    
    
    
    $
    .07Weighted average basic shares outstanding
    
    
    91,936
    
    
    
    
    
    
    
    
    
    
    
    91,936Weighted average diluted shares outstanding
    
    
    92,118
    
    
    
    
    
    
    
    (57
    )
    
    
    92,061
 Effects ofNine Months
    
    
    Effects of the
    
    
    Adoption of
    
    
    Nine MonthsEnded
    
    
    Adoption of
    
    
    Participating
    
    
    EndedJuly 31, 2009
    
    
    Convertible
    
    
    Share
    
    
    July 31, 2009As Reported
    
    
    Debt Guidance
    
    
    Guidance
    
    
    As AdjustedStatement of earnings:Interest expense
    
    $
    17,088
    
    
    $
    4,270
    
    
    
    
    
    
    $
    21,358Gain on early extinguishment of debt
    
    
    17,204
    
    
    
    (11,406
    )
    
    
    
    
    
    
    5,798Income taxes
    
    
    15,759
    
    
    
    (5,644
    )
    
    
    
    
    
    
    10,115Net earnings
    
    
    29,756
    
    
    
    (10,032
    )
    
    
    
    
    
    
    19,724Basic earnings per share
    
    $
    .32
    
    
    $
    (.11
    )
    
    
    
    
    
    $
    .21Diluted earnings per share
    
    $
    .32
    
    
    $
    (.11
    )
    
    
    
    
    
    $
    .21Weighted average basic shares outstanding
    
    
    91,883
    
    
    
    
    
    
    
    
    
    
    
    91,883Weighted average diluted shares outstanding
    
    
    91,936
    
    
    
    
    
    
    
    (10
    )
    
    
    91,926
 12




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2) New Accounting Principles(Continued)
 Effects ofEffects of the
    
    
    Adoption ofYear Ended
    
    
    Adoption of
    
    
    Participating
    
    
    Year EndedOctober 31, 2009
    
    
    Convertible
    
    
    Share
    
    
    October 31, 2009As Reported
    
    
    Debt Guidance
    
    
    Guidance
    
    
    As AdjustedStatement of earnings:Interest expense
    
    $
    22,353
    
    
    $
    5,423
    
    
    
    
    
    
    $
    27,776Gain on early extinguishment of debt
    
    
    20,078
    
    
    
    (13,932
    )
    
    
    
    
    
    
    6,146Income taxes
    
    
    19,611
    
    
    
    (6,968
    )
    
    
    
    
    
    
    12,643Net earnings
    
    
    35,653
    
    
    
    (12,387
    )
    
    
    
    
    
    
    23,266Basic earnings per share
    
    $
    .39
    
    
    $
    (.14
    )
    
    
    
    
    
    $
    .25Diluted earnings per share
    
    $
    .39
    
    
    $
    (.14
    )
    
    
    
    
    
    $
    .25Weighted average basic shares outstanding
    
    
    91,898
    
    
    
    
    
    
    
    
    
    
    
    91,898Weighted average diluted shares outstanding
    
    
    91,995
    
    
    
    
    
    
    
    (17
    )
    
    
    91,978
    13




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities
  Preneed Funeral Receivables and Trust Investments
  July 31,
    
    
    October 31,2010
    
    
    2009Trust assets
    
    $
    369,418
    
    
    $
    358,430Receivables from customers
    
    
    42,767
    
    
    
    43,225412,185
    
    
    
    401,655Allowance for cancellations
    
    
    (11,807
    )
    
    
    (12,143
    )Preneed funeral receivables and trust investments
    
    $
    400,378
    
    
    $
    389,512
  July 31, 2010Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other short-term investments
    
    $
    24,278
    
    
    $
    
    
    
    $
    
    
    
    $
    24,278U.S. Government, agencies and municipalities
    
    
    2,937
    
    
    
    109
    
    
    
    (1
    )
    
    
    3,045Corporate bonds
    
    
    44,300
    
    
    
    2,543
    
    
    
    (224
    )
    
    
    46,619Preferred stocks
    
    
    56,727
    
    
    
    281
    
    
    
    (4,346
    )
    
    
    52,662Common stocks
    
    
    238,095
    
    
    
    703
    
    
    
    (99,141
    )
    
    
    139,657Mutual funds:Equity
    
    
    28,685
    
    
    
    26
    
    
    
    (4,824
    )
    
    
    23,887Fixed income
    
    
    53,304
    
    
    
    1,263
    
    
    
    (989
    )
    
    
    53,578Commodity
    
    
    8,910
    
    
    
    385
    
    
    
    
    
    
    
    9,295Insurance contracts and other long-term investments
    
    
    15,270
    
    
    
    153
    
    
    
    (98
    )
    
    
    15,325Trust investments
    
    $
    472,506
    
    
    $
    5,463
    
    
    $
    (109,623
    )
    
    
    368,346Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78.0
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,072Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    369,418
 14




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
  October 31, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other short-term investments
    
    $
    28,979
    
    
    $
    
    
    
    $
    
    
    
    $
    28,979U.S. Government, agencies and municipalities
    
    
    6,044
    
    
    
    214
    
    
    
    (1
    )
    
    
    6,257Corporate bonds
    
    
    39,007
    
    
    
    1,650
    
    
    
    (1,458
    )
    
    
    39,199Preferred stocks
    
    
    56,885
    
    
    
    9
    
    
    
    (10,394
    )
    
    
    46,500Common stocks
    
    
    248,750
    
    
    
    848
    
    
    
    (106,788
    )
    
    
    142,810Mutual funds:Equity
    
    
    28,841
    
    
    
    20
    
    
    
    (7,486
    )
    
    
    21,375Fixed income
    
    
    56,193
    
    
    
    448
    
    
    
    (916
    )
    
    
    55,725Insurance contracts and other long-term investments
    
    
    19,054
    
    
    
    112
    
    
    
    (2,594
    )
    
    
    16,572Trust investments
    
    $
    483,753
    
    
    $
    3,301
    
    
    $
    (129,637
    )
    
    $
    357,417Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73.9
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,013Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    358,430
  July 31, 2010Due in one year or less
    
    $
    4,875Due in one to five years
    
    
    29,823Due in five to ten years
    
    
    14,943Thereafter
    
    
    23$
    49,664
    15




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
    SignificantQuoted Market
    
    
    OtherPrices in Active
    
    
    Observable
    
    
    SignificantMarkets
    
    
    Inputs
    
    
    Unobservable Inputs
    
    
    Fair Market(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueTrust investmentsJuly 31, 2010
    
    $
    258,217
    
    
    $
    102,326
    
    
    $
    7,803
    
    
    $
    368,346Trust investmentsOctober 31, 2009
    
    $
    256,799
    
    
    $
    91,956
    
    
    $
    8,662
    
    
    $
    357,417
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Fair market value, beginning balance
    
    $
    7,878
    
    
    $
    8,599
    
    
    $
    8,662
    
    
    $
    11,299Total unrealized losses included in other comprehensive income (1)
    
    
    (130
    )
    
    
    
    
    
    
    (1,060
    )
    
    
    (2,554
    )Distributions and other, net
    
    
    55
    
    
    
    112
    
    
    
    201
    
    
    
    (34
    )Fair market value, ending balance
    
    $
    7,803
    
    
    $
    8,711
    
    
    $
    7,803
    
    
    $
    8,711
 
 (1)
    
    All gains (losses) recognized in other comprehensive income for funeral trust
investments are attributable to the Companys preneed customers and are offset by a
corresponding increase (decrease) in deferred preneed funeral receipts held in trust. 16




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Purchases
    
    $
    12,117
    
    
    $
    10,198
    
    
    $
    27,675
    
    
    $
    11,776Sales
    
    
    8,609
    
    
    
    15,372
    
    
    
    31,037
    
    
    
    24,500Realized gains from sales of investments
    
    
    260
    
    
    
    710
    
    
    
    1,697
    
    
    
    1,702Realized losses from sales of
investments and other
    
    
    (3,729
    )(1)
    
    
    (511
    )(2)
    
    
    (4,783
    )(3)
    
    
    (9,404
    )(4)Interest income, dividends and other
ordinary income
    
    
    2,851
    
    
    
    2,917
    
    
    
    7,738
    
    
    
    8,742Deposits
    
    
    6,404
    
    
    
    6,442
    
    
    
    20,009
    
    
    
    19,456Withdrawals
    
    
    10,187
    
    
    
    9,202
    
    
    
    32,234
    
    
    
    32,101
 
 (1)
    
    Includes $193 in losses from the sale of investments and $3,536 in losses related to
certain investments that the Company determined it no longer had the intent to hold until they
recover in value.(2)
    
    Includes $477 in losses from the sale of investments and $34 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined it no longer had the intent to hold until they recover
in value.(3)
    
    Includes $1,426 in losses from the sale of investments and $3,536 in losses related
to certain investments that the Company determined it no longer had the intent to hold until
they recover in value.(4)
    
    Includes $964 in losses from the sale of investments and $8,440 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined it no longer had the intent to hold until they recover
in value.  July 31, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S.
Government,
agencies and
municipalities
    
    $
    
    
    
    $
    
    
    
    $
    21
    
    
    $
    (1
    )
    
    $
    21
    
    
    $
    (1
    )Corporate bonds
    
    
    2,983
    
    
    
    (21
    )
    
    
    7,465
    
    
    
    (203
    )
    
    
    10,448
    
    
    
    (224
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    40,686
    
    
    
    (4,346
    )
    
    
    40,686
    
    
    
    (4,346
    )Common stocks
    
    
    1,873
    
    
    
    (378
    )
    
    
    131,263
    
    
    
    (98,763
    )
    
    
    133,136
    
    
    
    (99,141
    )Mutual funds:Equity
    
    
    5
    
    
    
    
    
    
    
    23,742
    
    
    
    (4,824
    )
    
    
    23,747
    
    
    
    (4,824
    )Fixed income
    
    
    1,426
    
    
    
    (14
    )
    
    
    4,295
    
    
    
    (975
    )
    
    
    5,721
    
    
    
    (989
    )Insurance contracts
and other long-term
investments
    
    
    
    
    
    
    
    
    
    
    2,160
    
    
    
    (98
    )
    
    
    2,160
    
    
    
    (98
    )Total
    
    $
    6,287
    
    
    $
    (413
    )
    
    $
    209,632
    
    
    $
    (109,210
    )
    
    $
    215,919
    
    
    $
    (109,623
    )
 17




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
 October 31, 2009Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S.
Government,
agencies and
municipalities
    
    $
    
    
    
    $
    
    
    
    $
    21
    
    
    $
    (1
    )
    
    $
    21
    
    
    $
    (1
    )Corporate bonds
    
    
    
    
    
    
    
    
    
    
    10,154
    
    
    
    (1,458
    )
    
    
    10,154
    
    
    
    (1,458
    )Preferred stocks
    
    
    493
    
    
    
    (7
    )
    
    
    43,519
    
    
    
    (10,387
    )
    
    
    44,012
    
    
    
    (10,394
    )Common stocks
    
    
    1,000
    
    
    
    (276
    )
    
    
    133,428
    
    
    
    (106,512
    )
    
    
    134,428
    
    
    
    (106,788
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    21,237
    
    
    
    (7,486
    )
    
    
    21,237
    
    
    
    (7,486
    )Fixed income
    
    
    318
    
    
    
    (1
    )
    
    
    4,539
    
    
    
    (915
    )
    
    
    4,857
    
    
    
    (916
    )Insurance contracts
and other long-term
investments
    
    
    1,203
    
    
    
    (1,060
    )
    
    
    2,016
    
    
    
    (1,534
    )
    
    
    3,219
    
    
    
    (2,594
    )Total
    
    $
    3,014
    
    
    $
    (1,344
    )
    
    $
    214,914
    
    
    $
    (128,293
    )
    
    $
    217,928
    
    
    $
    (129,637
    )
    18




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  July 31,
    
    
    October 31,2010
    
    
    2009Trust assets
    
    $
    173,725
    
    
    $
    163,938Receivables from customers
    
    
    32,411
    
    
    
    35,718206,136
    
    
    
    199,656Allowance for cancellations
    
    
    (5,065
    )
    
    
    (6,239
    )Preneed cemetery receivables and trust investments
    
    $
    201,071
    
    
    $
    193,417
  July 31, 2010Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    12,244
    
    
    $
    
    
    
    $
    
    
    
    $
    12,244U.S. Government, agencies and
municipalities
    
    
    7,037
    
    
    
    652
    
    
    
    
    
    
    
    7,689Corporate bonds
    
    
    12,109
    
    
    
    828
    
    
    
    (27
    )
    
    
    12,910Preferred stocks
    
    
    20,812
    
    
    
    100
    
    
    
    (2,188
    )
    
    
    18,724Common stocks
    
    
    121,314
    
    
    
    551
    
    
    
    (50,340
    )
    
    
    71,525Mutual funds:Equity
    
    
    30,291
    
    
    
    18
    
    
    
    (8,890
    )
    
    
    21,419Fixed income
    
    
    22,427
    
    
    
    466
    
    
    
    (27
    )
    
    
    22,866Commodity
    
    
    5,082
    
    
    
    240
    
    
    
    
    
    
    
    5,322Other long-term investments
    
    
    560
    
    
    
    5
    
    
    
    
    
    
    
    565Trust investments
    
    $
    231,876
    
    
    $
    2,860
    
    
    $
    (61,472
    )
    
    
    173,264Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74.7
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    461Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    173,725
 19




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
  October 31, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    15,123
    
    
    $
    
    
    
    $
    
    
    
    $
    15,123U.S. Government, agencies and
municipalities
    
    
    9,259
    
    
    
    678
    
    
    
    
    
    
    
    9,937Corporate bonds
    
    
    7,554
    
    
    
    552
    
    
    
    (74
    )
    
    
    8,032Preferred stocks
    
    
    20,831
    
    
    
    46
    
    
    
    (4,363
    )
    
    
    16,514Common stocks
    
    
    127,942
    
    
    
    714
    
    
    
    (54,254
    )
    
    
    74,402Mutual funds:Equity
    
    
    30,291
    
    
    
    15
    
    
    
    (9,980
    )
    
    
    20,326Fixed income
    
    
    18,530
    
    
    
    125
    
    
    
    (4
    )
    
    
    18,651Other long-term investments
    
    
    562
    
    
    
    
    
    
    
    (8
    )
    
    
    554Trust investments
    
    $
    230,092
    
    
    $
    2,130
    
    
    $
    (68,683
    )
    
    $
    163,539Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71.1
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    399Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    163,938
  July 31, 2010Due in one year or less
    
    $
    4,041Due in one to five years
    
    
    10,585Due in five to ten years
    
    
    5,848Thereafter
    
    
    125$
    20,599
   20




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
    Quoted MarketPrices in Active
    
    
    Significant Other
    
    
    SignificantMarkets
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    Fair Market(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueTrust investmentsJuly 31, 2010
    
    $
    133,833
    
    
    $
    39,431
    
    
    $
    
    
    
    $
    173,264Trust investmentsOctober 31, 2009
    
    $
    129,032
    
    
    $
    34,507
    
    
    $
    
    
    
    $
    163,539
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Purchases
    
    $
    9,739
    
    
    $
    4,444
    
    
    $
    20,874
    
    
    $
    7,870Sales
    
    
    3,054
    
    
    
    6,966
    
    
    
    15,823
    
    
    
    11,464Realized gains from sales of investments
    
    
    170
    
    
    
    233
    
    
    
    1,429
    
    
    
    611Realized losses from sales of
investments and other
    
    
    (281
    )(1)
    
    
    (776
    )(2)
    
    
    (1,799
    )(3)
    
    
    (6,526
    )(4)Interest income, dividends and other
ordinary income
    
    
    1,461
    
    
    
    1,293
    
    
    
    3,851
    
    
    
    3,801Deposits
    
    
    4,303
    
    
    
    4,370
    
    
    
    13,779
    
    
    
    12,692Withdrawals
    
    
    4,472
    
    
    
    4,641
    
    
    
    13,201
    
    
    
    13,023
 
 (1)
    
    Includes $264 in losses from the sale of investments and $17 in losses related to
certain investments that were previously deemed other than temporarily impaired.(2)
    
    Includes $756 in losses from the sale of investments and $20 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined it no longer had the intent to hold until they recover
in value.(3)
    
    Includes $1,988 in losses from the sale of investments and $17 in losses related to
certain investments that were previously deemed other than temporarily impaired.(4)
    
    Includes $3,230 in losses from the sale of investments and $3,296 in losses
related to certain investments that were rendered worthless or practically worthless and to
certain investments that the Company determined it no longer had the intent to hold until they
recover in value. 21




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4)
    
    Preneed Cemetery Merchandise and Service Activities(Continued)
  July 31, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate bonds
    
    $
    1,660
    
    
    $
    (13
    )
    
    $
    685
    
    
    $
    (14
    )
    
    $
    2,345
    
    
    $
    (27
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    17,568
    
    
    
    (2,188
    )
    
    
    17,568
    
    
    
    (2,188
    )Common stocks
    
    
    1,314
    
    
    
    (214
    )
    
    
    65,426
    
    
    
    (50,126
    )
    
    
    66,740
    
    
    
    (50,340
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    21,276
    
    
    
    (8,890
    )
    
    
    21,276
    
    
    
    (8,890
    )Fixed income
    
    
    2,383
    
    
    
    (24
    )
    
    
    15
    
    
    
    (3
    )
    
    
    2,398
    
    
    
    (27
    )Total
    
    $
    5,357
    
    
    $
    (251
    )
    
    $
    104,970
    
    
    $
    (61,221
    )
    
    $
    110,327
    
    
    $
    (61,472
    )
 October 31, 2009Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate bonds
    
    $
    
    
    
    $
    
    
    
    $
    1,045
    
    
    $
    (74
    )
    
    $
    1,045
    
    
    $
    (74
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    16,356
    
    
    
    (4,363
    )
    
    
    16,356
    
    
    
    (4,363
    )Common stocks
    
    
    1,755
    
    
    
    (464
    )
    
    
    67,374
    
    
    
    (53,790
    )
    
    
    69,129
    
    
    
    (54,254
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    20,186
    
    
    
    (9,980
    )
    
    
    20,186
    
    
    
    (9,980
    )Fixed income
    
    
    20
    
    
    
    
    
    
    
    15
    
    
    
    (4
    )
    
    
    35
    
    
    
    (4
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (8
    )Total
    
    $
    1,775
    
    
    $
    (464
    )
    
    $
    104,976
    
    
    $
    (68,219
    )
    
    $
    106,751
    
    
    $
    (68,683
    )
   22




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4)
    
    Preneed Cemetery Merchandise and Service Activities(Continued)
  (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts
   July 31, 2010Cost Basis
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    39,522
    
    
    $
    
    
    
    $
    
    
    
    $
    39,522U.S. Government, agencies and
municipalities
    
    
    2,346
    
    
    
    243
    
    
    
    (52
    )
    
    
    2,537Corporate bonds
    
    
    35,035
    
    
    
    1,293
    
    
    
    (888
    )
    
    
    35,440Preferred stocks
    
    
    57,613
    
    
    
    80
    
    
    
    (9,060
    )
    
    
    48,633Common stocks
    
    
    90,675
    
    
    
    994
    
    
    
    (39,821
    )
    
    
    51,848Mutual funds:Equity
    
    
    8,853
    
    
    
    17
    
    
    
    (1,238
    )
    
    
    7,632Fixed income
    
    
    35,461
    
    
    
    576
    
    
    
    (385
    )
    
    
    35,652Other long-term investments
    
    
    642
    
    
    
    1
    
    
    
    (177
    )
    
    
    466Trust investments
    
    $
    270,147
    
    
    $
    3,204
    
    
    $
    (51,621
    )
    
    
    221,730Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82.1
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    638Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    222,368
 23




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  October 31, 2009Cost Basis
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    17,784
    
    
    $
    
    
    
    $
    
    
    
    $
    17,784U.S. Government, agencies and
municipalities
    
    
    5,416
    
    
    
    394
    
    
    
    (82
    )
    
    
    5,728Corporate bonds
    
    
    42,735
    
    
    
    2,088
    
    
    
    (1,085
    )
    
    
    43,738Preferred stocks
    
    
    58,421
    
    
    
    2
    
    
    
    (17,137
    )
    
    
    41,286Common stocks
    
    
    96,831
    
    
    
    2,663
    
    
    
    (42,792
    )
    
    
    56,702Mutual funds:Equity
    
    
    6,838
    
    
    
    25
    
    
    
    (1,560
    )
    
    
    5,303Fixed income
    
    
    32,561
    
    
    
    1,340
    
    
    
    (342
    )
    
    
    33,559Other long-term investments
    
    
    766
    
    
    
    4
    
    
    
    (177
    )
    
    
    593Trust investments
    
    $
    261,352
    
    
    $
    6,516
    
    
    $
    (63,175
    )
    
    $
    204,693Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78.3
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    783Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    205,476
  July 31, 2010Due in one year or less
    
    $
    10,772Due in one to five years
    
    
    19,345Due in five to ten years
    
    
    7,467Thereafter
    
    
    393$
    37,977
   24




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
    Quoted MarketPrices in Active
    
    
    Significant Other
    
    
    SignificantMarkets
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    Fair Market(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueTrust investmentsJuly 31, 2010
    
    $
    134,804
    
    
    $
    86,610
    
    
    $
    316
    
    
    $
    221,730Trust investmentsOctober 31, 2009
    
    $
    113,715
    
    
    $
    90,752
    
    
    $
    226
    
    
    $
    204,693
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Fair market value, beginning balance
    
    $
    250
    
    
    $
    287
    
    
    $
    226
    
    
    $
    611Total unrealized losses included in other
comprehensive income (1)
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    (177
    )Transfers out of Level 3 category and other
    
    
    69
    
    
    
    (83
    )
    
    
    93
    
    
    
    (230
    )Fair market value, ending balance
    
    $
    316
    
    
    $
    204
    
    
    $
    316
    
    
    $
    204
 
 (1)
    
    All gains (losses) recognized in other comprehensive income for cemetery perpetual
care trust investments are attributable to the Companys customers and are offset by a
corresponding increase (decrease) in perpetual care trusts corpus.  25




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
   Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Purchases
    
    $
    21,806
    
    
    $
    1,721
    
    
    $
    60,908
    
    
    $
    9,590Sales
    
    
    35,931
    
    
    
    1,492
    
    
    
    78,016
    
    
    
    3,345Realized gains from sales of investments
    
    
    945
    
    
    
    85
    
    
    
    5,228
    
    
    
    619Realized losses from sales of
investments and other
    
    
    (81
    )(1)
    
    
    (26
    )
    
    
    (899
    )(2)
    
    
    (3,235
    )(3)Interest income, dividends and other
ordinary income
    
    
    2,072
    
    
    
    2,145
    
    
    
    6,410
    
    
    
    7,001Deposits
    
    
    1,691
    
    
    
    2,526
    
    
    
    5,424
    
    
    
    6,747
    (4)Withdrawals
    
    
    1,838
    
    
    
    1,182
    
    
    
    4,847
    
    
    
    4,136
 
 (1)
    
    Includes $50 in losses from the sale of investments and includes $31 in losses related to
certain investments that were previously deemed other than temporarily impaired.(2)
    
    Includes $868 in losses from the sale of investments and includes $31 in losses related to
certain investments that were previously deemed other than temporarily impaired.(3)
    
    Includes $16 in losses from the sale of investments and includes $3,219 in losses related to
certain investments that were rendered worthless or practically worthless.(4)
    
    Includes $734 that the Company contributed to the cemetery perpetual care trusts as part of
its funding obligation during the nine months ended July 31, 2009..  26




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  July 31, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    
    
    
    $
    
    
    
    $
    115
    
    
    $
    (52
    )
    
    $
    115
    
    
    $
    (52
    )Corporate bonds
    
    
    3,388
    
    
    
    (38
    )
    
    
    1,562
    
    
    
    (850
    )
    
    
    4,950
    
    
    
    (888
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    43,157
    
    
    
    (9,060
    )
    
    
    43,157
    
    
    
    (9,060
    )Common stocks
    
    
    878
    
    
    
    (483
    )
    
    
    48,733
    
    
    
    (39,338
    )
    
    
    49,611
    
    
    
    (39,821
    )Mutual funds:Equity
    
    
    2,137
    
    
    
    (14
    )
    
    
    5,356
    
    
    
    (1,224
    )
    
    
    7,493
    
    
    
    (1,238
    )Fixed income
    
    
    7,979
    
    
    
    (83
    )
    
    
    851
    
    
    
    (302
    )
    
    
    8,830
    
    
    
    (385
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    199
    
    
    
    (177
    )
    
    
    199
    
    
    
    (177
    )Total
    
    $
    14,382
    
    
    $
    (618
    )
    
    $
    99,973
    
    
    $
    (51,003
    )
    
    $
    114,355
    
    
    $
    (51,621
    )
 October 31, 2009Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    270
    
    
    $
    (81
    )
    
    $
    6
    
    
    $
    (1
    )
    
    $
    276
    
    
    $
    (82
    )Corporate bonds
    
    
    600
    
    
    
    (124
    )
    
    
    1,732
    
    
    
    (961
    )
    
    
    2,332
    
    
    
    (1,085
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    40,784
    
    
    
    (17,137
    )
    
    
    40,784
    
    
    
    (17,137
    )Common stocks
    
    
    (38
    )
    
    
    (473
    )
    
    
    50,445
    
    
    
    (42,319
    )
    
    
    50,407
    
    
    
    (42,792
    )Mutual funds:Equity
    
    
    43
    
    
    
    (11
    )
    
    
    5,034
    
    
    
    (1,549
    )
    
    
    5,077
    
    
    
    (1,560
    )Fixed income
    
    
    118
    
    
    
    
    
    
    
    1,096
    
    
    
    (342
    )
    
    
    1,214
    
    
    
    (342
    )Other long-term investments
    
    
    201
    
    
    
    (177
    )
    
    
    
    
    
    
    
    
    
    
    201
    
    
    
    (177
    )Total
    
    $
    1,194
    
    
    $
    (866
    )
    
    $
    99,097
    
    
    $
    (62,309
    )
    
    $
    100,291
    
    
    $
    (63,175
    )
   27




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (6) Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care Trusts Corpus
  Deferred Receipts Held in TrustPreneed
    
    
    PreneedFuneral
    
    
    Cemetery
    
    
    TotalTrust assets at market value
    
    $
    369,418
    
    
    $
    173,725
    
    
    $
    543,143Less:Pending withdrawals
    
    
    (7,557
    )
    
    
    (5,087
    )
    
    
    (12,644
    )Pending deposits
    
    
    2,118
    
    
    
    1,365
    
    
    
    3,483Deferred receipts held in trust
    
    $
    363,979
    
    
    $
    170,003
    
    
    $
    533,982
  Perpetual CareTrusts CorpusTrust assets at market value
    
    $
    222,368Less:Pending withdrawals
    
    
    (2,755
    )Perpetual care trusts corpus
    
    $
    219,613
 Investment and other income, net
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Realized gains from sales of investments
    
    $
    1,375
    
    
    $
    1,028
    
    
    $
    8,354
    
    
    $
    2,932Realized losses from sales of investments and
other
    
    
    (4,091
    )
    
    
    (1,313
    )
    
    
    (7,481
    )
    
    
    (19,165
    )Interest income, dividends and other ordinary
income
    
    
    6,384
    
    
    
    6,355
    
    
    
    17,999
    
    
    
    19,544Trust expenses and income taxes
    
    
    (2,223
    )
    
    
    (2,106
    )
    
    
    (7,363
    )
    
    
    (6,203
    )Net trust investment income (loss)
    
    
    1,445
    
    
    
    3,964
    
    
    
    11,509
    
    
    
    (2,892
    )Reclassification to deferred preneed
funeral and cemetery receipts held in
trust
    
    
    758
    
    
    
    (2,453
    )
    
    
    (3,238
    )
    
    
    5,160Reclassification to perpetual care trusts
corpus
    
    
    (2,203
    )
    
    
    (1,511
    )
    
    
    (8,271
    )
    
    
    (2,268
    )Total deferred preneed funeral and cemetery
receipts held in trust and perpetual care
trusts corpus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    62
    
    
    
    12
    
    
    
    122
    
    
    
    85Total investment and other income, net
    
    $
    62
    
    
    $
    12
    
    
    $
    122
    
    
    $
    85
 
 (1)
    
    Investment and other income, net consists of interest income primarily on the
Companys cash, cash equivalents and marketable securities not held in trust. 28




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7) Commitments and Contingencies
 Litigation
 Funeral Consumers Alliance, Inc., et al. v. Service Corporation International, Alderwoods
Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville Casket Co.
  Other Litigation
   Other Commitments and Contingencies
   29




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7) Commitments and Contingencies(Continued)
  (8) Reconciliation of Basic and Diluted Per Share Data
 Earnings
    
    
    Shares
    
    
    Per ShareThree Months Ended July 31, 2010
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataNet earnings
    
    $
    6,039Allocation of earnings to nonvested restricted stock
    
    
    (63
    )Basic earnings per common share:Net earnings available to common shareholders
    
    $
    5,976
    
    
    
    92,207
    
    
    $
    .06Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    292Diluted earnings per common share:Net earnings available to common shareholders
plus stock options assumed exercised
    
    $
    5,976
    
    
    
    92,499
    
    
    $
    .06
 Earnings
    
    
    Shares
    
    
    Per ShareThree Months Ended July 31, 2009
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataNet earnings
    
    $
    6,092Allocation of earnings to nonvested restricted stock
    
    
    (48
    )Basic earnings per common share:Net earnings available to common shareholders
    
    $
    6,044
    
    
    
    91,936
    
    
    $
    .07Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    125Diluted earnings per common share:Net earnings available to common shareholders
plus stock options assumed exercised
    
    $
    6,044
    
    
    
    92,061
    
    
    $
    .07
 Earnings
    
    
    Shares
    
    
    Per ShareNine Months Ended July 31, 2010
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataNet earnings
    
    $
    21,917Allocation of earnings to nonvested restricted stock
    
    
    (226
    )Basic earnings per common share:Net earnings available to common shareholders
    
    $
    21,691
    
    
    
    92,124
    
    
    $
    .24Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    273Diluted earnings per common share:Net earnings available to common shareholders
plus stock options assumed exercised
    
    $
    21,691
    
    
    
    92,397
    
    
    $
    .23
 30




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8) Reconciliation of Basic and Diluted Per Share Data(Continued)
 Earnings
    
    
    Shares
    
    
    Per ShareNine Months Ended July 31, 2009
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataNet earnings
    
    $
    19,724Allocation of earnings to nonvested restricted stock
    
    
    (156
    )Basic earnings per common share:Net earnings available to common shareholders
    
    $
    19,568
    
    
    
    91,883
    
    
    $
    .21Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    43Diluted earnings per common share:Net earnings available to common shareholders
plus stock options assumed exercised
    
    $
    19,568
    
    
    
    91,926
    
    
    $
    .21
       31




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8) Reconciliation of Basic and Diluted Per Share Data(Continued)
  (9) Segment Data
  Total Revenue
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2010
    
    
    July 31, 2009
    
    
    July 31, 2010
    
    
    July 31, 2009Funeral
    
    $
    63,426
    
    
    $
    62,476
    
    
    $
    198,518
    
    
    $
    197,698Cemetery(1)
    
    
    54,023
    
    
    
    49,779
    
    
    
    159,603
    
    
    
    149,069Corporate Trust Management(2)
    
    
    5,466
    
    
    
    5,497
    
    
    
    17,553
    
    
    
    16,933Total
    
    $
    122,915
    
    
    $
    117,752
    
    
    $
    375,674
    
    
    $
    363,700
 Total Gross Profit
    
    
    Total Gross ProfitThree Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2010
    
    
    July 31, 2009
    
    
    July 31, 2010
    
    
    July 31, 2009Funeral
    
    $
    11,095
    
    
    $
    11,112
    
    
    $
    39,057
    
    
    $
    40,513Cemetery(1)
    
    
    6,025
    
    
    
    3,202
    
    
    
    16,893
    
    
    
    11,914Corporate Trust Management(2)
    
    
    5,080
    
    
    
    5,019
    
    
    
    16,335
    
    
    
    15,584Total
    
    $
    22,200
    
    
    $
    19,333
    
    
    $
    72,285
    
    
    $
    68,011
 Net Total Preneed     Merchandise
    
    
    Net Total Preneed Merchandiseand Service Sales(3)
    
    
    and Service Sales(3)Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2010
    
    
    July 31, 2009
    
    
    July 31, 2010
    
    
    July 31, 2009Funeral
    
    $
    25,586
    
    
    $
    27,643
    
    
    $
    70,976
    
    
    $
    71,197Cemetery
    
    
    12,975
    
    
    
    13,454
    
    
    
    35,513
    
    
    
    36,154Total
    
    $
    38,561
    
    
    $
    41,097
    
    
    $
    106,489
    
    
    $
    107,351
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of the
cemetery segment and amounted to $2,186 and $1,541 for the three months ended July 31, 2010
and 2009, respectively, and $6,005 and $5,342 for the nine months July 31, 2010 and 2009,
respectively. 32




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9) Segment Data(Continued)
 
 (2)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and services trust earnings recognized with respect to preneed contracts
delivered during the period. Trust management fees are established by the Company at rates
consistent with industry norms based on the fair market value of the assets managed and are
paid by the trusts to the Companys subsidiary, Investors Trust, Inc. The trust earnings
represent earnings generated over the life of the preneed contracts delivered during the
relevant periods and distributable to the Company based upon the Companys respective trust
agreements. Trust management fees included in funeral revenue for the three months ended July
31, 2010 and 2009 were $1,107 and $1,010, respectively, and funeral trust earnings recognized
with respect to preneed contracts delivered included in funeral revenue for the three months
ended July 31, 2010 and 2009 were $2,509 and $2,531, respectively. Trust management fees
included in cemetery revenue for the three months ended July 31, 2010 and 2009 were $1,197 and
$1,060, respectively, and cemetery trust earnings recognized with respect to preneed contracts
delivered included in cemetery revenue for the three months ended July 31, 2010 and 2009 were
$653 and $896, respectively. Trust management fees included in funeral revenue for the nine
months ended July 31, 2010 and 2009 were $3,369 and $2,832, respectively, and funeral trust
earnings for the nine months ended July 31, 2010 and 2009 were $8,648 and $8,477,
respectively. Trust management fees included in cemetery revenue for the nine months ended
July 31, 2010 and 2009 were $3,621 and $2,923, respectively, and cemetery trust earnings for
the nine months ended July 31, 2010 and 2009 were $1,915 and $2,701, respectively.(3)
    
    Preneed sales amounts represent total preneed funeral trust and insurance sales and
cemetery service and merchandise trust sales generated in the applicable period, net of
cancellations.  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Gross profit for reportable segments
    
    $
    22,200
    
    
    $
    19,333
    
    
    $
    72,285
    
    
    $
    68,011Corporate general and administrative expenses
    
    
    (7,686
    )
    
    
    (8,089
    )
    
    
    (20,188
    )
    
    
    (22,601
    )Hurricane related charges, net
    
    
    (30
    )
    
    
    (46
    )
    
    
    (62
    )
    
    
    (566
    )Separation charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (275
    )Net impairment losses on dispositions
    
    
    
    
    
    
    (117
    )
    
    
    
    
    
    
    (215
    )Other operating income, net
    
    
    607
    
    
    
    397
    
    
    
    1,051
    
    
    
    960Interest expense
    
    
    (6,184
    )
    
    
    (6,597
    )
    
    
    (18,531
    )
    
    
    (21,358
    )Gain (loss) on early extinguishment of debt
    
    
    (106
    )
    
    
    2,414
    
    
    
    (89
    )
    
    
    5,798Investment and other income, net
    
    
    62
    
    
    
    12
    
    
    
    122
    
    
    
    85Earnings before income taxes
    
    $
    8,863
    
    
    $
    7,307
    
    
    $
    34,588
    
    
    $
    29,839
 33




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (10) Supplementary Information
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Service revenueFuneral
    
    $
    45,313
    
    
    $
    41,821
    
    
    $
    136,364
    
    
    $
    132,658Cemetery
    
    
    14,272
    
    
    
    13,952
    
    
    
    45,081
    
    
    
    44,06259,585
    
    
    
    55,773
    
    
    
    181,445
    
    
    
    176,720Merchandise revenueFuneral
    
    
    19,978
    
    
    
    22,631
    
    
    
    69,112
    
    
    
    71,861Cemetery
    
    
    38,035
    
    
    
    34,315
    
    
    
    108,777
    
    
    
    100,45658,013
    
    
    
    56,946
    
    
    
    177,889
    
    
    
    172,317Other revenueFuneral
    
    
    1,751
    
    
    
    1,565
    
    
    
    5,060
    
    
    
    4,488Cemetery
    
    
    3,566
    
    
    
    3,468
    
    
    
    11,280
    
    
    
    10,1755,317
    
    
    
    5,033
    
    
    
    16,340
    
    
    
    14,663Total revenue
    
    $
    122,915
    
    
    $
    117,752
    
    
    $
    375,674
    
    
    $
    363,700Service costsFuneral
    
    $
    15,738
    
    
    $
    14,497
    
    
    $
    45,370
    
    
    $
    43,883Cemetery
    
    
    10,455
    
    
    
    10,568
    
    
    
    30,810
    
    
    
    29,94126,193
    
    
    
    25,065
    
    
    
    76,180
    
    
    
    73,824Merchandise costsFuneral
    
    
    13,292
    
    
    
    14,073
    
    
    
    42,447
    
    
    
    43,647Cemetery
    
    
    23,299
    
    
    
    22,479
    
    
    
    69,654
    
    
    
    67,41936,591
    
    
    
    36,552
    
    
    
    112,101
    
    
    
    111,066Facility expensesFuneral
    
    
    23,497
    
    
    
    23,037
    
    
    
    72,262
    
    
    
    70,287Cemetery
    
    
    14,434
    
    
    
    13,765
    
    
    
    42,846
    
    
    
    40,51237,931
    
    
    
    36,802
    
    
    
    115,108
    
    
    
    110,799Total costs
    
    $
    100,715
    
    
    $
    98,419
    
    
    $
    303,389
    
    
    $
    295,689
  34




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes
  Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended July 31, 2010Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    62,261
    
    
    $
    428
    
    
    $
    4,353
    
    
    $
    
    
    
    $
    67,042Cemetery
    
    
    
    
    
    
    50,435
    
    
    
    790
    
    
    
    4,648
    
    
    
    
    
    
    
    55,873
    
    
    
    112,696
    
    
    
    1,218
    
    
    
    9,001
    
    
    
    
    
    
    
    122,915Costs and expenses:Funeral
    
    
    
    
    
    
    49,134
    
    
    
    273
    
    
    
    3,120
    
    
    
    
    
    
    
    52,527Cemetery
    
    
    
    
    
    
    43,741
    
    
    
    579
    
    
    
    3,868
    
    
    
    
    
    
    
    48,188
    
    
    
    92,875
    
    
    
    852
    
    
    
    6,988
    
    
    
    
    
    
    
    100,715Gross profit
    
    
    
    
    
    
    19,821
    
    
    
    366
    
    
    
    2,013
    
    
    
    
    
    
    
    22,200Corporate general and
administrative expenses
    
    
    (7,686
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,686
    )Hurricane related charges, net
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )Other operating income, net
    
    
    18
    
    
    
    547
    
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    607Operating earnings (loss)
    
    
    (7,698
    )
    
    
    20,368
    
    
    
    366
    
    
    
    2,055
    
    
    
    
    
    
    
    15,091Interest expense
    
    
    (690
    )
    
    
    (5,025
    )
    
    
    (2
    )
    
    
    (467
    )
    
    
    
    
    
    
    (6,184
    )Loss on early extinguishment of debt
    
    
    (106
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (106
    )Investment and other income, net
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62Equity in subsidiaries
    
    
    8,920
    
    
    
    413
    
    
    
    
    
    
    
    
    
    
    
    (9,333
    )
    
    
    Earnings before income taxes
    
    
    488
    
    
    
    15,756
    
    
    
    364
    
    
    
    1,588
    
    
    
    (9,333
    )
    
    
    8,863Income tax expense (benefit)
    
    
    (5,551
    )
    
    
    7,066
    
    
    
    80
    
    
    
    1,229
    
    
    
    
    
    
    
    2,824Net earnings
    
    
    6,039
    
    
    
    8,690
    
    
    
    284
    
    
    
    359
    
    
    
    (9,333
    )
    
    
    6,039Other comprehensive income, net
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    (12
    )
    
    
    12Comprehensive income
    
    $
    6,051
    
    
    $
    8,690
    
    
    $
    284
    
    
    $
    371
    
    
    $
    (9,345
    )
    
    $
    6,051
 35




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended July 31, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    61,217
    
    
    $
    497
    
    
    $
    4,303
    
    
    $
    
    
    
    $
    66,017Cemetery
    
    
    
    
    
    
    46,813
    
    
    
    786
    
    
    
    4,136
    
    
    
    
    
    
    
    51,735
    
    
    
    108,030
    
    
    
    1,283
    
    
    
    8,439
    
    
    
    
    
    
    
    117,752Costs and expenses:Funeral
    
    
    
    
    
    
    48,093
    
    
    
    314
    
    
    
    3,200
    
    
    
    
    
    
    
    51,607Cemetery
    
    
    
    
    
    
    42,379
    
    
    
    673
    
    
    
    3,760
    
    
    
    
    
    
    
    46,812
    
    
    
    90,472
    
    
    
    987
    
    
    
    6,960
    
    
    
    
    
    
    
    98,419Gross profit
    
    
    
    
    
    
    17,558
    
    
    
    296
    
    
    
    1,479
    
    
    
    
    
    
    
    19,333Corporate general and administrative
expenses
    
    
    (8,089
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,089
    )Hurricane related charges, net
    
    
    (44
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46
    )Net impairment losses on dispositions
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (119
    )
    
    
    
    
    
    
    (117
    )Other operating income, net
    
    
    20
    
    
    
    317
    
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    397Operating earnings (loss)
    
    
    (8,113
    )
    
    
    17,875
    
    
    
    296
    
    
    
    1,420
    
    
    
    
    
    
    
    11,478Interest expense
    
    
    (87
    )
    
    
    (5,990
    )
    
    
    (28
    )
    
    
    (492
    )
    
    
    
    
    
    
    (6,597
    )Gain on early extinguishment of debt
    
    
    2,414
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,414Investment and other income, net
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Equity in subsidiaries
    
    
    8,354
    
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    (8,386
    )
    
    
    Earnings before income taxes
    
    
    2,580
    
    
    
    11,917
    
    
    
    268
    
    
    
    928
    
    
    
    (8,386
    )
    
    
    7,307Income tax expense (benefit)
    
    
    (3,512
    )
    
    
    4,401
    
    
    
    86
    
    
    
    240
    
    
    
    
    
    
    
    1,215Net earnings
    
    
    6,092
    
    
    
    7,516
    
    
    
    182
    
    
    
    688
    
    
    
    (8,386
    )
    
    
    6,092Other comprehensive loss, net
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    1
    
    
    
    (1
    )Comprehensive income
    
    $
    6,091
    
    
    $
    7,516
    
    
    $
    182
    
    
    $
    687
    
    
    $
    (8,385
    )
    
    $
    6,091
 36




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Nine Months Ended July 31, 2010GuarantorSubsidiaries-
    
    
    Guarantor
    
    
    Non-GuarantorParent
    
    
    Tier 1
    
    
    Subsidiaries-Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    196,079
    
    
    $
    1,383
    
    
    $
    13,074
    
    
    $
    
    
    
    $
    210,536Cemetery
    
    
    
    
    
    
    147,981
    
    
    
    2,191
    
    
    
    14,966
    
    
    
    
    
    
    
    165,138
    
    
    
    344,060
    
    
    
    3,574
    
    
    
    28,040
    
    
    
    
    
    
    
    375,674Costs and expenses:Funeral
    
    
    
    
    
    
    149,736
    
    
    
    832
    
    
    
    9,511
    
    
    
    
    
    
    
    160,079Cemetery
    
    
    
    
    
    
    129,447
    
    
    
    1,848
    
    
    
    12,015
    
    
    
    
    
    
    
    143,310
    
    
    
    279,183
    
    
    
    2,680
    
    
    
    21,526
    
    
    
    
    
    
    
    303,389Gross profit
    
    
    
    
    
    
    64,877
    
    
    
    894
    
    
    
    6,514
    
    
    
    
    
    
    
    72,285Corporate general and administrative
expenses
    
    
    (20,188
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,188
    )Hurricane related recoveries (charges), net
    
    
    (117
    )
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    (62
    )Other operating income, net
    
    
    60
    
    
    
    839
    
    
    
    3
    
    
    
    149
    
    
    
    
    
    
    
    1,051Operating earnings (loss)
    
    
    (20,245
    )
    
    
    65,716
    
    
    
    952
    
    
    
    6,663
    
    
    
    
    
    
    
    53,086Interest expense
    
    
    (1,172
    )
    
    
    (15,923
    )
    
    
    (13
    )
    
    
    (1,423
    )
    
    
    
    
    
    
    (18,531
    )Loss on early extinguishment of debt
    
    
    (89
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (89
    )Investment and other income, net
    
    
    121
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122Equity in subsidiaries
    
    
    32,133
    
    
    
    658
    
    
    
    
    
    
    
    
    
    
    
    (32,791
    )
    
    
    Earnings before income taxes
    
    
    10,748
    
    
    
    50,452
    
    
    
    939
    
    
    
    5,240
    
    
    
    (32,791
    )
    
    
    34,588Income tax expense (benefit)
    
    
    (11,169
    )
    
    
    21,151
    
    
    
    258
    
    
    
    2,431
    
    
    
    
    
    
    
    12,671Net earnings
    
    
    21,917
    
    
    
    29,301
    
    
    
    681
    
    
    
    2,809
    
    
    
    (32,791
    )
    
    
    21,917Other comprehensive income, net
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    (12
    )
    
    
    12Comprehensive income
    
    $
    21,929
    
    
    $
    29,301
    
    
    $
    681
    
    
    $
    2,821
    
    
    $
    (32,803
    )
    
    $
    21,929
 37




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Nine Months Ended July 31, 2009GuarantorSubsidiaries-
    
    
    Guarantor
    
    
    Non-GuarantorParent
    
    
    Tier 1
    
    
    Subsidiaries-Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    194,481
    
    
    $
    1,397
    
    
    $
    13,129
    
    
    $
    
    
    
    $
    209,007Cemetery
    
    
    
    
    
    
    139,701
    
    
    
    2,200
    
    
    
    12,792
    
    
    
    
    
    
    
    154,693
    
    
    
    334,182
    
    
    
    3,597
    
    
    
    25,921
    
    
    
    
    
    
    
    363,700Costs and expenses:Funeral
    
    
    
    
    
    
    147,551
    
    
    
    880
    
    
    
    9,386
    
    
    
    
    
    
    
    157,817Cemetery
    
    
    
    
    
    
    125,322
    
    
    
    1,905
    
    
    
    10,645
    
    
    
    
    
    
    
    137,872
    
    
    
    272,873
    
    
    
    2,785
    
    
    
    20,031
    
    
    
    
    
    
    
    295,689Gross profit
    
    
    
    
    
    
    61,309
    
    
    
    812
    
    
    
    5,890
    
    
    
    
    
    
    
    68,011Corporate general and administrative
expenses
    
    
    (22,601
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,601
    )Hurricane related recoveries (charges), net
    
    
    (670
    )
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (566
    )Separation charges
    
    
    (55
    )
    
    
    (220
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (275
    )Net impairment losses on dispositions
    
    
    (8
    )
    
    
    (88
    )
    
    
    
    
    
    
    (119
    )
    
    
    
    
    
    
    (215
    )Other operating income, net
    
    
    39
    
    
    
    804
    
    
    
    1
    
    
    
    116
    
    
    
    
    
    
    
    960Operating earnings (loss)
    
    
    (23,295
    )
    
    
    61,909
    
    
    
    813
    
    
    
    5,887
    
    
    
    
    
    
    
    45,314Interest expense
    
    
    (1,488
    )
    
    
    (18,264
    )
    
    
    (90
    )
    
    
    (1,516
    )
    
    
    
    
    
    
    (21,358
    )Gain on early extinguishment of debt
    
    
    5,798
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,798Investment and other income, net
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85Equity in subsidiaries
    
    
    32,661
    
    
    
    455
    
    
    
    
    
    
    
    
    
    
    
    (33,116
    )
    
    
    Earnings before income taxes
    
    
    13,761
    
    
    
    44,100
    
    
    
    723
    
    
    
    4,371
    
    
    
    (33,116
    )
    
    
    29,839Income tax expense (benefit)
    
    
    (5,963
    )
    
    
    14,804
    
    
    
    202
    
    
    
    1,072
    
    
    
    
    
    
    
    10,115Net earnings
    
    
    19,724
    
    
    
    29,296
    
    
    
    521
    
    
    
    3,299
    
    
    
    (33,116
    )
    
    
    19,724Other comprehensive loss, net
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    4
    
    
    
    (4
    )Comprehensive income
    
    $
    19,720
    
    
    $
    29,296
    
    
    $
    521
    
    
    $
    3,295
    
    
    $
    (33,112
    )
    
    $
    19,720
 38




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 July 31, 2010Guarantor
    
    
    Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries-Tier 1
    
    
    Subsidiaries-Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    52,454
    
    
    $
    7,067
    
    
    $
    42
    
    
    $
    110
    
    
    $
    
    
    
    $
    59,673Certificates of deposit and marketable
securities
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    429
    
    
    
    
    
    
    
    15,429Receivables, net of allowances
    
    
    5,604
    
    
    
    46,707
    
    
    
    507
    
    
    
    4,270
    
    
    
    
    
    
    
    57,088Inventories
    
    
    318
    
    
    
    33,310
    
    
    
    347
    
    
    
    2,140
    
    
    
    
    
    
    
    36,115Prepaid expenses
    
    
    1,642
    
    
    
    4,096
    
    
    
    65
    
    
    
    1,957
    
    
    
    
    
    
    
    7,760Deferred income taxes, net
    
    
    13,086
    
    
    
    10,868
    
    
    
    35
    
    
    
    1,483
    
    
    
    
    
    
    
    25,472Intercompany receivables
    
    
    7,782
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,782
    )
    
    
    Total current assets
    
    
    95,886
    
    
    
    102,048
    
    
    
    996
    
    
    
    10,389
    
    
    
    (7,782
    )
    
    
    201,537Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    48,285
    
    
    
    427
    
    
    
    13,637
    
    
    
    
    
    
    
    62,349Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    390,976
    
    
    
    
    
    
    
    9,402
    
    
    
    
    
    
    
    400,378Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    193,587
    
    
    
    1,094
    
    
    
    6,390
    
    
    
    
    
    
    
    201,071Goodwill
    
    
    
    
    
    
    227,401
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,236Cemetery property, at cost
    
    
    
    
    
    
    347,085
    
    
    
    11,151
    
    
    
    25,674
    
    
    
    
    
    
    
    383,910Property and equipment, at cost
    
    
    56,448
    
    
    
    472,673
    
    
    
    2,286
    
    
    
    38,930
    
    
    
    
    
    
    
    570,337Less accumulated depreciation
    
    
    39,656
    
    
    
    221,724
    
    
    
    1,131
    
    
    
    16,178
    
    
    
    
    
    
    
    278,689Net property and equipment
    
    
    16,792
    
    
    
    250,949
    
    
    
    1,155
    
    
    
    22,752
    
    
    
    
    
    
    
    291,648Deferred income taxes, net
    
    
    19,575
    
    
    
    70,534
    
    
    
    
    
    
    
    9,965
    
    
    
    (3,276
    )
    
    
    96,798Cemetery perpetual care trust investments
    
    
    
    
    
    
    209,711
    
    
    
    8,733
    
    
    
    3,924
    
    
    
    
    
    
    
    222,368Other assets
    
    
    6,761
    
    
    
    4,890
    
    
    
    8
    
    
    
    1,035
    
    
    
    
    
    
    
    12,694Intercompany receivables
    
    
    704,288
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (704,288
    )
    
    
    Equity in subsidiaries
    
    
    14,515
    
    
    
    8,779
    
    
    
    
    
    
    
    
    
    
    
    (23,294
    )
    
    
    Total assets
    
    $
    857,817
    
    
    $
    1,854,245
    
    
    $
    23,612
    
    
    $
    122,955
    
    
    $
    (738,640
    )
    
    $
    2,119,989LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5Accounts payable, accrued expenses and
other current liabilities
    
    
    15,814
    
    
    
    70,164
    
    
    
    140
    
    
    
    5,268
    
    
    
    
    
    
    
    91,386Intercompany payables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,782
    
    
    
    (7,782
    )
    
    
    Total current liabilities
    
    
    15,819
    
    
    
    70,164
    
    
    
    140
    
    
    
    13,050
    
    
    
    (7,782
    )
    
    
    91,391Long-term debt, less current maturities
    
    
    325,482
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    325,482Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    3,276
    
    
    
    
    
    
    
    (3,276
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    691,420
    
    
    
    2,307
    
    
    
    10,561
    
    
    
    (704,288
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    198,676
    
    
    
    
    
    
    
    46,549
    
    
    
    
    
    
    
    245,225Deferred preneed cemetery revenue
    
    
    
    
    
    
    233,995
    
    
    
    305
    
    
    
    26,971
    
    
    
    
    
    
    
    261,271Deferred preneed funeral and cemetery
receipts held in trust
    
    
    
    
    
    
    526,462
    
    
    
    1,051
    
    
    
    6,469
    
    
    
    
    
    
    
    533,982Perpetual care trusts corpus
    
    
    
    
    
    
    207,072
    
    
    
    8,702
    
    
    
    3,839
    
    
    
    
    
    
    
    219,613Other long-term liabilities
    
    
    17,712
    
    
    
    2,038
    
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    19,803Negative equity in subsidiaries
    
    
    75,582
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75,582
    )
    
    
    Total liabilities
    
    
    434,595
    
    
    
    1,929,827
    
    
    
    15,781
    
    
    
    107,492
    
    
    
    (790,928
    )
    
    
    1,696,767Common stock
    
    
    93,186
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    93,186Other
    
    
    329,989
    
    
    
    (75,684
    )
    
    
    7,507
    
    
    
    15,364
    
    
    
    52,813
    
    
    
    329,989Accumulated other comprehensive income
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    47
    
    
    
    (47
    )
    
    
    47Total shareholders equity
    
    
    423,222
    
    
    
    (75,582
    )
    
    
    7,831
    
    
    
    15,463
    
    
    
    52,288
    
    
    
    423,222Total liabilities and shareholders equity
    
    $
    857,817
    
    
    $
    1,854,245
    
    
    $
    23,612
    
    
    $
    122,955
    
    
    $
    (738,640
    )
    
    $
    2,119,989
 39




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 October 31, 2009Guarantor
    
    
    Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries-Tier 1
    
    
    Subsidiaries-Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    56,734
    
    
    $
    5,096
    
    
    $
    52
    
    
    $
    926
    
    
    $
    
    
    
    $
    62,808Receivables, net of allowances
    
    
    7,062
    
    
    
    47,388
    
    
    
    504
    
    
    
    4,485
    
    
    
    
    
    
    
    59,439Inventories
    
    
    269
    
    
    
    33,440
    
    
    
    312
    
    
    
    2,135
    
    
    
    
    
    
    
    36,156Prepaid expenses
    
    
    1,218
    
    
    
    3,804
    
    
    
    38
    
    
    
    1,688
    
    
    
    
    
    
    
    6,748Deferred income taxes, net
    
    
    9,006
    
    
    
    11,168
    
    
    
    47
    
    
    
    1,494
    
    
    
    
    
    
    
    21,715Intercompany receivables
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,000
    )
    
    
    Total current assets
    
    
    80,289
    
    
    
    100,896
    
    
    
    953
    
    
    
    10,728
    
    
    
    (6,000
    )
    
    
    186,866Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    48,783
    
    
    
    420
    
    
    
    13,808
    
    
    
    
    
    
    
    63,011Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    379,899
    
    
    
    
    
    
    
    9,613
    
    
    
    
    
    
    
    389,512Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    185,447
    
    
    
    1,124
    
    
    
    6,846
    
    
    
    
    
    
    
    193,417Goodwill
    
    
    
    
    
    
    227,401
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,236Cemetery property, at cost
    
    
    
    
    
    
    348,627
    
    
    
    11,315
    
    
    
    26,035
    
    
    
    
    
    
    
    385,977Property and equipment, at cost
    
    
    53,956
    
    
    
    466,187
    
    
    
    2,183
    
    
    
    38,136
    
    
    
    
    
    
    
    560,462Less accumulated depreciation
    
    
    36,015
    
    
    
    208,806
    
    
    
    994
    
    
    
    15,190
    
    
    
    
    
    
    
    261,005Net property and equipment
    
    
    17,941
    
    
    
    257,381
    
    
    
    1,189
    
    
    
    22,946
    
    
    
    
    
    
    
    299,457Deferred income taxes, net
    
    
    
    
    
    
    107,636
    
    
    
    
    
    
    
    10,415
    
    
    
    (4,653
    )
    
    
    113,398Cemetery perpetual care trust investments
    
    
    
    
    
    
    193,616
    
    
    
    8,207
    
    
    
    3,653
    
    
    
    
    
    
    
    205,476Other assets
    
    
    8,402
    
    
    
    5,196
    
    
    
    6
    
    
    
    1,050
    
    
    
    
    
    
    
    14,654Intercompany receivables
    
    
    765,490
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (765,490
    )
    
    
    Equity in subsidiaries
    
    
    15,065
    
    
    
    8,121
    
    
    
    
    
    
    
    
    
    
    
    (23,186
    )
    
    
    Total assets
    
    $
    887,187
    
    
    $
    1,863,003
    
    
    $
    23,262
    
    
    $
    124,881
    
    
    $
    (799,329
    )
    
    $
    2,099,004LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5Accounts payable, accrued expenses and
other current liabilities
    
    
    15,209
    
    
    
    75,920
    
    
    
    199
    
    
    
    4,678
    
    
    
    
    
    
    
    96,006Intercompany payables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000
    
    
    
    (6,000
    )
    
    
    Total current liabilities
    
    
    15,214
    
    
    
    75,920
    
    
    
    199
    
    
    
    10,678
    
    
    
    (6,000
    )
    
    
    96,011Long-term debt, less current maturities
    
    
    339,721
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,721Deferred income taxes
    
    
    1,672
    
    
    
    
    
    
    
    2,981
    
    
    
    
    
    
    
    (4,653
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    747,847
    
    
    
    3,402
    
    
    
    14,241
    
    
    
    (765,490
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    200,990
    
    
    
    
    
    
    
    46,835
    
    
    
    
    
    
    
    247,825Deferred preneed cemetery revenue
    
    
    
    
    
    
    239,177
    
    
    
    277
    
    
    
    27,510
    
    
    
    
    
    
    
    266,964Deferred preneed funeral and cemetery
receipts held in trust
    
    
    
    
    
    
    507,912
    
    
    
    1,045
    
    
    
    5,830
    
    
    
    
    
    
    
    514,787Perpetual care trusts corpus
    
    
    
    
    
    
    192,324
    
    
    
    8,208
    
    
    
    3,636
    
    
    
    
    
    
    
    204,168Other long-term liabilities
    
    
    17,040
    
    
    
    3,716
    
    
    
    
    
    
    
    115
    
    
    
    
    
    
    
    20,871Negative equity in subsidiaries
    
    
    104,883
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (104,883
    )
    
    
    Total liabilities
    
    
    478,530
    
    
    
    1,967,886
    
    
    
    16,112
    
    
    
    108,845
    
    
    
    (881,026
    )
    
    
    1,690,347Common stock
    
    
    92,684
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    92,684Other
    
    
    315,938
    
    
    
    (104,985
    )
    
    
    6,826
    
    
    
    15,949
    
    
    
    82,210
    
    
    
    315,938Accumulated other comprehensive income
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    (35
    )
    
    
    35Total shareholders equity
    
    
    408,657
    
    
    
    (104,883
    )
    
    
    7,150
    
    
    
    16,036
    
    
    
    81,697
    
    
    
    408,657Total liabilities and shareholders equity
    
    $
    887,187
    
    
    $
    1,863,003
    
    
    $
    23,262
    
    
    $
    124,881
    
    
    $
    (799,329
    )
    
    $
    2,099,004
 40




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Nine Months Ended July 31, 2010Guarantor
    
    
    
    
    
    
    Non-Subsidiaries-
    
    
    Guarantor
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Subsidiaries-Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    955
    
    
    $
    44,143
    
    
    $
    917
    
    
    $
    3,130
    
    
    $
    
    
    
    $
    49,145Cash flows from investing activities:Proceeds from sales of marketable
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    250Purchases of certificates of deposit
and marketable securities
    
    
    (15,000
    )
    
    
    
    
    
    
    
    
    
    
    (661
    )
    
    
    
    
    
    
    (15,661
    )Proceeds from sale of assets
    
    
    
    
    
    
    388
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388Additions to property and equipment
    
    
    (2,320
    )
    
    
    (8,424
    )
    
    
    (87
    )
    
    
    (733
    )
    
    
    
    
    
    
    (11,564
    )Other
    
    
    
    
    
    
    136
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136Net cash used in investing activities
    
    
    (17,320
    )
    
    
    (7,900
    )
    
    
    (87
    )
    
    
    (1,144
    )
    
    
    
    
    
    
    (26,451
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (18,423
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,423
    )Intercompany receivables (payables)
    
    
    37,914
    
    
    
    (34,272
    )
    
    
    (840
    )
    
    
    (2,802
    )
    
    
    
    
    
    
    Retirement of common stock warrants
    
    
    (2,118
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,118
    )Issuance of common stock
    
    
    621
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    621Retirement of call options
    
    
    2,370
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,370Debt refinancing costs
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38
    )Dividends
    
    
    (8,278
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,278
    )Excess tax benefits from share-based
payment arrangements
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37Net cash provided by (used in)
financing activities
    
    
    12,085
    
    
    
    (34,272
    )
    
    
    (840
    )
    
    
    (2,802
    )
    
    
    
    
    
    
    (25,829
    )Net increase (decrease) in cash
    
    
    (4,280
    )
    
    
    1,971
    
    
    
    (10
    )
    
    
    (816
    )
    
    
    
    
    
    
    (3,135
    )Cash and cash equivalents, beginning of
period
    
    
    56,734
    
    
    
    5,096
    
    
    
    52
    
    
    
    926
    
    
    
    
    
    
    
    62,808Cash and cash equivalents, end of period
    
    $
    52,454
    
    
    $
    7,067
    
    
    $
    42
    
    
    $
    110
    
    
    $
    
    
    
    $
    59,673
 41




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Nine Months Ended July 31, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    15,345
    
    
    $
    39,487
    
    
    $
    1,036
    
    
    $
    7,722
    
    
    $
    
    
    
    $
    63,590Cash flows from investing activities:Proceeds from sales of marketable
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    250Purchases of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (199
    )
    
    
    
    
    
    
    (199
    )Proceeds from sale of assets
    
    
    292
    
    
    
    202
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    494Purchase of subsidiaries and other
investments, net of cash acquired
    
    
    (300
    )
    
    
    (1,623
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,923
    )Additions to property and equipment
    
    
    (4,144
    )
    
    
    (10,281
    )
    
    
    (130
    )
    
    
    (474
    )
    
    
    
    
    
    
    (15,029
    )Other
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37Net cash used in investing activities
    
    
    (4,152
    )
    
    
    (11,665
    )
    
    
    (130
    )
    
    
    (423
    )
    
    
    
    
    
    
    (16,370
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (39,901
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,901
    )Intercompany receivables (payables)
    
    
    35,778
    
    
    
    (26,734
    )
    
    
    (885
    )
    
    
    (8,159
    )
    
    
    
    
    
    
    Retirement of common stock warrants
    
    
    (4,981
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,981
    )Issuance of common stock
    
    
    225
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225Retirement of call options
    
    
    5,111
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,111Purchase and retirement of common stock
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (52
    )Debt refinancing costs
    
    
    (2,029
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,029
    )Dividends
    
    
    (6,953
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,953
    )Net cash used in financing activities
    
    
    (12,802
    )
    
    
    (26,734
    )
    
    
    (885
    )
    
    
    (8,159
    )
    
    
    
    
    
    
    (48,580
    )Net increase (decrease) in cash
    
    
    (1,609
    )
    
    
    1,088
    
    
    
    21
    
    
    
    (860
    )
    
    
    
    
    
    
    (1,360
    )Cash and cash equivalents, beginning of
period
    
    
    65,593
    
    
    
    4,332
    
    
    
    22
    
    
    
    2,627
    
    
    
    
    
    
    
    72,574Cash and cash equivalents, end of period
    
    $
    63,984
    
    
    $
    5,420
    
    
    $
    43
    
    
    $
    1,767
    
    
    $
    
    
    
    $
    71,214
 42




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12) Consolidated Comprehensive Income
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net earnings
    
    $
    6,039
    
    
    $
    6,092
    
    
    $
    21,917
    
    
    $
    19,724Other comprehensive income (loss):Unrealized appreciation (depreciation)
of investments, net of deferred tax
(expense) benefit of ($6), $0, ($6)and
$2, respectively
    
    
    12
    
    
    
    (1
    )
    
    
    12
    
    
    
    (4
    )(Increase) reduction in net unrealized
losses associated with
available-for-sale securities of the
trusts
    
    
    (17,308
    )
    
    
    74,562
    
    
    
    38,359
    
    
    
    61,993Reclassification of the net unrealized
(increases) losses activity
attributable to the deferred preneed
funeral and cemetery receipts held in
trust and perpetual care trusts
corpus
    
    
    17,308
    
    
    
    (74,562
    )
    
    
    (38,359
    )
    
    
    (61,993
    )Total other comprehensive income (loss)
    
    
    12
    
    
    
    (1
    )
    
    
    12
    
    
    
    (4
    )Total comprehensive income
    
    $
    6,051
    
    
    $
    6,091
    
    
    $
    21,929
    
    
    $
    19,720
 (13) Long-term Debt
 July 31, 2010
    
    
    October 31, 2009Long-term debt:3.125% senior convertible notes due
2014, net of unamortized discount of
$10,913 and $12,912 as of July 31, 2010
and October 31, 2009, respectively
    
    $
    75,503
    
    
    $
    74,5043.375% senior convertible notes due
2016, net of unamortized discount of
$10,092 and $14,858 as of July 31, 2010
and October 31, 2009, respectively
    
    
    49,893
    
    
    
    65,127Senior secured revolving credit facility
    
    
    
    
    
    
    6.25% senior notes due 2013
    
    
    200,000
    
    
    
    200,000Other, principally seller financing of
acquired operations or assumption upon
acquisition, weighted average interest
rate of 8.0% as of July 31, 2010 and
October 31, 2009, partially secured by
assets of subsidiaries, with maturities
through 2022
    
    
    91
    
    
    
    95Total long-term debt
    
    
    325,487
    
    
    
    339,726Less current maturities
    
    
    5
    
    
    
    5$
    325,482
    
    
    $
    339,721
 Fair Value
  43




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (13) Long-term Debt(Continued)
 Senior Convertible Notes
   Adoption of Convertible Debt Guidance
    44




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (13) Long-term Debt(Continued)
       45




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (13) Long-term Debt(Continued)
   (14) Income Taxes
  (15) Subsequent Events
   46




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
 General
   Financial Summary
   47




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##### Table of Contents



48




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##### Table of Contents



49




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##### Table of Contents



Funeral andCemeteryMerchandise andServices
    
    
    Cemetery PerpetualTrusts(1)
    
    
    Care Trusts(1)For the quarter ended July 31, 2010
    
    
    (2.3
    )%
    
    
    (0.4
    )%For the last twelve months ended July 31, 2010
    
    
    12.4
    %
    
    
    14.2
    %For the last five years ended July 31, 2010
    
    
    1.2
    %
    
    
    2.6
    %For the last ten years ended July 31, 2010
    
    
    2.2
    %
    
    
    3.0
    %
 
 (1)
    
    Periods less than a year represent actual returns experienced. Periods of
one year or more represent annualized returns.  Critical Accounting Policies
  Results of Operations
  Three Months Ended July 31, 2010 Compared to Three Months Ended July 31, 2009
 Funeral Operations
 Three Months Ended July 31,2010
    
    
    2009
    
    
    Increase(In millions)Funeral Revenue:Funeral Home Locations
    
    $
    63.4
    
    
    $
    62.5
    
    
    $
    .9Corporate Trust Management (1)
    
    
    3.6
    
    
    
    3.5
    
    
    
    .1Total Funeral Revenue
    
    $
    67.0
    
    
    $
    66.0
    
    
    $
    1.0Funeral Costs:Funeral Home Locations
    
    $
    52.3
    
    
    $
    51.4
    
    
    $
    .9Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Funeral Costs
    
    $
    52.5
    
    
    $
    51.6
    
    
    $
    .9Funeral Gross Profit:Funeral Home Locations
    
    $
    11.1
    
    
    $
    11.1
    
    
    $
    Corporate Trust Management (1)
    
    
    3.4
    
    
    
    3.3
    
    
    
    .1Total Funeral Gross Profit
    
    $
    14.5
    
    
    $
    14.4
    
    
    $
    .1
 50




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##### Table of Contents



Same-Store Analysis for the Three Months Ended July 31, 2010 and 2009
 Change in Average
    
    Change in Same-StoreRevenue Per Funeral Service
    
    Funeral Services
    
    Same-Store Cremation Rate2010
    
    20091.5% (1)
    
    (1.2)%
    
    42.4%
    
    41.8%
 
 (1)
    
    Corporate trust management consists of the trust management fees and funeral
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
distributable earnings as stipulated by our respective trust agreements that are generated by
the trusts over the life of the preneed contracts and allocated to those products and services
delivered during the relevant periods. See Notes 3 and 6 to the condensed consolidated
financial statements included herein for information regarding the cost basis and market value
of the trust assets and current performance of the trusts (i.e., current realized gains and
losses, interest income and dividends). Trust management fees included in funeral revenue for
the three months ended July 31, 2010 and 2009 were $1.1 million and $1.0 million,
respectively. Funeral trust earnings recognized in funeral revenue for both the three months
ended July 31, 2010 and 2009 were $2.5 million.   Cemetery Operations
 Three Months Ended July 31,Increase2010
    
    
    2009
    
    
    (Decrease)(In millions)Cemetery Revenue:Cemetery Locations
    
    $
    54.1
    
    
    $
    49.8
    
    
    $
    4.3Corporate Trust Management (1)
    
    
    1.8
    
    
    
    1.9
    
    
    
    (.1
    )Total Cemetery Revenue
    
    $
    55.9
    
    
    $
    51.7
    
    
    $
    4.2Cemetery Costs:Cemetery Locations
    
    $
    48.0
    
    
    $
    46.6
    
    
    $
    1.4Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Cemetery Costs
    
    $
    48.2
    
    
    $
    46.8
    
    
    $
    1.4Cemetery Gross Profit:Cemetery Locations
    
    $
    6.1
    
    
    $
    3.2
    
    
    $
    2.9Corporate Trust Management (1)
    
    
    1.6
    
    
    
    1.7
    
    
    
    (.1
    )Total Cemetery Gross Profit
    
    $
    7.7
    
    
    $
    4.9
    
    
    $
    2.8
 51




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##### Table of Contents



(1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
distributable earnings as stipulated by our respective trust agreements that are generated by
the trusts over the life of the preneed contracts and allocated to those products and services
delivered during the relevant periods. See Notes 4 and 6 to the condensed consolidated
financial statements included herein for information regarding the cost basis and market value
of the trust assets and current performance of the trusts (i.e., current realized gains and
losses, interest income and dividends). Trust management fees included in cemetery revenue
for the three months ended July 31, 2010 and 2009 were $1.1 million and $1.0 million,
respectively, and cemetery trust earnings recognized included in cemetery revenue for the
three months ended July 31, 2010 and 2009 were $0.7 million and $0.9 million, respectively.
Perpetual care trust earnings of $2.2 million and $1.6 million for the three months ended July
31, 2010 and 2009, respectively, are included in the revenues and gross profit of the cemetery
segment. See Notes 5 and 6 to the condensed consolidated financial statements included herein
for information regarding the cemetery perpetual care trusts.   Other
    Preneed Sales into the Backlog
   52




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##### Table of Contents



Nine Months Ended July 31, 2010 Compared to Nine Months Ended July 31, 2009
 Funeral Operations
 Nine Months Ended July 31,Increase2010
    
    
    2009
    
    
    (Decrease)(In millions)Funeral Revenue:Funeral Home Locations
    
    $
    198.6
    
    
    $
    197.7
    
    
    $
    .9Corporate Trust Management (1)
    
    
    12.0
    
    
    
    11.3
    
    
    
    .7Total Funeral Revenue
    
    $
    210.6
    
    
    $
    209.0
    
    
    $
    1.6Funeral Costs:Funeral Home Locations
    
    $
    159.5
    
    
    $
    157.2
    
    
    $
    2.3Corporate Trust Management (1)
    
    
    .6
    
    
    
    .6
    
    
    
    Total Funeral Costs
    
    $
    160.1
    
    
    $
    157.8
    
    
    $
    2.3Funeral Gross Profit:Funeral Home Locations
    
    $
    39.1
    
    
    $
    40.5
    
    
    $
    (1.4
    )Corporate Trust Management (1)
    
    
    11.4
    
    
    
    10.7
    
    
    
    .7Total Funeral Gross Profit
    
    $
    50.5
    
    
    $
    51.2
    
    
    $
    (.7
    )
 Same-Store Analysis for the Nine Months Ended July 31, 2010 and 2009
 Change in Average Revenue Per Funeral
    
    Change in Same-StoreService
    
    Funeral Services
    
    Same-Store Cremation Rate2010
    
    20090.5% (1)
    
    (1.7)%
    
    42.0%
    
    41.2%
 
 (1)
    
    Corporate trust management consists of trust management fees and funeral merchandise
and services trust earnings recognized with respect to preneed contracts delivered during the
period. Trust management fees are established by the Company at rates consistent with
industry norms based on the fair market value of assets managed and are paid by the trusts to
our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
distributable earnings as stipulated by our respective trust agreements that are generated by
the trusts over the life of the preneed contracts and allocated to those products and services
delivered during the relevant periods. See Notes 3 and 6 to the condensed consolidated
financial statements included herein for information regarding the cost basis and market value
of the trust assets and current performance of the trusts (i.e., current realized gains and
losses, interest income and dividends). Trust management fees included in funeral revenue for
the nine months ended July 31, 2010 and 2009 were $3.4 million and $2.8 million, respectively.
Funeral trust earnings recognized in funeral revenue for the nine months ended July 31, 2010
and 2009 were $8.6 million and $8.5 million, respectively.  53




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Cemetery Operations
 Nine Months Ended July 31,Increase2010
    
    
    2009
    
    
    (Decrease)(In millions)Cemetery Revenue:Cemetery Locations
    
    $
    159.6
    
    
    $
    149.1
    
    
    $
    10.5Corporate Trust Management (1)
    
    
    5.5
    
    
    
    5.6
    
    
    
    (.1
    )Total Cemetery Revenue
    
    $
    165.1
    
    
    $
    154.7
    
    
    $
    10.4Cemetery Costs:Cemetery Locations
    
    $
    142.7
    
    
    $
    137.2
    
    
    $
    5.5Corporate Trust Management (1)
    
    
    .6
    
    
    
    .7
    
    
    
    (.1
    )Total Cemetery Costs
    
    $
    143.3
    
    
    $
    137.9
    
    
    $
    5.4Cemetery Gross Profit:Cemetery Locations
    
    $
    16.9
    
    
    $
    11.9
    
    
    $
    5.0Corporate Trust Management (1)
    
    
    4.9
    
    
    
    4.9
    
    
    
    Total Cemetery Gross Profit
    
    $
    21.8
    
    
    $
    16.8
    
    
    $
    5.0
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
distributable earnings as stipulated by our respective trust agreements that are generated by
the trusts over the life of the preneed contracts and allocated to those products and services
delivered during the relevant periods. See Notes 4 and 6 to the condensed consolidated
financial statements included herein for information regarding the cost basis and market value
of the trust assets and current performance of the trusts (i.e., current realized gains and
losses, interest income and dividends). Trust management fees included in cemetery revenue
for the nine months ended July 31, 2010 and 2009 were $3.6 million and $2.9 million,
respectively, and cemetery trust earnings recognized included in cemetery revenue for the nine
months ended July 31, 2010 and 2009 were $1.9 million and $2.7 million, respectively.
Perpetual care trust earnings of $6.0 million and $5.3 million for the nine months ended July
31, 2010 and 2009, respectively, are included in the revenues and gross profit of the cemetery
segment. See Notes 5 and 6 to the condensed consolidated financial statements included herein
for information regarding the cemetery perpetual care trusts.  54




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##### Table of Contents



Other
       55




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##### Table of Contents



Preneed Sales into the Backlog
   Liquidity and Capital Resources
 General
    56




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##### Table of Contents



Cash Flow
    57




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##### Table of Contents



Contractual Obligations and Commercial Commitments
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsLong-term debt obligations (1)
    
    $
    346.5
    
    
    $
    
    
    
    $
    200.0
    
    
    $
    86.4
    
    
    $
    60.1Interest on long-term debt (2)
    
    
    60.5
    
    
    
    17.2
    
    
    
    34.5
    
    
    
    6.8
    
    
    
    2.0Operating lease obligations (3)
    
    
    29.0
    
    
    
    1.2
    
    
    
    6.4
    
    
    
    4.2
    
    
    
    17.2Purchase obligations (4)
    
    
    2.7
    
    
    
    2.7
    
    
    
    
    
    
    
    
    
    
    
    Non-competition agreements (5)
    
    
    1.2
    
    
    
    .1
    
    
    
    .5
    
    
    
    .2
    
    
    
    .4$
    439.9
    
    
    $
    21.2
    
    
    $
    241.4
    
    
    $
    97.6
    
    
    $
    79.7
 
 (1)
    
    See below for a breakdown of our future scheduled principal payments and
maturities of our long-term debt by type as of July 31, 2010.(2)
    
    Includes contractual interest payments for our senior convertible notes, senior
notes and third-party debt.(3)
    
    Our noncancellable operating leases are primarily for land and buildings and expire
over the next one to 14 years, except for eight leases that expire between 2032 and 2039. Our
future minimum lease payments for all operating leases as of July 31, 2010 are $1.2 million,
$3.5 million, $2.9 million, $2.3 million, $1.9 million and $17.2 million for the years ending
October 31, 2010, 2011, 2012, 2013, 2014 and later years, respectively.(4)
    
    Represents a construction contract for a funeral home.(5)
    
    This category includes payments pursuant to non-competition agreements with prior
owners and key employees of acquired businesses.  Expiration by PeriodContingent Obligations
    
    Total
    
    
    Less than 
1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    More than 
5 yearsCemetery perpetual
care trust funding
obligations
(1)
    
    $
    13.5
    
    
    $
    13.5
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term obligations
related to uncertain
tax positions
(2)
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.2$
    15.7
    
    
    $
    13.5
    
    
    $
    
    
    
    $
    
    
    
    $
    2.2
 
 (1)
    
    In those states where we have withdrawn realized net capital gains in the past
from our cemetery perpetual care trusts, regulators may seek replenishment of the realized net
capital losses either by requiring a cash deposit to the trust or by prohibiting or
restricting withdrawals of future earnings until they cover the loss. The estimated probable
funding obligation in the cemetery perpetual care trusts in these states was $13.5 million as
of July 31, 2010. As of July 31, 2010, we had net unrealized losses of $42.1 million in the
trusts in these states. Because some of these trusts currently have assets with a fair market
value less than the aggregate amounts required to be contributed to the trust, any additional
realized net capital losses in these trusts may result in a corresponding funding liability
and increase in cemetery costs. In those states where realized net capital gains have not
been withdrawn, we believe it is reasonably possible but not probable that additional funding
obligations may exist with an estimated amount of approximately $2.7 million; no charge has
been recorded for these amounts as of July 31, 2010.(2)
    
    In accordance with the required accounting guidance on uncertain tax positions, as
of July 31, 2010, we have recorded $2.2 million of unrecognized tax benefits and related
interest and penalties. Due to the uncertainty 58




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##### Table of Contents



regarding the timing and completion of audits and possible outcomes, it is not possible to
estimate the range of increase and decrease and the timing of any potential cash payments.  SeniorSecured
    
    
    
    
    
    
    
    
    
    
    Other, PrincipallyRevolving
    
    
    
    
    
    
    
    
    
    
    Seller FinancingCredit
    
    
    Senior Convertible
    
    
    Senior
    
    
    of AcquiredFiscal Years Ending October 31,
    
    Facility
    
    
    Notes
    
    
    Notes
    
    
    Operations
    
    
    Total2010
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2013
    
    
    
    
    
    
    
    
    
    
    200.0
    
    
    
    
    
    
    
    200.02014
    
    
    
    
    
    
    86.4
    
    
    
    
    
    
    
    
    
    
    
    86.4Thereafter
    
    
    
    
    
    
    60.0
    
    
    
    
    
    
    
    .1
    
    
    
    60.1Total long-term debt
    
    $
    
    
    
    $
    146.4
    
    
    $
    200.0
    
    
    $
    .1
    
    
    $
    346.5
 Off-Balance Sheet Arrangements
  (1)
    
    the $24.8 million bond we are required to maintain to guarantee our obligations
relating to funds we withdrew in fiscal year 2001 from our preneed funeral trusts in
Florida, which is discussed above and in Note 20 to the consolidated financial
statements in our 2009 Form 10-K; and(2)
    
    the insurance-funded preneed funeral contracts, which will be funded by life
insurance or annuity contracts issued by third-party insurers, are not reflected in our
condensed consolidated balance sheets, and are discussed in Note 2(i) to the
consolidated financial statements in our 2009 Form 10-K.
 Recent Accounting Standards
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   59




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##### Table of Contents



Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 1A. Risk Factors
  Increased costs, including potential increased health care costs, may have a negative impact on earnings and cash flows.
  60




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 Issuer Purchases of Equity Securities
 Maximum approximateTotal number of
    
    
    dollar value of sharesshares purchased as
    
    
    that may yet bepart of
    
    
    purchased under theTotal number
    
    
    Average price paid
    
    
    publicly-announced
    
    
    plans orPeriod
    
    of shares purchased
    
    
    per share
    
    
    plans or programs
    
    
    programs(1)May 1, 2010 through May 31, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    26,495,706June 1, 2010 through June 30, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    26,495,706July 1, 2010 through July 31, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    26,495,706Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    26,495,706
 
 (1)
    
    We announced a $25.0 million stock repurchase program in September 2007, which was
increased by $25.0 million in December 2007 and June 2008, resulting in a $75.0 million
program. 
 Item 6. Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
April 3, 2008 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended April 30, 2008)3.2
    
    By-laws of the Company, as amended and restated as of September 8, 2008 (incorporated by
reference to Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended
July 31, 2008)4.1
    
    See Exhibits 3.1 and 3.2 for provisions of the Companys Amended and Restated Articles of
Incorporation, as amended, and By-laws, as amended, defining the rights of holders of Class A
and Class B common stock4.2
    
    Specimen of Class A common stock certificate (incorporated by reference to Exhibit 3 to the
Companys Registration Statement on Form 8-A/A filed with the Commission on June 21, 2007)4.3
    
    Second Amended and Restated Credit Agreement dated June 2, 2009 by and among the Company,
Empresas Stewart-Cementerios and Empresas Stewart-Funerarias, as Borrowers, Bank of America,
N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer and The
Other Lenders party hereto (incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K filed June 3, 2009)4.4
    
    Indenture dated as of February 11, 2005 by and among Stewart Enterprises, Inc., the
Guarantors thereunder and U.S. Bank National Association, as Trustee, with respect to the 6.25
percent Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K filed February 14, 2005 (File No. 001-15449))
 61




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##### Table of Contents



4.5
    
    Form of 6.25 percent Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed February 14, 2005 (File No. 001-15449))4.6
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.125 percent Senior
Convertible Notes due 2014 (including Form of 3.125 percent Senior Convertible Notes due 2014)
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed
June 27, 2007)4.7
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.375 percent Senior
Convertible Notes due 2016 (including Form of 3.375 percent Senior Convertible Notes due 2016)
(incorporated by reference to Exhibit 4.2 to the Companys Current Report on Form 8-K filed
June 27, 2007)31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
 62




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.September 8, 2010
    /s/  THOMAS M. KITCHENThomas M. KitchenSenior Executive Vice President and

Chief Financial OfficerSeptember 8, 2010
    /s/  ANGELA M. LACOURAngela M. LacourVice President

Corporate Controller

Chief Accounting Officer 63




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##### Table of Contents



Exhibit Index
 31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
 64