##### 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 April 30, 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
    
    72-0693290(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)1333 South Clearview ParkwayJefferson, Louisiana
    
    70121(Address of principal executive offices)
    
    (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
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 INDEX
 PagePart I. Financial Information PageItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings 
Three Months Ended April 30, 2010 and 2009
    
    3Condensed Consolidated Statements of Earnings 
Six Months Ended April 30, 2010 and 2009
    
    4Condensed Consolidated Balance Sheets 
April 30, 2010 and October 31, 2009
    
    5Condensed Consolidated Statement of Shareholders Equity 
Six Months Ended April 30, 2010
    
    7Condensed Consolidated Statements of Cash Flows 
Six Months Ended April 30, 2010 and 2009
    
    8Notes to Condensed Consolidated Financial Statements
    
    9Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    49Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    61Item 4. Controls and Procedures
    
    62Part II. Other InformationItem 1. Legal Proceedings
    
    62Item 1A. Risk Factors
    
    62Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    63Item 6. Exhibits
    
    63Signatures
    
    65EX-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 April 30,2010
    
    
    2009(As Adjusted)Revenues:Funeral
    
    $
    71,386
    
    
    $
    71,240Cemetery
    
    
    56,973
    
    
    
    55,378128,359
    
    
    
    126,618Costs and expenses:Funeral
    
    
    54,641
    
    
    
    52,715Cemetery
    
    
    48,802
    
    
    
    48,308103,443
    
    
    
    101,023Gross profit
    
    
    24,916
    
    
    
    25,595Corporate general and administrative expenses
    
    
    (5,948
    )
    
    
    (7,006
    )Hurricane related charges, net
    
    
    (32
    )
    
    
    (205
    )Separation charges
    
    
    
    
    
    
    (275
    )Net impairment losses on dispositions
    
    
    
    
    
    
    (35
    )Other operating income, net
    
    
    265
    
    
    
    304Operating earnings
    
    
    19,201
    
    
    
    18,378Interest expense
    
    
    (5,891
    )
    
    
    (7,366
    )Gain on early extinguishment of debt
    
    
    
    
    
    
    3,384Investment and other income, net
    
    
    36
    
    
    
    32Earnings before income taxes
    
    
    13,346
    
    
    
    14,428Income taxes
    
    
    4,955
    
    
    
    5,562Net earnings
    
    $
    8,391
    
    
    $
    8,866Net earnings per common share:Basic
    
    $
    .09
    
    
    $
    .10Diluted
    
    $
    .09
    
    
    $
    .10Weighted average common shares outstanding (in thousands):Basic
    
    
    92,113
    
    
    
    91,888Diluted
    
    
    92,387
    
    
    
    91,888Dividends 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)
 Six Months Ended April 30,2010
    
    
    2009(As Adjusted)Revenues:Funeral
    
    $
    143,494
    
    
    $
    142,990Cemetery
    
    
    109,265
    
    
    
    102,958252,759
    
    
    
    245,948Costs and expenses:Funeral
    
    
    107,552
    
    
    
    106,210Cemetery
    
    
    95,122
    
    
    
    91,060202,674
    
    
    
    197,270Gross profit
    
    
    50,085
    
    
    
    48,678Corporate general and administrative expenses
    
    
    (12,502
    )
    
    
    (14,512
    )Hurricane related charges, net
    
    
    (32
    )
    
    
    (520
    )Separation charges
    
    
    
    
    
    
    (275
    )Net impairment losses on dispositions
    
    
    
    
    
    
    (98
    )Other operating income, net
    
    
    444
    
    
    
    563Operating earnings
    
    
    37,995
    
    
    
    33,836Interest expense
    
    
    (12,347
    )
    
    
    (14,761
    )Gain on early extinguishment of debt
    
    
    17
    
    
    
    3,384Investment and other income, net
    
    
    60
    
    
    
    73Earnings before income taxes
    
    
    25,725
    
    
    
    22,532Income taxes
    
    
    9,847
    
    
    
    8,900Net earnings
    
    $
    15,878
    
    
    $
    13,632Net earnings per common share:Basic
    
    $
    .17
    
    
    $
    .15Diluted
    
    $
    .17
    
    
    $
    .15Weighted average common shares outstanding (in thousands):Basic
    
    
    92,082
    
    
    
    91,856Diluted
    
    
    92,332
    
    
    
    91,865Dividends declared per common share
    
    $
    .06
    
    
    $
    .05
  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)
 April 30, 2010
    
    
    October 31, 2009(As Adjusted)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    64,559
    
    
    $
    62,808Certificates of deposit and marketable securities
    
    
    10,411
    
    
    
    Receivables, net of allowances
    
    
    56,138
    
    
    
    59,439Inventories
    
    
    36,374
    
    
    
    36,156Prepaid expenses
    
    
    9,019
    
    
    
    6,748Deferred income taxes, net
    
    
    24,693
    
    
    
    21,715Total current assets
    
    
    201,194
    
    
    
    186,866Receivables due beyond one year, net of allowances
    
    
    61,625
    
    
    
    63,011Preneed funeral receivables and trust investments
    
    
    413,799
    
    
    
    389,512Preneed cemetery receivables and trust investments
    
    
    205,941
    
    
    
    193,417Goodwill
    
    
    247,236
    
    
    
    247,236Cemetery property, at cost
    
    
    384,652
    
    
    
    385,977Property and equipment, at cost:Land
    
    
    43,677
    
    
    
    43,677Buildings
    
    
    333,861
    
    
    
    329,685Equipment and other
    
    
    189,560
    
    
    
    187,100567,098
    
    
    
    560,462Less accumulated depreciation
    
    
    272,985
    
    
    
    261,005Net property and equipment
    
    
    294,113
    
    
    
    299,457Deferred income taxes, net
    
    
    100,785
    
    
    
    113,398Cemetery perpetual care trust investments
    
    
    224,190
    
    
    
    205,476Other assets
    
    
    13,517
    
    
    
    14,654Total assets
    
    $
    2,147,052
    
    
    $
    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)
 April 30, 2010
    
    
    October 31, 2009(As Adjusted)LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5
    
    
    $
    5Accounts payable and accrued expenses
    
    
    21,554
    
    
    
    25,604Accrued payroll and other benefits
    
    
    10,542
    
    
    
    15,200Accrued insurance
    
    
    20,182
    
    
    
    20,504Accrued interest
    
    
    4,452
    
    
    
    4,561Estimated obligation to fund cemetery perpetual care trust
    
    
    13,489
    
    
    
    14,010Other current liabilities
    
    
    12,183
    
    
    
    14,099Income taxes payable
    
    
    1,616
    
    
    
    2,028Total current liabilities
    
    
    84,023
    
    
    
    96,011Long-term debt, less current maturities
    
    
    341,014
    
    
    
    339,721Deferred preneed funeral revenue
    
    
    245,721
    
    
    
    247,825Deferred preneed cemetery revenue
    
    
    261,285
    
    
    
    266,964Deferred preneed funeral and cemetery receipts held in trust
    
    
    551,715
    
    
    
    514,787Perpetual care trusts corpus
    
    
    222,787
    
    
    
    204,168Other long-term liabilities
    
    
    19,801
    
    
    
    20,871Total liabilities
    
    
    1,726,346
    
    
    
    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 89,607,802 and 89,128,700 shares at April 30, 2010 and October 31, 2009, respectively
    
    
    89,608
    
    
    
    89,129Class B authorized 5,000,000 shares; issued and outstanding 3,555,020 shares at April 30, 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
    
    
    556,755
    
    
    
    561,063Accumulated deficit
    
    
    (229,247
    )
    
    
    (245,125
    )Accumulated other comprehensive income:Unrealized appreciation of investments
    
    
    35
    
    
    
    35Total accumulated other comprehensive income
    
    
    35
    
    
    
    35Total shareholders equity
    
    
    420,706
    
    
    
    408,657Total liabilities and shareholders equity
    
    $
    2,147,052
    
    
    $
    2,099,004
  6




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
(Dollars in thousands, except per share amounts)
 UnrealizedCommon
    
    
    Additional Paid-In
    
    
    
    
    
    
    Appreciation of
    
    
    Total ShareholdersStock(1)
    
    
    Capital
    
    
    Accumulated Deficit
    
    
    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
    
    
    
    
    
    
    
    
    
    
    15,878
    
    
    
    
    
    
    
    15,878Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    15,878
    
    
    
    
    
    
    
    15,878Restricted stock activity
    
    
    294
    
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    437Issuance of common stock
    
    
    122
    
    
    
    448
    
    
    
    
    
    
    
    
    
    
    
    570Stock options exercised
    
    
    63
    
    
    
    252
    
    
    
    
    
    
    
    
    
    
    
    315Stock option expense
    
    
    
    
    
    
    540
    
    
    
    
    
    
    
    
    
    
    
    540Tax benefit associated
with stock activity
    
    
    
    
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    (52
    )Retirement of call
options, net of tax
expense of $37
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    70Retirement of common stock
warrants
    
    
    
    
    
    
    (107
    )
    
    
    
    
    
    
    
    
    
    
    (107
    )Repurchase of convertible
notes, net of tax benefit
of $7
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    (13
    )Dividends ($.06 per share)
    
    
    
    
    
    
    (5,589
    )
    
    
    
    
    
    
    
    
    
    
    (5,589
    )Balance April 30, 2010
    
    $
    93,163
    
    
    $
    556,755
    
    
    $
    (229,247
    )
    
    $
    35
    
    
    $
    420,706
 
 (1)
    
    Amount includes 89,608 and 89,129 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of April 30, 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)
 Six Months Ended April 30,2010
    
    
    2009(As Adjusted)Cash flows from operating activities:Net earnings
    
    $
    15,878
    
    
    $
    13,632Adjustments to reconcile net earnings to net cash provided by operating activities:Net impairment losses on dispositions
    
    
    
    
    
    
    98Gain on early extinguishment of debt
    
    
    (17
    )
    
    
    (3,384
    )Depreciation and amortization
    
    
    13,194
    
    
    
    13,968Non-cash interest and amortization of discount on senior convertible notes
    
    
    3,046
    
    
    
    3,810Provision for doubtful accounts
    
    
    2,406
    
    
    
    4,344Share-based compensation
    
    
    1,500
    
    
    
    1,259Excess tax benefits from share-based payment arrangements
    
    
    (26
    )
    
    
    Provision for deferred income taxes
    
    
    8,395
    
    
    
    1,791Estimated obligation to fund cemetery perpetual care trust
    
    
    
    
    
    
    3,200Other
    
    
    12
    
    
    
    157Changes in assets and liabilities:Decrease in receivables
    
    
    754
    
    
    
    5,041Increase in prepaid expenses
    
    
    (2,271
    )
    
    
    (2,915
    )(Increase) decrease in inventories and cemetery property
    
    
    1,106
    
    
    
    (515
    )Federal income tax refunds
    
    
    1,600
    
    
    
    134Decrease in accounts payable and accrued expenses
    
    
    (11,501
    )
    
    
    (10,382
    )Net effect of preneed funeral production and maturities:Decrease in preneed funeral receivables and trust investments
    
    
    5,925
    
    
    
    15,895Decrease in deferred preneed funeral revenue
    
    
    (2,104
    )
    
    
    (743
    )Decrease in deferred preneed funeral receipts held in trust
    
    
    (6,926
    )
    
    
    (14,018
    )Net effect of preneed cemetery production and deliveries:Decrease in preneed cemetery receivables and trust investments
    
    
    793
    
    
    
    7,584Decrease in deferred preneed cemetery revenue
    
    
    (5,679
    )
    
    
    (7,595
    )Increase (decrease) in deferred preneed cemetery receipts held in trust
    
    
    325
    
    
    
    (4,433
    )Increase in other
    
    
    45
    
    
    
    2,156Net cash provided by operating activities
    
    
    26,455
    
    
    
    29,084Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    250
    
    
    
    Purchases of certificates of deposit and marketable securities
    
    
    (10,661
    )
    
    
    (99
    )Proceeds from sale of assets
    
    
    
    
    
    
    494Purchase of subsidiaries and other investments, net of cash acquired
    
    
    
    
    
    
    (1,623
    )Additions to property and equipment
    
    
    (8,366
    )
    
    
    (10,729
    )Other
    
    
    50
    
    
    
    28Net cash used in investing activities
    
    
    (18,727
    )
    
    
    (11,929
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (847
    )
    
    
    (13,538
    )Retirement of common stock warrants
    
    
    (107
    )
    
    
    (1,182
    )Issuance of common stock
    
    
    471
    
    
    
    149Retirement of call options
    
    
    107
    
    
    
    1,261Debt refinancing costs
    
    
    (38
    )
    
    
    Dividends
    
    
    (5,589
    )
    
    
    (4,636
    )Excess tax benefits from share-based payment arrangements
    
    
    26
    
    
    
    Net cash used in financing activities
    
    
    (5,977
    )
    
    
    (17,946
    )Net increase (decrease) in cash
    
    
    1,751
    
    
    
    (791
    )Cash and cash equivalents, beginning of period
    
    
    62,808
    
    
    
    72,574Cash and cash equivalents, end of period
    
    $
    64,559
    
    
    $
    71,783Supplemental cash flow information:Cash paid (received) during the period for:Income taxes, net
    
    $
    (430
    )
    
    $
    3,374Interest
    
    $
    9,728
    
    
    $
    11,798Non-cash investing and financing activities:Issuance of common stock to executive officers and directors
    
    $
    414
    
    
    $
    305Issuance of restricted stock, net of forfeitures
    
    $
    931
    
    
    $
    52
  8




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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)
 (1) Basis of Presentation
 The Company
  Principles of Consolidation
  Interim Disclosures
    Use of Estimates
  Share-Based Compensation
  9




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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)
 (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
    )
 Effects ofThree Months
    
    
    Effects of the
    
    
    Adoption of
    
    
    Three MonthsEnded
    
    
    Adoption of
    
    
    Participating
    
    
    EndedApril 30, 2009
    
    
    Convertible
    
    
    Share
    
    
    April 30, 2009As Reported
    
    
    Debt Guidance
    
    
    Guidance
    
    
    As AdjustedStatement of earnings:Interest expense
    
    $
    5,879
    
    
    $
    1,487
    
    
    
    
    
    
    $
    7,366Gain on early
extinguishment of debt
    
    
    8,671
    
    
    
    (5,287
    )
    
    
    
    
    
    
    3,384Income taxes
    
    
    8,000
    
    
    
    (2,438
    )
    
    
    
    
    
    
    5,562Net earnings
    
    
    13,202
    
    
    
    (4,336
    )
    
    
    
    
    
    
    8,866Basic earnings per share
    
    $
    .14
    
    
    $
    (.04
    )
    
    
    
    
    
    $
    .10Diluted earnings per share
    
    $
    .14
    
    
    $
    (.04
    )
    
    
    
    
    
    $
    .10Weighted average basic
shares outstanding
    
    
    91,888
    
    
    
    
    
    
    
    
    
    
    
    91,888Weighted average diluted
shares outstanding
    
    
    91,921
    
    
    
    
    
    
    
    (33
    )
    
    
    91,888
 Effects ofSix Months
    
    
    Effects of the
    
    
    Adoption of
    
    
    Six MonthsEnded
    
    
    Adoption of
    
    
    Participating
    
    
    EndedApril 30, 2009
    
    
    Convertible
    
    
    Share
    
    
    April 30, 2009As Reported
    
    
    Debt Guidance
    
    
    Guidance
    
    
    As AdjustedStatement of earnings:Interest expense
    
    $
    11,789
    
    
    $
    2,972
    
    
    
    
    
    
    $
    14,761Gain on early
extinguishment of debt
    
    
    8,671
    
    
    
    (5,287
    )
    
    
    
    
    
    
    3,384Income taxes
    
    
    11,873
    
    
    
    (2,973
    )
    
    
    
    
    
    
    8,900Net earnings
    
    
    18,918
    
    
    
    (5,286
    )
    
    
    
    
    
    
    13,632Basic earnings per share
    
    $
    .21
    
    
    $
    (.06
    )
    
    
    
    
    
    $
    .15Diluted earnings per share
    
    $
    .21
    
    
    $
    (.06
    )
    
    
    
    
    
    $
    .15Weighted average basic
shares outstanding
    
    
    91,856
    
    
    
    
    
    
    
    
    
    
    
    91,856Weighted average diluted
shares outstanding
    
    
    91,871
    
    
    
    
    
    
    
    (6
    )
    
    
    91,865
 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 of theYear Ended
    
    
    Adoption of
    
    
    Effects of Adoption
    
    
    Year Ended OctoberOctober 31, 2009
    
    
    Convertible Debt
    
    
    of Participating
    
    
    31, 2009As Reported
    
    
    Guidance
    
    
    Share 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
    (3) Preneed Funeral Activities
  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(Continued)
 Preneed Funeral Receivables and Trust Investments
  April 30,2010
    
    
    October 31, 2009Trust assets
    
    $
    383,135
    
    
    $
    358,430Receivables from customers
    
    
    42,503
    
    
    
    43,225425,638
    
    
    
    401,655Allowance for cancellations
    
    
    (11,839
    )
    
    
    (12,143
    )Preneed funeral receivables and trust investments
    
    $
    413,799
    
    
    $
    389,512
  April 30, 2010Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    29,972
    
    
    $
    
    
    
    $
    
    
    
    $
    29,972U.S. Government, agencies and
municipalities
    
    
    2,938
    
    
    
    132
    
    
    
    (1
    )
    
    
    3,069Corporate bonds
    
    
    43,455
    
    
    
    1,923
    
    
    
    (212
    )
    
    
    45,166Preferred stocks
    
    
    56,785
    
    
    
    186
    
    
    
    (6,142
    )
    
    
    50,829Common stocks
    
    
    239,168
    
    
    
    1,080
    
    
    
    (86,545
    )
    
    
    153,703Mutual funds:Equity
    
    
    28,684
    
    
    
    170
    
    
    
    (3,008
    )
    
    
    25,846Fixed income
    
    
    58,273
    
    
    
    567
    
    
    
    (947
    )
    
    
    57,893Insurance contracts and other
long-term investments
    
    
    18,982
    
    
    
    105
    
    
    
    (3,433
    )
    
    
    15,654Trust investments
    
    $
    478,257
    
    
    $
    4,163
    
    
    $
    (100,288
    )
    
    
    382,132Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79.9
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,003Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    383,135
 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
  April 30, 2010Due in one year or less
    
    $
    1,873Due in one to five years
    
    
    31,068Due in five to ten years
    
    
    15,270Thereafter
    
    
    24$
    48,235
   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)
    Quoted MarketPrices in Active
    
    
    Significant Other
    
    
    SignificantMarkets
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    Fair Market(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueTrust investmentsApril 30, 2010
    
    $
    275,191
    
    
    $
    99,063
    
    
    $
    7,878
    
    
    $
    382,132Trust investmentsOctober 31, 2009
    
    $
    256,799
    
    
    $
    91,956
    
    
    $
    8,662
    
    
    $
    357,417
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Fair market value, beginning balance
    
    $
    8,735
    
    
    $
    9,070
    
    
    $
    8,662
    
    
    $
    11,299Total unrealized losses included in
other comprehensive income
(1)
    
    
    (930
    )
    
    
    (840
    )
    
    
    (930
    )
    
    
    (2,554
    )Purchases, sales, contributions and
distributions, net
    
    
    73
    
    
    
    369
    
    
    
    146
    
    
    
    (146
    )Fair market value, ending balance
    
    $
    7,878
    
    
    $
    8,599
    
    
    $
    7,878
    
    
    $
    8,599
 
 (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 April 30,
    
    
    Six Months Ended April 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Purchases
    
    $
    14,709
    
    
    $
    937
    
    
    $
    15,558
    
    
    $
    1,578Sales
    
    
    18,079
    
    
    
    4,512
    
    
    
    22,428
    
    
    
    9,128Realized gains from sales of investments
    
    
    809
    
    
    
    484
    
    
    
    1,437
    
    
    
    992Realized losses from sales of
investments and other
    
    
    (538
    )
    
    
    (392
    )(1)
    
    
    (1,054
    )
    
    
    (8,893
    )(2)Interest income, dividends and other
ordinary income
    
    
    2,542
    
    
    
    2,672
    
    
    
    4,887
    
    
    
    5,825Deposits
    
    
    5,590
    
    
    
    6,655
    
    
    
    13,605
    
    
    
    13,013Withdrawals
    
    
    10,070
    
    
    
    10,386
    
    
    
    22,047
    
    
    
    21,438
 
 (1)
    
    Includes $292 in losses from the sale of investments and $100 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined it did not have the intent to hold until they recover
in value.(2)
    
    Includes $487 in losses from the sale of investments and $8,406 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined it did not have the intent to hold until they recover
in value.  April 30, 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
    
    
    2,312
    
    
    
    (12
    )
    
    
    8,378
    
    
    
    (200
    )
    
    
    10,690
    
    
    
    (212
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    44,004
    
    
    
    (6,142
    )
    
    
    44,004
    
    
    
    (6,142
    )Common stocks
    
    
    583
    
    
    
    (782
    )
    
    
    140,765
    
    
    
    (85,763
    )
    
    
    141,348
    
    
    
    (86,545
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    19,781
    
    
    
    (3,008
    )
    
    
    19,781
    
    
    
    (3,008
    )Fixed income
    
    
    10,867
    
    
    
    (28
    )
    
    
    4,611
    
    
    
    (919
    )
    
    
    15,478
    
    
    
    (947
    )Insurance contracts
and other long-term
investments
    
    
    
    
    
    
    
    
    
    
    2,289
    
    
    
    (3,433
    )
    
    
    2,289
    
    
    
    (3,433
    )Total
    
    $
    13,762
    
    
    $
    (822
    )
    
    $
    219,849
    
    
    $
    (99,466
    )
    
    $
    233,611
    
    
    $
    (100,288
    )
 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
    )
    (4) Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  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(Continued)
  April 30,2010
    
    
    October 31, 2009Trust assets
    
    $
    178,630
    
    
    $
    163,938Receivables from customers
    
    
    32,954
    
    
    
    35,718211,584
    
    
    
    199,656Allowance for cancellations
    
    
    (5,643
    )
    
    
    (6,239
    )Preneed cemetery receivables and trust investments
    
    $
    205,941
    
    
    $
    193,417
  April 30, 2010Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    18,347
    
    
    $
    
    
    
    $
    
    
    
    $
    18,347U.S. Government, agencies and
municipalities
    
    
    7,054
    
    
    
    563
    
    
    
    
    
    
    
    7,617Corporate bonds
    
    
    11,239
    
    
    
    636
    
    
    
    (24
    )
    
    
    11,851Preferred stocks
    
    
    20,831
    
    
    
    105
    
    
    
    (2,963
    )
    
    
    17,973Common stocks
    
    
    121,369
    
    
    
    704
    
    
    
    (44,985
    )
    
    
    77,088Mutual funds:Equity
    
    
    30,291
    
    
    
    39
    
    
    
    (7,480
    )
    
    
    22,850Fixed income
    
    
    21,715
    
    
    
    185
    
    
    
    (17
    )
    
    
    21,883Other long-term investments
    
    
    612
    
    
    
    
    
    
    
    
    
    
    
    612Trust investments
    
    $
    231,458
    
    
    $
    2,232
    
    
    $
    (55,469
    )
    
    
    178,221Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77.0
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    409Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    178,630
 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
  April 30, 2010Due in one year or less
    
    $
    2,936Due in one to five years
    
    
    10,433Due in five to ten years
    
    
    5,958Thereafter
    
    
    141$
    19,468
   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April 30, 2010
    
    $
    140,673
    
    
    $
    37,548
    
    
    $
    
    
    
    $
    178,221Trust investmentsOctober 31, 2009
    
    $
    129,032
    
    
    $
    34,507
    
    
    $
    
    
    
    $
    163,539
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Purchases
    
    $
    9,089
    
    
    $
    2,273
    
    
    $
    11,135
    
    
    $
    3,426Sales
    
    
    10,449
    
    
    
    2,042
    
    
    
    12,769
    
    
    
    4,498Realized gains from sales of investments
    
    
    836
    
    
    
    274
    
    
    
    1,259
    
    
    
    378Realized losses from sales of
investments and other
    
    
    (637
    )
    
    
    (1,286
    )(1)
    
    
    (1,518
    )
    
    
    (5,750
    )(2)Interest income, dividends and other
ordinary income
    
    
    1,237
    
    
    
    1,208
    
    
    
    2,390
    
    
    
    2,508Deposits
    
    
    3,783
    
    
    
    4,289
    
    
    
    9,476
    
    
    
    8,322Withdrawals
    
    
    4,325
    
    
    
    4,614
    
    
    
    8,729
    
    
    
    8,382
 
 (1)
    
    Includes $1,231 in losses from the sale of investments and $55 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined it did not have the intent to hold until they recover
in value.(2)
    
    Includes $2,474 in losses from the sale of investments and $3,276 in losses related
to certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined it did not have 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)
  April 30, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate bonds
    
    $
    1,916
    
    
    $
    (9
    )
    
    $
    1,184
    
    
    $
    (15
    )
    
    $
    3,100
    
    
    $
    (24
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    17,011
    
    
    
    (2,963
    )
    
    
    17,011
    
    
    
    (2,963
    )Common stocks
    
    
    752
    
    
    
    (342
    )
    
    
    69,331
    
    
    
    (44,643
    )
    
    
    70,083
    
    
    
    (44,985
    )Mutual funds:Equity
    
    
    80
    
    
    
    (45
    )
    
    
    21,715
    
    
    
    (7,435
    )
    
    
    21,795
    
    
    
    (7,480
    )Fixed income
    
    
    3,671
    
    
    
    (13
    )
    
    
    15
    
    
    
    (4
    )
    
    
    3,686
    
    
    
    (17
    )Total
    
    $
    6,419
    
    
    $
    (409
    )
    
    $
    109,256
    
    
    $
    (55,060
    )
    
    $
    115,675
    
    
    $
    (55,469
    )
 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
   April 30, 2010Cost Basis
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    24,293
    
    
    $
    
    
    
    $
    
    
    
    $
    24,293U.S. Government, agencies and
municipalities
    
    
    3,768
    
    
    
    337
    
    
    
    (81
    )
    
    
    4,024Corporate bonds
    
    
    46,956
    
    
    
    1,542
    
    
    
    (877
    )
    
    
    47,621Preferred stocks
    
    
    57,893
    
    
    
    55
    
    
    
    (10,154
    )
    
    
    47,794Common stocks
    
    
    90,589
    
    
    
    1,044
    
    
    
    (35,428
    )
    
    
    56,205Mutual funds:Equity
    
    
    8,864
    
    
    
    33
    
    
    
    (812
    )
    
    
    8,085Fixed income
    
    
    35,034
    
    
    
    340
    
    
    
    (341
    )
    
    
    35,033Other long-term investments
    
    
    576
    
    
    
    2
    
    
    
    (177
    )
    
    
    401Trust investments
    
    $
    267,973
    
    
    $
    3,353
    
    
    $
    (47,870
    )
    
    
    223,456Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83.4
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    734Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    224,190
 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
  April 30, 2010Due in one year or less
    
    $
    10,468Due in one to five years
    
    
    25,688Due in five to ten years
    
    
    15,027Thereafter
    
    
    462$
    51,645
   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April 30, 2010
    
    $
    123,767
    
    
    $
    99,439
    
    
    $
    250
    
    
    $
    223,456Trust investmentsOctober 31, 2009
    
    $
    113,715
    
    
    $
    90,752
    
    
    $
    226
    
    
    $
    204,693
  Three Months Ended April       30,
    
    
    Six Months Ended April 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Fair market value, beginning balance
    
    $
    168
    
    
    $
    243
    
    
    $
    226
    
    
    $
    611Total unrealized losses included in other
comprehensive income (1)
    
    
    
    
    
    
    (59
    )
    
    
    
    
    
    
    (177
    )Transfers out of Level 3 category and other
    
    
    82
    
    
    
    103
    
    
    
    24
    
    
    
    (147
    )Fair market value, ending balance
    
    $
    250
    
    
    $
    287
    
    
    $
    250
    
    
    $
    287
 
 (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 April 30,
    
    
    Six Months Ended April 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Purchases
    
    $
    22,930
    
    
    $
    7,540
    
    
    $
    39,102
    
    
    $
    7,869Sales
    
    
    13,200
    
    
    
    47
    
    
    
    42,085
    
    
    
    1,853Realized gains from sales of investments
    
    
    2,258
    
    
    
    175
    
    
    
    4,283
    
    
    
    534Realized losses from sales of investments and other
    
    
    (268
    )
    
    
    (3,113
    )(1)
    
    
    (818
    )
    
    
    (3,209
    )(2)Interest income, dividends and other ordinary income
    
    
    2,177
    
    
    
    2,572
    
    
    
    4,338
    
    
    
    4,856Deposits
    
    
    1,895
    
    
    
    1,767
    
    
    
    3,733
    
    
    
    4,221
    (3)Withdrawals
    
    
    2,121
    
    
    
    1,368
    
    
    
    3,009
    
    
    
    2,954
 
 (1)
    
    Includes $3,112 in losses related to certain investments that were rendered
worthless or practically worthless.(2)
    
    Includes $3,196 in losses related to certain investments that were rendered
worthless or practically worthless.(3)
    
    Includes $734 that the Company contributed to the cemetery perpetual care trusts as
part of its funding obligation during the six months ended April 30, 2009..   April 30, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government, agencies and municipalities
    
    $
    79
    
    
    $
    (1
    )
    
    $
    118
    
    
    $
    (80
    )
    
    $
    197
    
    
    $
    (81
    )Corporate bonds
    
    
    4,721
    
    
    
    (20
    )
    
    
    3,265
    
    
    
    (857
    )
    
    
    7,986
    
    
    
    (877
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    44,647
    
    
    
    (10,154
    )
    
    
    44,647
    
    
    
    (10,154
    )Common stocks
    
    
    521
    
    
    
    (399
    )
    
    
    52,438
    
    
    
    (35,029
    )
    
    
    52,959
    
    
    
    (35,428
    )Mutual funds:Equity
    
    
    1,998
    
    
    
    (4
    )
    
    
    5,754
    
    
    
    (808
    )
    
    
    7,752
    
    
    
    (812
    )Fixed income
    
    
    6,019
    
    
    
    (13
    )
    
    
    1,043
    
    
    
    (328
    )
    
    
    7,062
    
    
    
    (341
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    201
    
    
    
    (177
    )
    
    
    201
    
    
    
    (177
    )Total
    
    $
    13,338
    
    
    $
    (437
    )
    
    $
    107,466
    
    
    $
    (47,433
    )
    
    $
    120,804
    
    
    $
    (47,870
    )
 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)
 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
    )
   (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
    
    $
    383,135
    
    
    $
    178,630
    
    
    $
    561,765Less:Pending withdrawals
    
    
    (8,086
    )
    
    
    (5,026
    )
    
    
    (13,112
    )Pending deposits
    
    
    1,728
    
    
    
    1,334
    
    
    
    3,062Deferred receipts held in trust
    
    $
    376,777
    
    
    $
    174,938
    
    
    $
    551,715
 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(Continued)
  Perpetual CareTrusts CorpusTrust assets at market value
    
    $
    224,190Less:Pending withdrawals
    
    
    (2,074
    )Pending deposits
    
    
    671Perpetual care trusts corpus
    
    $
    222,787
 Investment and other income, net
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Realized gains from sales of investments
    
    $
    3,903
    
    
    $
    933
    
    
    $
    6,979
    
    
    $
    1,904Realized losses from sales of investments and
other
    
    
    (1,443
    )
    
    
    (4,791
    )
    
    
    (3,390
    )
    
    
    (17,852
    )Interest income, dividends and other ordinary
income
    
    
    5,956
    
    
    
    6,452
    
    
    
    11,615
    
    
    
    13,189Trust expenses and income taxes
    
    
    (2,602
    )
    
    
    (1,963
    )
    
    
    (5,140
    )
    
    
    (4,097
    )Net trust investment income (loss)
    
    
    5,814
    
    
    
    631
    
    
    
    10,064
    
    
    
    (6,856
    )Reclassification to deferred preneed
funeral and cemetery receipts held in
trust
    
    
    (2,646
    )
    
    
    (1,660
    )
    
    
    (3,996
    )
    
    
    7,613Reclassification to perpetual care trusts
corpus
    
    
    (3,168
    )
    
    
    1,029
    
    
    
    (6,068
    )
    
    
    (757
    )Total deferred preneed funeral and cemetery
receipts held in trust and perpetual care
trusts corpus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    36
    
    
    
    32
    
    
    
    60
    
    
    
    73Total investment and other income, net
    
    $
    36
    
    
    $
    32
    
    
    $
    60
    
    
    $
    73
 
 (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. (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.
 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(Continued)
        Other Litigation
  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)
  Other Commitments and Contingencies
    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
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended April 30, 2010Net earnings
    
    $
    8,391Allocation of earnings to nonvested restricted stock
    
    
    (89
    )Basic earnings per common share:Net earnings available to common shareholders
    
    $
    8,302
    
    
    
    92,113
    
    
    $
    .09Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    274Diluted earnings per common share:Net earnings available to common shareholders
plus stock options assumed exercised
    
    $
    8,302
    
    
    
    92,387
    
    
    $
    .09
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended April 30, 2009Net earnings
    
    $
    8,866Allocation of earnings to nonvested restricted stock
    
    
    (72
    )Basic earnings per common share:Net earnings available to common shareholders
    
    $
    8,794
    
    
    
    91,888
    
    
    $
    .10Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    Diluted earnings per common share:Net earnings available to common shareholders
plus stock options assumed exercised
    
    $
    8,794
    
    
    
    91,888
    
    
    $
    .10
 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)
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataSix Months Ended April 30, 2010Net earnings
    
    $
    15,878Allocation of earnings to nonvested restricted stock
    
    
    (168
    )Basic earnings per common share:Net earnings available to common shareholders
    
    $
    15,710
    
    
    
    92,082
    
    
    $
    .17Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    250Diluted earnings per common share:Net earnings available to common shareholders
plus stock options assumed exercised
    
    $
    15,710
    
    
    
    92,332
    
    
    $
    .17
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataSix Months Ended April 30, 2009Net earnings
    
    $
    13,632Allocation of earnings to nonvested restricted stock
    
    
    (111
    )Basic earnings per common share:Net earnings available to common shareholders
    
    $
    13,521
    
    
    
    91,856
    
    
    $
    .15Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    9Diluted earnings per common share:Net earnings available to common shareholders
plus stock options assumed exercised
    
    $
    13,521
    
    
    
    91,865
    
    
    $
    .15
     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)
 (8) Reconciliation of Basic and Diluted Per Share Data(Continued)
     (9) Segment Data
  Total Revenue
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2010
    
    
    April 30, 2009
    
    
    April 30, 2010
    
    
    April 30, 2009Funeral
    
    $
    67,062
    
    
    $
    67,075
    
    
    $
    135,092
    
    
    $
    135,221Cemetery(1)
    
    
    55,072
    
    
    
    53,600
    
    
    
    105,579
    
    
    
    99,290Corporate Trust Management(2)
    
    
    6,225
    
    
    
    5,943
    
    
    
    12,088
    
    
    
    11,437Total
    
    $
    128,359
    
    
    $
    126,618
    
    
    $
    252,759
    
    
    $
    245,948
 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)
 (9) Segment Data(Continued)
 Total Gross Profit
    
    
    Total Gross ProfitThree MonthsEnded
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    Six Months EndedApril 30, 2010
    
    
    April 30, 2009
    
    
    April 30, 2010
    
    
    April 30, 2009Funeral
    
    $
    12,615
    
    
    $
    14,559
    
    
    $
    27,961
    
    
    $
    29,401Cemetery(1)
    
    
    6,457
    
    
    
    5,525
    
    
    
    10,868
    
    
    
    8,712Corporate Trust Management(2)
    
    
    5,844
    
    
    
    5,511
    
    
    
    11,256
    
    
    
    10,565Total
    
    $
    24,916
    
    
    $
    25,595
    
    
    $
    50,085
    
    
    $
    48,678Net Total Preneed Merchandise and
    
    
    Net Total Preneed Merchandise andService Sales(3)
    
    
    Service Sales(3)Three MonthsEnded
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    Six Months EndedApril 30, 2010
    
    
    April 30, 2009
    
    
    April 30, 2010
    
    
    April 30, 2009Funeral
    
    $
    25,426
    
    
    $
    24,727
    
    
    $
    43,537
    
    
    $
    43,222Cemetery
    
    
    12,334
    
    
    
    11,921
    
    
    
    22,538
    
    
    
    22,700Total
    
    $
    37,760
    
    
    $
    36,648
    
    
    $
    66,075
    
    
    $
    65,922
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of the
cemetery segment and amounted to $1,346 and $2,079 for the three months ended April 30, 2010
and 2009, respectively, and $3,819 and $3,801 for the six months April 30, 2010 and 2009,
respectively.(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
April 30, 2010 and 2009 were $1,148 and $885, respectively, and funeral trust earnings
recognized with respect to preneed contracts delivered included in funeral revenue for the
three months ended April 30, 2010 and 2009 were $3,176 and $3,280, respectively. Trust
management fees included in cemetery revenue for the three months ended April 30, 2010 and
2009 were $1,235 and $912, respectively, and cemetery trust earnings recognized with respect
to preneed contracts delivered included in cemetery revenue for the three months ended April
30, 2010 and 2009 were $666 and $866, respectively. Trust management fees included in funeral
revenue for the six months ended April 30, 2010 and 2009 were $2,263 and $1,823, respectively,
and funeral trust earnings for the six months ended April 30, 2010 and 2009 were $6,139 and
$5,946, respectively. Trust management fees included in
cemetery revenue for the six months ended April 30, 2010 and 2009 were $2,424 and $1,863,
respectively, and cemetery trust earnings for the six months ended April 30, 2010 and 2009 were
$1,262 and $1,805, 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. 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)
 (9) Segment Data(Continued)
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Gross profit for reportable segments
    
    $
    24,916
    
    
    $
    25,595
    
    
    $
    50,085
    
    
    $
    48,678Corporate general and administrative expenses
    
    
    (5,948
    )
    
    
    (7,006
    )
    
    
    (12,502
    )
    
    
    (14,512
    )Hurricane related charges, net
    
    
    (32
    )
    
    
    (205
    )
    
    
    (32
    )
    
    
    (520
    )Separation charges
    
    
    
    
    
    
    (275
    )
    
    
    
    
    
    
    (275
    )Net impairment losses on dispositions
    
    
    
    
    
    
    (35
    )
    
    
    
    
    
    
    (98
    )Other operating income, net
    
    
    265
    
    
    
    304
    
    
    
    444
    
    
    
    563Interest expense
    
    
    (5,891
    )
    
    
    (7,366
    )
    
    
    (12,347
    )
    
    
    (14,761
    )Gain on early extinguishment of debt
    
    
    
    
    
    
    3,384
    
    
    
    17
    
    
    
    3,384Investment and other income, net
    
    
    36
    
    
    
    32
    
    
    
    60
    
    
    
    73Earnings before income taxes
    
    $
    13,346
    
    
    $
    14,428
    
    
    $
    25,725
    
    
    $
    22,532
 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)
 (10) Supplementary Information
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Service revenueFuneral
    
    $
    45,659
    
    
    $
    45,494
    
    
    $
    91,010
    
    
    $
    90,807Cemetery
    
    
    15,238
    
    
    
    15,009
    
    
    
    30,809
    
    
    
    30,11060,897
    
    
    
    60,503
    
    
    
    121,819
    
    
    
    120,917Merchandise revenueFuneral
    
    
    24,058
    
    
    
    24,349
    
    
    
    49,176
    
    
    
    49,259Cemetery
    
    
    37,601
    
    
    
    37,114
    
    
    
    70,742
    
    
    
    66,14161,659
    
    
    
    61,463
    
    
    
    119,918
    
    
    
    115,400Other revenueFuneral
    
    
    1,669
    
    
    
    1,397
    
    
    
    3,308
    
    
    
    2,924Cemetery
    
    
    4,134
    
    
    
    3,255
    
    
    
    7,714
    
    
    
    6,7075,803
    
    
    
    4,652
    
    
    
    11,022
    
    
    
    9,631Total revenue
    
    $
    128,359
    
    
    $
    126,618
    
    
    $
    252,759
    
    
    $
    245,948Service costsFuneral
    
    $
    14,954
    
    
    $
    14,702
    
    
    $
    29,664
    
    
    $
    29,371Cemetery
    
    
    10,551
    
    
    
    9,618
    
    
    
    20,356
    
    
    
    19,37425,505
    
    
    
    24,320
    
    
    
    50,020
    
    
    
    48,745Merchandise costsFuneral
    
    
    14,544
    
    
    
    14,584
    
    
    
    29,123
    
    
    
    29,590Cemetery
    
    
    24,151
    
    
    
    25,690
    
    
    
    46,354
    
    
    
    44,94038,695
    
    
    
    40,274
    
    
    
    75,477
    
    
    
    74,530Facility expensesFuneral
    
    
    25,143
    
    
    
    23,429
    
    
    
    48,765
    
    
    
    47,249Cemetery
    
    
    14,100
    
    
    
    13,000
    
    
    
    28,412
    
    
    
    26,74639,243
    
    
    
    36,429
    
    
    
    77,177
    
    
    
    73,995Total costs
    
    $
    103,443
    
    
    $
    101,023
    
    
    $
    202,674
    
    
    $
    197,270
  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
  Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended April 30, 2010GuarantorSubsidiaries-
    
    
    Guarantor
    
    
    Non-GuarantorParent
    
    
    Tier 1
    
    
    Subsidiaries-Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    66,586
    
    
    $
    470
    
    
    $
    4,330
    
    
    $
    
    
    
    $
    71,386Cemetery
    
    
    
    
    
    
    50,870
    
    
    
    829
    
    
    
    5,274
    
    
    
    
    
    
    
    56,973
    
    
    
    117,456
    
    
    
    1,299
    
    
    
    9,604
    
    
    
    
    
    
    
    128,359Costs and expenses:Funeral
    
    
    
    
    
    
    51,161
    
    
    
    296
    
    
    
    3,184
    
    
    
    
    
    
    
    54,641Cemetery
    
    
    
    
    
    
    44,133
    
    
    
    649
    
    
    
    4,020
    
    
    
    
    
    
    
    48,802
    
    
    
    95,294
    
    
    
    945
    
    
    
    7,204
    
    
    
    
    
    
    
    103,443Gross profit
    
    
    
    
    
    
    22,162
    
    
    
    354
    
    
    
    2,400
    
    
    
    
    
    
    
    24,916Corporate general and administrative
expenses
    
    
    (5,948
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,948
    )Hurricane related recoveries (charges), net
    
    
    (33
    )
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    (32
    )Other operating income, net
    
    
    26
    
    
    
    149
    
    
    
    3
    
    
    
    87
    
    
    
    
    
    
    
    265Operating earnings (loss)
    
    
    (5,955
    )
    
    
    22,311
    
    
    
    358
    
    
    
    2,487
    
    
    
    
    
    
    
    19,201Interest income (expense)
    
    
    5
    
    
    
    (5,420
    )
    
    
    (3
    )
    
    
    (473
    )
    
    
    
    
    
    
    (5,891
    )Investment and other income, net
    
    
    35
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36Equity in subsidiaries
    
    
    11,392
    
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    (11,557
    )
    
    
    Earnings before income taxes
    
    
    5,477
    
    
    
    17,057
    
    
    
    355
    
    
    
    2,014
    
    
    
    (11,557
    )
    
    
    13,346Income tax expense (benefit)
    
    
    (2,914
    )
    
    
    7,042
    
    
    
    124
    
    
    
    703
    
    
    
    
    
    
    
    4,955Net earnings
    
    
    8,391
    
    
    
    10,015
    
    
    
    231
    
    
    
    1,311
    
    
    
    (11,557
    )
    
    
    8,391Other comprehensive income, net
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    (1
    )
    
    
    1Comprehensive income
    
    $
    8,392
    
    
    $
    10,015
    
    
    $
    231
    
    
    $
    1,312
    
    
    $
    (11,558
    )
    
    $
    8,392
 37




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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 April 30, 2009GuarantorSubsidiaries-
    
    
    Guarantor
    
    
    Non-GuarantorParent
    
    
    Tier 1
    
    
    Subsidiaries-Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    66,393
    
    
    $
    501
    
    
    $
    4,346
    
    
    $
    
    
    
    $
    71,240Cemetery
    
    
    
    
    
    
    49,863
    
    
    
    753
    
    
    
    4,762
    
    
    
    
    
    
    
    55,378
    
    
    
    116,256
    
    
    
    1,254
    
    
    
    9,108
    
    
    
    
    
    
    
    126,618Costs and expenses:Funeral
    
    
    
    
    
    
    49,458
    
    
    
    275
    
    
    
    2,982
    
    
    
    
    
    
    
    52,715Cemetery
    
    
    
    
    
    
    44,132
    
    
    
    596
    
    
    
    3,580
    
    
    
    
    
    
    
    48,308
    
    
    
    93,590
    
    
    
    871
    
    
    
    6,562
    
    
    
    
    
    
    
    101,023Gross profit
    
    
    
    
    
    
    22,666
    
    
    
    383
    
    
    
    2,546
    
    
    
    
    
    
    
    25,595Corporate general and administrative
expenses
    
    
    (7,006
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,006
    )Hurricane related recoveries (charges), net
    
    
    (350
    )
    
    
    145
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (205
    )Separation charges
    
    
    (55
    )
    
    
    (220
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (275
    )Net impairment losses on dispositions
    
    
    
    
    
    
    (35
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35
    )Other operating income, net
    
    
    21
    
    
    
    243
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    304Operating earnings (loss)
    
    
    (7,390
    )
    
    
    22,799
    
    
    
    383
    
    
    
    2,586
    
    
    
    
    
    
    
    18,378Interest expense
    
    
    (735
    )
    
    
    (6,109
    )
    
    
    (26
    )
    
    
    (496
    )
    
    
    
    
    
    
    (7,366
    )Gain on early extinguishment of debt
    
    
    3,384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,384Investment and other income, net
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32Equity in subsidiaries
    
    
    13,136
    
    
    
    288
    
    
    
    
    
    
    
    
    
    
    
    (13,424
    )
    
    
    Earnings before income taxes
    
    
    8,427
    
    
    
    16,978
    
    
    
    357
    
    
    
    2,090
    
    
    
    (13,424
    )
    
    
    14,428Income tax expense (benefit)
    
    
    (439
    )
    
    
    5,567
    
    
    
    97
    
    
    
    337
    
    
    
    
    
    
    
    5,562Net earnings
    
    
    8,866
    
    
    
    11,411
    
    
    
    260
    
    
    
    1,753
    
    
    
    (13,424
    )
    
    
    8,866Other comprehensive loss, net
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    6
    
    
    
    (6
    )Comprehensive income
    
    $
    8,860
    
    
    $
    11,411
    
    
    $
    260
    
    
    $
    1,747
    
    
    $
    (13,418
    )
    
    $
    8,860
 38




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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
 Six Months Ended April 30, 2010Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    133,818
    
    
    $
    955
    
    
    $
    8,721
    
    
    $
    
    
    
    $
    143,494Cemetery
    
    
    
    
    
    
    97,546
    
    
    
    1,401
    
    
    
    10,318
    
    
    
    
    
    
    
    109,265
    
    
    
    231,364
    
    
    
    2,356
    
    
    
    19,039
    
    
    
    
    
    
    
    252,759Costs and expenses:Funeral
    
    
    
    
    
    
    100,602
    
    
    
    559
    
    
    
    6,391
    
    
    
    
    
    
    
    107,552Cemetery
    
    
    
    
    
    
    85,706
    
    
    
    1,269
    
    
    
    8,147
    
    
    
    
    
    
    
    95,122
    
    
    
    186,308
    
    
    
    1,828
    
    
    
    14,538
    
    
    
    
    
    
    
    202,674Gross profit
    
    
    
    
    
    
    45,056
    
    
    
    528
    
    
    
    4,501
    
    
    
    
    
    
    
    50,085Corporate general and administrative
expenses
    
    
    (12,502
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,502
    )Hurricane related recoveries (charges), net
    
    
    (87
    )
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    (32
    )Other operating income, net
    
    
    42
    
    
    
    292
    
    
    
    3
    
    
    
    107
    
    
    
    
    
    
    
    444Operating earnings (loss)
    
    
    (12,547
    )
    
    
    45,348
    
    
    
    586
    
    
    
    4,608
    
    
    
    
    
    
    
    37,995Interest expense
    
    
    (482
    )
    
    
    (10,898
    )
    
    
    (11
    )
    
    
    (956
    )
    
    
    
    
    
    
    (12,347
    )Gain on early extinguishment of debt
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Investment and other income, net
    
    
    59
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60Equity in subsidiaries
    
    
    23,213
    
    
    
    245
    
    
    
    
    
    
    
    
    
    
    
    (23,458
    )
    
    
    Earnings before income taxes
    
    
    10,260
    
    
    
    34,696
    
    
    
    575
    
    
    
    3,652
    
    
    
    (23,458
    )
    
    
    25,725Income tax expense (benefit)
    
    
    (5,618
    )
    
    
    14,085
    
    
    
    178
    
    
    
    1,202
    
    
    
    
    
    
    
    9,847Net earnings
    
    
    15,878
    
    
    
    20,611
    
    
    
    397
    
    
    
    2,450
    
    
    
    (23,458
    )
    
    
    15,878Other comprehensive loss, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income
    
    $
    15,878
    
    
    $
    20,611
    
    
    $
    397
    
    
    $
    2,450
    
    
    $
    (23,458
    )
    
    $
    15,878
 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 Statements of Earnings and Other Comprehensive Income
 Six Months Ended April 30, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    133,264
    
    
    $
    900
    
    
    $
    8,826
    
    
    $
    
    
    
    $
    142,990Cemetery
    
    
    
    
    
    
    92,888
    
    
    
    1,414
    
    
    
    8,656
    
    
    
    
    
    
    
    102,958
    
    
    
    226,152
    
    
    
    2,314
    
    
    
    17,482
    
    
    
    
    
    
    
    245,948Costs and expenses:Funeral
    
    
    
    
    
    
    99,458
    
    
    
    566
    
    
    
    6,186
    
    
    
    
    
    
    
    106,210Cemetery
    
    
    
    
    
    
    82,943
    
    
    
    1,232
    
    
    
    6,885
    
    
    
    
    
    
    
    91,060
    
    
    
    182,401
    
    
    
    1,798
    
    
    
    13,071
    
    
    
    
    
    
    
    197,270Gross profit
    
    
    
    
    
    
    43,751
    
    
    
    516
    
    
    
    4,411
    
    
    
    
    
    
    
    48,678Corporate general and administrative
expenses
    
    
    (14,512
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,512
    )Hurricane related recoveries (charges), net
    
    
    (626
    )
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (520
    )Separation charges
    
    
    (55
    )
    
    
    (220
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (275
    )Net impairment losses on dispositions
    
    
    (8
    )
    
    
    (90
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98
    )Other operating income, net
    
    
    19
    
    
    
    487
    
    
    
    1
    
    
    
    56
    
    
    
    
    
    
    
    563Operating earnings (loss)
    
    
    (15,182
    )
    
    
    44,034
    
    
    
    517
    
    
    
    4,467
    
    
    
    
    
    
    
    33,836Interest expense
    
    
    (1,401
    )
    
    
    (12,274
    )
    
    
    (62
    )
    
    
    (1,024
    )
    
    
    
    
    
    
    (14,761
    )Gain on early extinguishment of debt
    
    
    3,384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,384Investment and other income, net
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73Equity in subsidiaries
    
    
    24,307
    
    
    
    423
    
    
    
    
    
    
    
    
    
    
    
    (24,730
    )
    
    
    Earnings before income taxes
    
    
    11,181
    
    
    
    32,183
    
    
    
    455
    
    
    
    3,443
    
    
    
    (24,730
    )
    
    
    22,532Income tax expense (benefit)
    
    
    (2,451
    )
    
    
    10,403
    
    
    
    116
    
    
    
    832
    
    
    
    
    
    
    
    8,900Net earnings
    
    
    13,632
    
    
    
    21,780
    
    
    
    339
    
    
    
    2,611
    
    
    
    (24,730
    )
    
    
    13,632Other comprehensive loss, net
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    3
    
    
    
    (3
    )Comprehensive income
    
    $
    13,629
    
    
    $
    21,780
    
    
    $
    339
    
    
    $
    2,608
    
    
    $
    (24,727
    )
    
    $
    13,629
 40




---



##### 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
 April 30, 2010Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    58,541
    
    
    $
    5,631
    
    
    $
    50
    
    
    $
    337
    
    
    $
    
    
    
    $
    64,559Certificates of deposit and marketable
securities
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    411
    
    
    
    
    
    
    
    10,411Receivables, net of allowances
    
    
    5,411
    
    
    
    46,055
    
    
    
    437
    
    
    
    4,235
    
    
    
    
    
    
    
    56,138Inventories
    
    
    327
    
    
    
    33,593
    
    
    
    345
    
    
    
    2,109
    
    
    
    
    
    
    
    36,374Prepaid expenses
    
    
    1,299
    
    
    
    6,048
    
    
    
    70
    
    
    
    1,602
    
    
    
    
    
    
    
    9,019Deferred income taxes, net
    
    
    12,507
    
    
    
    10,672
    
    
    
    36
    
    
    
    1,478
    
    
    
    
    
    
    
    24,693Intercompany receivables
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,000
    )
    
    
    Total current assets
    
    
    94,085
    
    
    
    101,999
    
    
    
    938
    
    
    
    10,172
    
    
    
    (6,000
    )
    
    
    201,194Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    47,797
    
    
    
    408
    
    
    
    13,420
    
    
    
    
    
    
    
    61,625Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    404,342
    
    
    
    
    
    
    
    9,457
    
    
    
    
    
    
    
    413,799Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    198,103
    
    
    
    1,112
    
    
    
    6,726
    
    
    
    
    
    
    
    205,941Goodwill
    
    
    
    
    
    
    227,401
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,236Cemetery property, at cost
    
    
    
    
    
    
    347,858
    
    
    
    11,218
    
    
    
    25,576
    
    
    
    
    
    
    
    384,652Property and equipment, at cost
    
    
    55,310
    
    
    
    470,995
    
    
    
    2,212
    
    
    
    38,581
    
    
    
    
    
    
    
    567,098Less accumulated depreciation
    
    
    38,284
    
    
    
    217,782
    
    
    
    1,084
    
    
    
    15,835
    
    
    
    
    
    
    
    272,985Net property and equipment
    
    
    17,026
    
    
    
    253,213
    
    
    
    1,128
    
    
    
    22,746
    
    
    
    
    
    
    
    294,113Deferred income taxes, net
    
    
    16,930
    
    
    
    77,335
    
    
    
    
    
    
    
    9,476
    
    
    
    (2,956
    )
    
    
    100,785Cemetery perpetual care trust investments
    
    
    
    
    
    
    211,562
    
    
    
    8,734
    
    
    
    3,894
    
    
    
    
    
    
    
    224,190Other assets
    
    
    7,532
    
    
    
    4,938
    
    
    
    7
    
    
    
    1,040
    
    
    
    
    
    
    
    13,517Intercompany receivables
    
    
    723,704
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (723,704
    )
    
    
    Equity in subsidiaries
    
    
    17,667
    
    
    
    8,366
    
    
    
    
    
    
    
    
    
    
    
    (26,033
    )
    
    
    Total assets
    
    $
    876,944
    
    
    $
    1,882,914
    
    
    $
    23,593
    
    
    $
    122,294
    
    
    $
    (758,693
    )
    
    $
    2,147,052LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5Accounts payable, accrued expenses and
other current liabilities
    
    
    13,497
    
    
    
    66,040
    
    
    
    174
    
    
    
    4,307
    
    
    
    
    
    
    
    84,018Intercompany payables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000
    
    
    
    (6,000
    )
    
    
    Total current liabilities
    
    
    13,502
    
    
    
    66,040
    
    
    
    174
    
    
    
    10,307
    
    
    
    (6,000
    )
    
    
    84,023Long-term debt, less current maturities
    
    
    341,014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    341,014Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    2,956
    
    
    
    
    
    
    
    (2,956
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    711,083
    
    
    
    2,814
    
    
    
    9,807
    
    
    
    (723,704
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    199,119
    
    
    
    
    
    
    
    46,602
    
    
    
    
    
    
    
    245,721Deferred preneed cemetery revenue
    
    
    
    
    
    
    234,196
    
    
    
    301
    
    
    
    26,788
    
    
    
    
    
    
    
    261,285Deferred preneed funeral and cemetery
receipts held in trust
    
    
    
    
    
    
    544,298
    
    
    
    1,059
    
    
    
    6,358
    
    
    
    
    
    
    
    551,715Perpetual care trusts corpus
    
    
    
    
    
    
    210,151
    
    
    
    8,742
    
    
    
    3,894
    
    
    
    
    
    
    
    222,787Other long-term liabilities
    
    
    17,450
    
    
    
    2,299
    
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    19,801Negative equity in subsidiaries
    
    
    84,272
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84,272
    )
    
    
    Total liabilities
    
    
    456,238
    
    
    
    1,967,186
    
    
    
    16,046
    
    
    
    103,808
    
    
    
    (816,932
    )
    
    
    1,726,346Common stock
    
    
    93,163
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    93,163Other
    
    
    327,508
    
    
    
    (84,374
    )
    
    
    7,223
    
    
    
    18,399
    
    
    
    58,752
    
    
    
    327,508Accumulated other comprehensive income
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    (35
    )
    
    
    35Total shareholders equity
    
    
    420,706
    
    
    
    (84,272
    )
    
    
    7,547
    
    
    
    18,486
    
    
    
    58,239
    
    
    
    420,706Total liabilities and shareholders equity
    
    $
    876,944
    
    
    $
    1,882,914
    
    
    $
    23,593
    
    
    $
    122,294
    
    
    $
    (758,693
    )
    
    $
    2,147,052
 41




---



##### 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-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    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
 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)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended April 30, 2010Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (1,511
    )
    
    $
    24,505
    
    
    $
    661
    
    
    $
    2,800
    
    
    $
    
    
    
    $
    26,455Cash flows from investing activities:Proceeds from sales of marketable
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    250Purchases of certificates of deposit
and marketable securities
    
    
    (10,000
    )
    
    
    
    
    
    
    
    
    
    
    (661
    )
    
    
    
    
    
    
    (10,661
    )Additions to property and equipment
    
    
    (1,430
    )
    
    
    (6,416
    )
    
    
    (75
    )
    
    
    (445
    )
    
    
    
    
    
    
    (8,366
    )Other
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Net cash used in investing activities
    
    
    (11,430
    )
    
    
    (6,366
    )
    
    
    (75
    )
    
    
    (856
    )
    
    
    
    
    
    
    (18,727
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (847
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (847
    )Intercompany receivables (payables)
    
    
    20,725
    
    
    
    (17,604
    )
    
    
    (588
    )
    
    
    (2,533
    )
    
    
    
    
    
    
    Retirement of common stock warrants
    
    
    (107
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107
    )Issuance of common stock
    
    
    471
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    471Retirement of call options
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107Debt refinancing costs
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38
    )Dividends
    
    
    (5,589
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,589
    )Excess tax benefits from share-based
payment arrangements
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Net cash provided by (used in)
financing activities
    
    
    14,748
    
    
    
    (17,604
    )
    
    
    (588
    )
    
    
    (2,533
    )
    
    
    
    
    
    
    (5,977
    )Net increase (decrease) in cash
    
    
    1,807
    
    
    
    535
    
    
    
    (2
    )
    
    
    (589
    )
    
    
    
    
    
    
    1,751Cash and cash equivalents, beginning of
period
    
    
    56,734
    
    
    
    5,096
    
    
    
    52
    
    
    
    926
    
    
    
    
    
    
    
    62,808Cash and cash equivalents, end of period
    
    $
    58,541
    
    
    $
    5,631
    
    
    $
    50
    
    
    $
    337
    
    
    $
    
    
    
    $
    64,559
 43




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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
 Six Months Ended April 30, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (1,044
    )
    
    $
    25,339
    
    
    $
    434
    
    
    $
    4,355
    
    
    $
    
    
    
    $
    29,084Cash flows from investing activities:Purchases of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99
    )
    
    
    
    
    
    
    (99
    )Proceeds from sale of assets
    
    
    292
    
    
    
    202
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    494Purchase of subsidiaries and other
investments, net of cash acquired
    
    
    
    
    
    
    (1,623
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,623
    )Additions to property and equipment
    
    
    (3,596
    )
    
    
    (6,627
    )
    
    
    (130
    )
    
    
    (376
    )
    
    
    
    
    
    
    (10,729
    )Other
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Net cash used in investing activities
    
    
    (3,304
    )
    
    
    (8,020
    )
    
    
    (130
    )
    
    
    (475
    )
    
    
    
    
    
    
    (11,929
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (13,538
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,538
    )Intercompany receivables (payables)
    
    
    19,064
    
    
    
    (13,888
    )
    
    
    (287
    )
    
    
    (4,889
    )
    
    
    
    
    
    
    Retirement of common stock warrants
    
    
    (1,182
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,182
    )Issuance of common stock
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149Retirement of call options
    
    
    1,261
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,261Dividends
    
    
    (4,636
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,636
    )Net cash provided by (used in)
financing activities
    
    
    1,118
    
    
    
    (13,888
    )
    
    
    (287
    )
    
    
    (4,889
    )
    
    
    
    
    
    
    (17,946
    )Net increase (decrease) in cash
    
    
    (3,230
    )
    
    
    3,431
    
    
    
    17
    
    
    
    (1,009
    )
    
    
    
    
    
    
    (791
    )Cash and cash equivalents, beginning of
period
    
    
    65,593
    
    
    
    4,332
    
    
    
    22
    
    
    
    2,627
    
    
    
    
    
    
    
    72,574Cash and cash equivalents, end of period
    
    $
    62,363
    
    
    $
    7,763
    
    
    $
    39
    
    
    $
    1,618
    
    
    $
    
    
    
    $
    71,783
 44




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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 April 30,
    
    
    Six Months Ended April 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net earnings
    
    $
    8,391
    
    
    $
    8,866
    
    
    $
    15,878
    
    
    $
    13,632Other comprehensive income (loss):Unrealized appreciation (depreciation)
of investments, net of deferred tax
(expense) benefit of ($1), $4 and $2,
respectively
    
    
    1
    
    
    
    (6
    )
    
    
    
    
    
    
    (3
    )(Increase) reduction in net unrealized
losses associated with
available-for-sale securities of the
trusts
    
    
    35,437
    
    
    
    23,346
    
    
    
    55,667
    
    
    
    (12,569
    )Reclassification of the net unrealized
(increases) losses activity
attributable to the deferred preneed
funeral and cemetery receipts held in
trust and perpetual care trusts
corpus
    
    
    (35,437
    )
    
    
    (23,346
    )
    
    
    (55,667
    )
    
    
    12,569Total other comprehensive income (loss)
    
    
    1
    
    
    
    (6
    )
    
    
    
    
    
    
    (3
    )Total comprehensive income
    
    $
    8,392
    
    
    $
    8,860
    
    
    $
    15,878
    
    
    $
    13,629
 (13) Long-term Debt
 April 30, 2010
    
    
    October 31, 2009Long-term debt:3.125% senior convertible notes due
2014, net of unamortized discount of
$11,540 and $12,912 as of April 30,
2010 and October 31, 2009, respectively
    
    $
    74,876
    
    
    $
    74,5043.375% senior convertible notes due
2016, net of unamortized discount of
$13,935 and $14,858 as of April 30,
2010 and October 31, 2009, respectively
    
    
    66,051
    
    
    
    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 April 30, 2010 and
October 31, 2009, partially secured by
assets of subsidiaries, with maturities
through 2022
    
    
    92
    
    
    
    95Total long-term debt
    
    
    341,019
    
    
    
    339,726Less current maturities
    
    
    5
    
    
    
    5$
    341,014
    
    
    $
    339,721
 Fair Value
  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)
 Senior Convertible Notes
  Adoption of Convertible Debt Guidance
     46




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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)
       (14) Income Taxes
  47




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (14)
Income Taxes  (Continued)
  (15) Subsequent Events
   48




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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
  49




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50




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##### Table of Contents



Funeral and CemeteryMerchandise and
    
    Cemetery PerpetualServices Trusts
    
    Care TrustsFor the quarter ended April 30, 2010
    
    
    6.5
    %
    
    
    5.5
    %For the last twelve months ended April 30, 2010
    
    
    30.6
    %
    
    
    33.6
    %For the last five years ended April 30, 2010
    
    
    2.9
    %
    
    
    3.7
    %For the last ten years ended April 30, 2010
    
    
    2.5
    %
    
    
    3.2
    %
  51




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##### Table of Contents



Critical Accounting Policies
  Results of Operations
  Three Months Ended April 30, 2010 Compared to Three Months Ended April 30, 2009
 Funeral Operations
 Three Months Ended April 30,Increase2010
    
    
    2009
    
    
    (Decrease)(In millions)Funeral Revenue:Funeral Home Locations
    
    $
    67.0
    
    
    $
    67.0
    
    
    $
    Corporate Trust Management (1)
    
    
    4.3
    
    
    
    4.2
    
    
    
    .1Total Funeral Revenue
    
    $
    71.3
    
    
    $
    71.2
    
    
    $
    .1Funeral Costs:Funeral Home Locations
    
    $
    54.4
    
    
    $
    52.5
    
    
    $
    1.9Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Funeral Costs
    
    $
    54.6
    
    
    $
    52.7
    
    
    $
    1.9Funeral Gross Profit:Funeral Home Locations
    
    $
    12.6
    
    
    $
    14.5
    
    
    $
    (1.9
    )Corporate Trust Management (1)
    
    
    4.1
    
    
    
    4.0
    
    
    
    .1Total Funeral Gross Profit
    
    $
    16.7
    
    
    $
    18.5
    
    
    $
    (1.8
    )
 Same-Store Analysis for the Three Months Ended April 30, 2010 and 2009
 Change in Average Revenue
    
    Change in Same-Store
    
    Same-Store Cremation RatePer Funeral Service
    
    Funeral Services
    
    2010
    
    20090.8% (1)
    
    (2.8)%
    
    42.2%
    
    41.4%
 
 (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 52




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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 April 30, 2010 and 2009 were $1.1 million and $0.9 million,
respectively. Funeral trust earnings recognized in funeral revenue for the three months ended
April 30, 2010 and 2009 were $3.2 million and $3.3 million, respectively.   Cemetery Operations
 Three Months Ended April 30,2010
    
    
    2009
    
    
    Increase(In millions)Cemetery Revenue:Cemetery Locations
    
    $
    55.1
    
    
    $
    53.6
    
    
    $
    1.5Corporate Trust Management (1)
    
    
    1.9
    
    
    
    1.8
    
    
    
    .1Total Cemetery Revenue
    
    $
    57.0
    
    
    $
    55.4
    
    
    $
    1.6Cemetery Costs:Cemetery Locations
    
    $
    48.6
    
    
    $
    48.1
    
    
    $
    .5Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Cemetery Costs
    
    $
    48.8
    
    
    $
    48.3
    
    
    $
    .5Cemetery Gross Profit:Cemetery Locations
    
    $
    6.5
    
    
    $
    5.5
    
    
    $
    1.0Corporate Trust Management (1)
    
    
    1.7
    
    
    
    1.6
    
    
    
    .1Total Cemetery Gross Profit
    
    $
    8.2
    
    
    $
    7.1
    
    
    $
    1.1
 
 (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 53




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##### Table of Contents



realized
gains and losses, interest income and dividends). Trust management fees included in cemetery
revenue for the three months ended April 30, 2010 and 2009 were $1.2 million and $0.9 million,
respectively, and cemetery trust earnings recognized included in cemetery revenue for the three
months ended April 30, 2010 and 2009 were $0.7 million and $0.9 million, respectively.
Perpetual care trust earnings of $1.4 million and $2.1 million for the three months ended April
30, 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
   54




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Six Months Ended April 30, 2010 Compared to Six Months Ended April 30, 2009
 Funeral Operations
 Six Months Ended April 30,Increase2010
    
    
    2009
    
    
    (Decrease)(In millions)Funeral Revenue:Funeral Home Locations
    
    $
    135.1
    
    
    $
    135.2
    
    
    $
    (.1
    )Corporate Trust Management (1)
    
    
    8.4
    
    
    
    7.8
    
    
    
    .6Total Funeral Revenue
    
    $
    143.5
    
    
    $
    143.0
    
    
    $
    .5Funeral Costs:Funeral Home Locations
    
    $
    107.1
    
    
    $
    105.8
    
    
    $
    1.3Corporate Trust Management (1)
    
    
    .4
    
    
    
    .4
    
    
    
    Total Funeral Costs
    
    $
    107.5
    
    
    $
    106.2
    
    
    $
    1.3Funeral Gross Profit:Funeral Home Locations
    
    $
    28.0
    
    
    $
    29.4
    
    
    $
    (1.4
    )Corporate Trust Management (1)
    
    
    8.0
    
    
    
    7.4
    
    
    
    .6Total Funeral Gross Profit
    
    $
    36.0
    
    
    $
    36.8
    
    
    $
    (.8
    )
 Same-Store Analysis for the Six Months Ended April 30, 2010 and 2009
 Change in AverageRevenue Per Funeral
    
    Change in Same-StoreService
    
    Funeral Services
    
    Same-Store Cremation Rate2010
    
    20090.1% (1)
    
    
    (2.0
    )%
    
    
    41.8
    %
    
    
    40.9
    %
 
 (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 six months ended April 30, 2010 and 2009 were $2.2 million and $1.8 million, respectively.
Funeral trust earnings recognized in funeral revenue for the six months ended April 30, 2010
and 2009 were $6.2 million and $6.0 million, respectively.  55




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##### Table of Contents



Cemetery Operations
 Six Months Ended April 30,2010
    
    
    2009
    
    
    Increase(In millions)Cemetery Revenue:Cemetery Locations
    
    $
    105.6
    
    
    $
    99.3
    
    
    $
    6.3Corporate Trust Management (1)
    
    
    3.7
    
    
    
    3.7
    
    
    
    Total Cemetery Revenue
    
    $
    109.3
    
    
    $
    103.0
    
    
    $
    6.3Cemetery Costs:Cemetery Locations
    
    $
    94.7
    
    
    $
    90.6
    
    
    $
    4.1Corporate Trust Management (1)
    
    
    .5
    
    
    
    .5
    
    
    
    Total Cemetery Costs
    
    $
    95.2
    
    
    $
    91.1
    
    
    $
    4.1Cemetery Gross Profit:Cemetery Locations
    
    $
    10.9
    
    
    $
    8.7
    
    
    $
    2.2Corporate Trust Management (1)
    
    
    3.2
    
    
    
    3.2
    
    
    
    Total Cemetery Gross Profit
    
    $
    14.1
    
    
    $
    11.9
    
    
    $
    2.2
 
 (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 six months ended April 30, 2010 and 2009 were $2.4 million and $1.9 million,
respectively, and cemetery trust earnings recognized included in cemetery revenue for the six
months ended April 30, 2010 and 2009 were $1.3 million and $1.8 million, respectively.
Perpetual care trust earnings of $3.8 million for both the six months ended April 30, 2010 and
2009 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.  56




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##### Table of Contents



Other
        Preneed Sales into the Backlog
  57




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Liquidity and Capital Resources
 General
     58




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Cash Flow
    59




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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)
    
    $
    366.5
    
    
    $
    
    
    
    $
    200.0
    
    
    $
    86.4
    
    
    $
    80.1Interest on long-term debt (2)
    
    
    67.3
    
    
    
    17.9
    
    
    
    35.8
    
    
    
    9.5
    
    
    
    4.1Operating lease obligations (3)
    
    
    28.8
    
    
    
    2.3
    
    
    
    6.0
    
    
    
    3.8
    
    
    
    16.7Purchase obligations (4)
    
    
    2.7
    
    
    
    2.7
    
    
    
    
    
    
    
    
    
    
    
    Non-competition agreements (5)
    
    
    1.3
    
    
    
    .2
    
    
    
    .5
    
    
    
    .2
    
    
    
    .4$
    466.6
    
    
    $
    23.1
    
    
    $
    242.3
    
    
    $
    99.9
    
    
    $
    101.3
 
 (1)
    
    See below for a breakdown of our future scheduled principal payments and
maturities of our long-term debt by type as of April 30, 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 April 30, 2010 are $2.3 million,
$3.3 million, $2.7 million, $2.1 million, $1.7 million and $16.7 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 April 30, 2010. As of April 30, 2010, we had unrealized losses of $38.3 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 $2.6 million; no charge has
been recorded for these amounts as of April 30, 2010. 60




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##### Table of Contents



(2)
    
    In accordance with the required accounting guidance on uncertain tax positions, as
of April 30, 2010, we have recorded $2.2 million of unrecognized tax benefits and related
interest and penalties. Due to the uncertainty 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
    
    
    
    
    
    
    80.0
    
    
    
    
    
    
    
    .1
    
    
    
    80.1Total long-term debt
    
    $
    
    
    
    $
    166.4
    
    
    $
    200.0
    
    
    $
    .1
    
    
    $
    366.5
 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
   61




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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.
  62




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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)February 1,
2010 through
February 28, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    26,495,706March 1, 2010
through March 31,
2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    26,495,706April 1, 2010
through April 30,
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)
 63




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##### Table of Contents



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))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
 64




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.June 8, 2010
    /s/  THOMAS M. KITCHENThomas M. KitchenSenior Executive Vice President and
Chief Financial OfficerJune 8, 2010
    /s/ ANGELA M. LACOURAngela M. LacourVice President

Corporate Controller
Chief Accounting Officer 65




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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
 66