##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended July 31, 2006
 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 þ o
 Yes o No þ




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 INDEX
 PagePart I.
    
    Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings 
Three Months Ended July 31, 2006 and 2005
    
    
    3Condensed Consolidated Statements of Earnings 
Nine Months Ended July 31, 2006 and 2005
    
    
    4Condensed Consolidated Balance Sheets 
July 31, 2006 and October 31, 2005
    
    
    5Condensed Consolidated Statement of Shareholders Equity 
Nine Months Ended July 31, 2006
    
    
    7Condensed Consolidated Statements of Cash Flows 
Nine Months Ended July 31, 2006 and 2005
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    44Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    58Item 4. Controls and Procedures
    
    
    59Part II.
    
    Other InformationItem 1. Legal Proceedings
    
    
    61Item 1A. Risk Factors
    
    
    61Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    62Item 6. Exhibits
    
    
    63Signatures
    
    
    64Certification of CEO & CFO Pursuant to Section 302Certification of CEO & CFO Pursuant to Section 906
  2




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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)
 Three Months Ended July 31,2006
    
    
    2005Revenues:Funeral
    
    $
    68,822
    
    
    $
    66,021Cemetery
    
    
    60,699
    
    
    
    58,650129,521
    
    
    
    124,671Costs and expenses:Funeral
    
    
    55,668
    
    
    
    53,407Cemetery
    
    
    48,476
    
    
    
    47,228104,144
    
    
    
    100,635Gross profit
    
    
    25,377
    
    
    
    24,036Corporate general and administrative expenses
    
    
    (8,517
    )
    
    
    (5,545
    )Hurricane related charges, net
    
    
    1,072
    
    
    
    Separation charges
    
    
    (680
    )
    
    
    (147
    )Gains on dispositions and impairment (losses), net
    
    
    (7
    )
    
    
    56Other operating income (expense), net
    
    
    (117
    )
    
    
    571Operating earnings
    
    
    17,128
    
    
    
    18,971Interest expense
    
    
    (7,092
    )
    
    
    (6,456
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (114
    )Investment and other income, net
    
    
    508
    
    
    
    184Earnings from continuing operations before income taxes
    
    
    10,544
    
    
    
    12,585Income taxes
    
    
    3,208
    
    
    
    4,471Earnings from continuing operations
    
    
    7,336
    
    
    
    8,114Discontinued operations:Earnings (loss) from discontinued operations before income taxes
    
    
    (2
    )
    
    
    608Income tax benefit
    
    
    
    
    
    
    (153
    )Earnings (loss) from discontinued operations
    
    
    (2
    )
    
    
    761Net earnings
    
    $
    7,334
    
    
    $
    8,875Basic earnings per common share:Earnings from continuing operations
    
    $
    .07
    
    
    $
    .07Earnings from discontinued operations
    
    
    
    
    
    
    .01Net earnings
    
    $
    .07
    
    
    $
    .08Diluted earnings per common share:Earnings from continuing operations
    
    $
    .07
    
    
    $
    .07Earnings from discontinued operations
    
    
    
    
    
    
    .01Net earnings
    
    $
    .07
    
    
    $
    .08Weighted average common shares outstanding (in thousands):Basic
    
    
    106,177
    
    
    
    109,147Diluted
    
    
    106,255
    
    
    
    109,266Dividends declared per common share
    
    $
    .025
    
    
    $
    .025
  3




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
 (Unaudited)
 (Dollars in thousands, except per share amounts)
 Nine Months Ended July 31,2006
    
    
    2005Revenues:Funeral
    
    $
    212,563
    
    
    $
    210,001Cemetery
    
    
    174,175
    
    
    
    168,946386,738
    
    
    
    378,947Costs and expenses:Funeral
    
    
    163,174
    
    
    
    159,488Cemetery
    
    
    137,189
    
    
    
    134,984300,363
    
    
    
    294,472Gross profit
    
    
    86,375
    
    
    
    84,475Corporate general and administrative expenses
    
    
    (22,992
    )
    
    
    (14,343
    )Hurricane related charges, net
    
    
    (1,008
    )
    
    
    Separation charges
    
    
    (956
    )
    
    
    (147
    )Gains on dispositions and impairment (losses), net
    
    
    152
    
    
    
    1,233Other operating income, net
    
    
    897
    
    
    
    1,069Operating earnings
    
    
    62,468
    
    
    
    72,287Interest expense
    
    
    (22,301
    )
    
    
    (23,503
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (32,822
    )Investment and other income, net
    
    
    1,628
    
    
    
    404Earnings from continuing operations before income taxes and
cumulative effect of change in accounting principle
    
    
    41,795
    
    
    
    16,366Income taxes
    
    
    14,989
    
    
    
    5,612Earnings from continuing operations before cumulative
effect of change in accounting principle
    
    
    26,806
    
    
    
    10,754Discontinued operations:Earnings from discontinued operations before income taxes
    
    
    343
    
    
    
    1,075Income tax benefit
    
    
    (21
    )
    
    
    (32
    )Earnings from discontinued operations
    
    
    364
    
    
    
    1,107Earnings before cumulative effect of change in accounting principle
    
    
    27,170
    
    
    
    11,861Cumulative effect of change in accounting principle (net of
$101,061 income tax benefit)
    
    
    
    
    
    
    (153,180
    )Net earnings (loss)
    
    $
    27,170
    
    
    $
    (141,319
    )Basic earnings (loss) per common share:Earnings from continuing operations before cumulative effect
of change in accounting principle
    
    $
    .25
    
    
    $
    .10Earnings from discontinued operations
    
    
    
    
    
    
    .01Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (1.40
    )Net earnings (loss)
    
    $
    .25
    
    
    $
    (1.29
    )Diluted earnings (loss) per common share:Earnings from continuing operations before cumulative effect
of change in accounting principle
    
    $
    .25
    
    
    $
    .10Earnings from discontinued operations
    
    
    
    
    
    
    .01Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (1.40
    )Net earnings (loss)
    
    $
    .25
    
    
    $
    (1.29
    )Weighted average common shares outstanding (in thousands):Basic
    
    
    107,540
    
    
    
    109,243Diluted
    
    
    107,570
    
    
    
    109,430Dividends declared per common share
    
    $
    .075
    
    
    $
    .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)
 July 31,
    
    
    October 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    44,289
    
    
    $
    40,605Marketable securities
    
    
    1,330
    
    
    
    1,302Receivables, net of allowances
    
    
    68,059
    
    
    
    79,825Inventories
    
    
    32,380
    
    
    
    33,461Prepaid expenses
    
    
    4,672
    
    
    
    2,766Deferred income taxes, net
    
    
    5,159
    
    
    
    11,116Assets held for sale
    
    
    
    
    
    
    603Total current assets
    
    
    155,889
    
    
    
    169,678Receivables due beyond one year, net of allowances
    
    
    80,002
    
    
    
    68,935Preneed funeral receivables and trust investments
    
    
    492,581
    
    
    
    503,468Preneed cemetery receivables and trust investments
    
    
    245,432
    
    
    
    257,437Goodwill
    
    
    272,729
    
    
    
    272,729Cemetery property, at cost
    
    
    366,595
    
    
    
    366,776Property and equipment, at cost:Land
    
    
    41,093
    
    
    
    41,090Buildings
    
    
    293,929
    
    
    
    287,525Equipment and other
    
    
    168,625
    
    
    
    158,250503,647
    
    
    
    486,865Less accumulated depreciation
    
    
    208,918
    
    
    
    195,741Net property and equipment
    
    
    294,729
    
    
    
    291,124Deferred income taxes, net
    
    
    182,861
    
    
    
    187,573Cemetery perpetual care trust investments
    
    
    217,227
    
    
    
    213,088Other assets
    
    
    18,800
    
    
    
    20,318Total assets
    
    $
    2,326,845
    
    
    $
    2,351,126
  5




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 (Dollars in thousands, except per share amounts)
 July 31,
    
    
    October 31,2006
    
    
    2005LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    2,898
    
    
    $
    3,168Accounts payable
    
    
    15,134
    
    
    
    10,758Accrued payroll
    
    
    12,864
    
    
    
    12,306Accrued insurance
    
    
    22,394
    
    
    
    20,757Accrued interest
    
    
    8,966
    
    
    
    5,236Other current liabilities
    
    
    19,873
    
    
    
    24,681Income taxes payable
    
    
    2,930
    
    
    
    886Liabilities associated with assets held for sale
    
    
    
    
    
    
    374Total current liabilities
    
    
    85,059
    
    
    
    78,166Long-term debt, less current maturities
    
    
    374,655
    
    
    
    406,859Deferred preneed funeral revenue
    
    
    281,958
    
    
    
    284,090Deferred preneed cemetery revenue
    
    
    299,199
    
    
    
    292,511Non-controlling interest in funeral and cemetery trusts
    
    
    617,914
    
    
    
    626,841Other long-term liabilities
    
    
    12,585
    
    
    
    11,442Total liabilities
    
    
    1,671,370
    
    
    
    1,699,909Commitments and contingencies
    
    
    
    
    
    
    Non-controlling interest in perpetual care trusts
    
    
    215,945
    
    
    
    211,764Shareholders equity:Preferred stock, $1.00 par
value, 5,000,000 shares authorized; no shares issued
    
    
    
    
    
    
    Common stock, $1.00 stated value:Class A authorized 150,000,000 shares issued
and outstanding 101,558,455 and 105,115,187
shares at July 31, 2006 and October 31, 2005,
respectively
    
    
    101,559
    
    
    
    105,115Class B authorized 5,000,000 shares issued
and outstanding 3,555,020 shares at July 31,
2006 and October 31, 2005, 10 votes per
share, convertible into an equal number of
Class A shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    643,562
    
    
    
    667,663Accumulated deficit
    
    
    (309,138
    )
    
    
    (336,308
    )Unearned restricted stock compensation
    
    
    
    
    
    
    (569
    )Accumulated other comprehensive loss:Unrealized depreciation of investments
    
    
    (8
    )
    
    
    (3
    )Total accumulated other comprehensive losses
    
    
    (8
    )
    
    
    (3
    )Total shareholders equity
    
    
    439,530
    
    
    
    439,453Total liabilities and shareholders equity
    
    $
    2,326,845
    
    
    $
    2,351,126
  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)
 Unearned
    
    
    UnrealizedAdditional
    
    
    
    
    
    
    Restricted
    
    
    Depreciation
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Accumulated
    
    
    Stock
    
    
    of
    
    
    ShareholdersStock(1)
    
    
    Capital
    
    
    Deficit
    
    
    Compensation
    
    
    Investments
    
    
    EquityBalance October 31, 2005
    
    $
    108,670
    
    
    $
    667,663
    
    
    $
    (336,308
    )
    
    $
    (569
    )
    
    $
    (3
    )
    
    $
    439,453Comprehensive income (loss):Net earnings
    
    
    
    
    
    
    
    
    
    
    27,170
    
    
    
    
    
    
    
    
    
    
    
    27,170Other comprehensive loss:Unrealized depreciation of
investments, net of
deferred tax benefit of $3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )Total other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )Total comprehensive income
(loss)
    
    
    
    
    
    
    
    
    
    
    27,170
    
    
    
    
    
    
    
    (5
    )
    
    
    27,165Adoption of SFAS No. 123R
    
    
    
    
    
    
    (569
    )
    
    
    
    
    
    
    569
    
    
    
    
    
    
    
    Restricted stock activity
    
    
    14
    
    
    
    299
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    313Issuance of common stock
    
    
    150
    
    
    
    649
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    799Share-based compensation
    
    
    
    
    
    
    895
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    895Purchase and retirement of
common stock
    
    
    (3,720
    )
    
    
    (17,326
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,046
    )Dividends ($.075 per share)
    
    
    
    
    
    
    (8,049
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,049
    )Balance July 31, 2006
    
    $
    105,114
    
    
    $
    643,562
    
    
    $
    (309,138
    )
    
    $
    
    
    
    $
    (8
    )
    
    $
    439,530
 
 (1)
    
    Amount includes 101,559 and 105,115 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of July 31, 2006 and October 31, 2005, respectively,
and includes 3,555 shares (in thousands) of Class B common stock.  7




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 (Dollars in thousands, except per share amounts)
 Nine Months Ended July 31,2006
    
    
    2005Cash flows from operating activities:Net earnings (loss)
    
    $
    27,170
    
    
    $
    (141,319
    )Adjustments to reconcile net earnings (loss) to net cash provided
by operating activities:(Gains) on dispositions and impairment losses, net
    
    
    (555
    )
    
    
    (2,368
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    153,180Loss on early extinguishment of debt
    
    
    
    
    
    
    32,822Premiums paid on early extinguishment of debt
    
    
    
    
    
    
    (25,463
    )Depreciation and amortization
    
    
    16,453
    
    
    
    15,732Amortization of deferred financing costs
    
    
    798
    
    
    
    1,011Provision for doubtful accounts
    
    
    5,012
    
    
    
    5,306Share-based compensation
    
    
    895
    
    
    
    Tax benefit on stock options exercised
    
    
    
    
    
    
    1,991Provision for deferred income taxes
    
    
    10,671
    
    
    
    5,203Other
    
    
    1,490
    
    
    
    782Changes in assets and liabilities:Increase in other receivables
    
    
    (5,798
    )
    
    
    (10,129
    )Decrease in inventories and cemetery property
    
    
    1,775
    
    
    
    1,746Increase (decrease) in accounts payable and accrued expenses
    
    
    5,810
    
    
    
    (3,833
    )Net effect of preneed funeral production and maturities
    
    
    464
    
    
    
    (9,134
    )Net effect of preneed cemetery production and deliveries
    
    
    14,023
    
    
    
    10,507Decrease in other
    
    
    (108
    )
    
    
    (2,307
    )Net cash provided by operating activities
    
    
    78,100
    
    
    
    33,727Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    
    
    
    
    16Proceeds from sale of assets, net
    
    
    761
    
    
    
    9,731Insurance proceeds related to hurricane damaged properties
    
    
    5,300
    
    
    
    Additions to property and equipment
    
    
    (19,180
    )
    
    
    (17,896
    )Other
    
    
    23
    
    
    
    113Net cash used in investing activities
    
    
    (13,096
    )
    
    
    (8,036
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    
    
    
    
    440,000Repayments of long-term debt
    
    
    (32,474
    )
    
    
    (446,021
    )Debt issue costs
    
    
    
    
    
    
    (6,247
    )Issuance of common stock
    
    
    187
    
    
    
    13,541Purchase and retirement of common stock
    
    
    (21,046
    )
    
    
    (13,685
    )Dividends
    
    
    (8,049
    )
    
    
    (5,466
    )Other
    
    
    62
    
    
    
    8Net cash used in financing activities
    
    
    (61,320
    )
    
    
    (17,870
    )Net increase in cash
    
    
    3,684
    
    
    
    7,821Cash and cash equivalents, beginning of period
    
    
    40,605
    
    
    
    21,514Cash and cash equivalents, end of period
    
    $
    44,289
    
    
    $
    29,335Supplemental cash flow information:Cash paid (received) during the period for:Income taxes
    
    $
    (900
    )
    
    $
    3,700Interest
    
    $
    17,500
    
    
    $
    25,200Non-cash investing and financing activities:Issuance of common stock to executive officers and directors
    
    $
    612
    
    
    $
    Issuance of restricted stock
    
    $
    82
    
    
    $
    1,158
  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)
    Nine Months Ended July 31, 2006Number of Shares
    
    
    Weighted Average
    
    
    AggregateUnderlying Options
    
    
    Exercise Prices
    
    
    Intrinsic ValueOutstanding as of November 1, 2005
    
    
    1,468,734
    
    
    $
    6.62Granted
    
    
    473,060
    
    
    $
    5.37Exercised/Repurchased
    
    
    
    
    
    $
    Forfeited
    
    
    (456,166
    )
    
    $
    6.94Outstanding as of July 31, 2006
    
    
    1,485,628
    
    
    $
    6.12
    
    
    $
    76Exercisable as of July 31, 2006
    
    
    517,188
    
    
    $
    6.28
    
    
    $
    Weighted-average fair value of options granted
    
    
    
    
    
    $
    2.27
  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)
 (1) Basis
of Presentation  (Continued)
 Options Outstanding
    
    
    Options ExercisableNumber
    
    
    Weighted Average
    
    
    
    
    
    
    Number
    
    
    WeightedRange of
    
    Outstanding
    
    
    Remaining
    
    
    Weighted Average
    
    
    Exercisable
    
    
    Average ExerciseExercise Prices
    
    at 7/31/2006
    
    
    Contractual Life
    
    
    Exercise Prices
    
    
    at 7/31/2006
    
    
    Prices$ 5.06
    
    
    261,000
    
    
    6.33 years
    
    $
    5.06
    
    
    
    
    
    
    $
    $ 5.35
    
    
    36,250
    
    
    6.89 years
    
    $
    5.35
    
    
    
    
    
    
    $
    $ 5.44
    
    
    316,668
    
    
    7.39 years
    
    $
    5.44
    
    
    
    233,338
    
    
    $
    5.44$ 5.86
    
    
    12,739
    
    
    6.33 years
    
    $
    5.86
    
    
    
    
    
    
    $
    $ 5.86
    
    
    154,821
    
    
    6.78 years
    
    $
    5.86
    
    
    
    
    
    
    $
    $ 6.90
    
    
    560,400
    
    
    5.39 years
    
    $
    6.90
    
    
    
    140,100
    
    
    $
    6.90$ 7.03
    
    
    143,750
    
    
    5.30 years
    
    $
    7.03
    
    
    
    143,750
    
    
    $
    7.03$ 5.06 to $ 7.03
    
    
    1,485,628
    
    
    6.16 years
    
    $
    6.12
    
    
    
    517,188
    
    
    $
    6.28
 Weighted AverageNine Months Ended
    
    
    Grant-DateJuly 31, 2006
    
    
    Fair ValueNonvested options as of November 1, 2005
    
    
    1,235,396
    
    
    $
    3.92Granted
    
    
    473,060
    
    
    $
    2.27Vested
    
    
    (283,850
    )
    
    $
    4.06Forfeited
    
    
    (456,166
    )
    
    $
    4.00Nonvested options as of July 31, 2006
    
    
    968,440
    
    
    $
    3.04
    11




---



##### 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)
 Three Months
    
    
    Nine MonthsEnded
    
    
    EndedJuly 31, 2005
    
    
    July 31, 2005Net earnings (loss)
    
    $
    8,875
    
    
    $
    (141,319
    )Stock-based employee compensation
expense included in reported net
earnings, net of tax
    
    
    133
    
    
    
    351Total stock-based employee
compensation expense determined
under fair value-based method, net
of tax
    
    
    (416
    )
    
    
    (1,351
    )Pro forma net earnings (loss)
    
    $
    8,592
    
    
    $
    (142,319
    )Net earnings (loss) per common share:Basic  as reported
    
    $
    .08
    
    
    $
    (1.29
    )Basic  pro forma
    
    $
    .08
    
    
    $
    (1.30
    )Diluted  as reported
    
    $
    .08
    
    
    $
    (1.29
    )Diluted  pro forma
    
    $
    .08
    
    
    $
    (1.30
    )
 Business Interruption Insurance
  Out of Period Adjustments
  12




---



##### 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)
  Three Months Ended
    
    
    Nine Months EndedJuly 31, 2006
    
    
    July 31, 2006Out of PeriodAdjustments
    
    
    Out of PeriodAdjustmentsIncrease (Decrease)
    
    
    Increase (Decrease)Revenue:Funeral:Western division
    
    $
    
    
    
    $
    Eastern division
    
    
    
    
    
    
    Total funeral revenue
    
    
    
    
    
    
    Cemetery:Western division
    
    
    693
    
    
    
    769Eastern division
    
    
    2,372
    
    
    
    2,351Total cemetery revenue
    
    
    3,065
    
    
    
    3,120Total revenues
    
    $
    3,065
    
    
    $
    3,120Costs and expenses:Funeral:Western division
    
    $
    1,273
    
    
    $
    1,337Eastern division
    
    
    1,418
    
    
    
    1,482Total funeral costs and expenses
    
    
    2,691
    
    
    
    2,819Cemetery:Western division
    
    
    555
    
    
    
    619Eastern division
    
    
    956
    
    
    
    1,020Total cemetery costs and expenses
    
    
    1,511
    
    
    
    1,639Total costs and expenses
    
    $
    4,202
    
    
    $
    4,458Gross profit:Funeral:Western division
    
    $
    (1,273
    )
    
    $
    (1,337
    )Eastern division
    
    
    (1,418
    )
    
    
    (1,482
    )Total funeral gross profit
    
    
    (2,691
    )
    
    
    (2,819
    )Cemetery:Western division
    
    
    138
    
    
    
    150Eastern division
    
    
    1,416
    
    
    
    1,331Total cemetery gross profit
    
    
    1,554
    
    
    
    1,481Total gross profit
    
    $
    (1,137
    )
    
    $
    (1,338
    )Operating earnings
    
    $
    (1,343
    )
    
    $
    (1,544
    )Earnings from continuing operations
    
    $
    (853
    )
    
    $
    (980
    )Net earnings
    
    $
    (853
    )
    
    $
    (980
    )
 Reclassifications
  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)
 (2) Change in Accounting Principles and New Accounting Principles
 Preneed Selling Costs
   Other Accounting Pronouncements
    14




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (Dollars in thousands, except per share amounts)
 (2) Change
in Accounting Principles and New Accounting Principles  (Continued)
  (3) Preneed Funeral Activities
 Preneed Funeral Receivables and Trust Investments
  July 31, 2006
    
    
    October 31, 2005Trust assets
    
    $
    440,491
    
    
    $
    446,344Receivables from customers
    
    
    52,090
    
    
    
    57,124Preneed funeral receivables and trust
investments
    
    $
    492,581
    
    
    $
    503,468
  July 31, 2006Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    37,846
    
    
    $
    
    
    
    $
    
    
    
    $
    37,846U.S. Government, agencies and
municipalities
    
    
    13,259
    
    
    
    38
    
    
    
    (222
    )
    
    
    13,075Corporate bonds
    
    
    23,140
    
    
    
    492
    
    
    
    (519
    )
    
    
    23,113Preferred stocks
    
    
    78,804
    
    
    
    319
    
    
    
    (3,354
    )
    
    
    75,769Common stocks
    
    
    228,768
    
    
    
    19,261
    
    
    
    (11,583
    )
    
    
    236,446Mutual funds
    
    
    33,080
    
    
    
    336
    
    
    
    (1,246
    )
    
    
    32,170Insurance contracts and other
long-term investments
    
    
    19,734
    
    
    
    138
    
    
    
    
    
    
    
    19,872Trust investments
    
    $
    434,631
    
    
    $
    20,584
    
    
    $
    (16,924
    )
    
    
    438,291Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100.8
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,200Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    440,491
  July 31, 2006Due in one year or less
    
    $
    1,707Due in one to five years
    
    
    14,457Due in five to ten years
    
    
    19,689Thereafter
    
    
    335$
    36,188
 15




---



##### 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, 2005Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    52,275
    
    
    $
    
    
    
    $
    
    
    
    $
    52,275U.S. Government, agencies and
municipalities
    
    
    7,421
    
    
    
    52
    
    
    
    (384
    )
    
    
    7,089Corporate bonds
    
    
    19,702
    
    
    
    679
    
    
    
    (566
    )
    
    
    19,815Preferred stocks
    
    
    68,419
    
    
    
    503
    
    
    
    (1,577
    )
    
    
    67,345Common stocks
    
    
    239,970
    
    
    
    13,803
    
    
    
    (9,812
    )
    
    
    243,961Mutual funds
    
    
    30,254
    
    
    
    215
    
    
    
    (247
    )
    
    
    30,222Insurance contracts and other
long-term investments
    
    
    23,190
    
    
    
    351
    
    
    
    
    
    
    
    23,541Trust investments
    
    $
    441,231
    
    
    $
    15,603
    
    
    $
    (12,586
    )
    
    
    444,248Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100.7
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,096Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    446,344
 (4) Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  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)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
 July 31, 2006
    
    
    October 31, 2005Trust assets
    
    $
    188,842
    
    
    $
    191,506Receivables from customers
    
    
    56,590
    
    
    
    65,931Preneed cemetery receivables and trust investments
    
    $
    245,432
    
    
    $
    257,437
  July 31, 2006Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    13,207
    
    
    $
    
    
    
    $
    
    
    
    $
    13,207U.S. Government, agencies and
municipalities
    
    
    13,179
    
    
    
    22
    
    
    
    (207
    )
    
    
    12,994Corporate bonds
    
    
    8,820
    
    
    
    209
    
    
    
    (53
    )
    
    
    8,976Preferred stocks
    
    
    32,926
    
    
    
    110
    
    
    
    (1,279
    )
    
    
    31,757Common stocks
    
    
    93,508
    
    
    
    7,946
    
    
    
    (5,779
    )
    
    
    95,675Mutual funds
    
    
    24,065
    
    
    
    709
    
    
    
    (475
    )
    
    
    24,299Insurance contracts and other
long-term investments
    
    
    573
    
    
    
    1
    
    
    
    (4
    )
    
    
    570Trust investments
    
    $
    186,278
    
    
    $
    8,997
    
    
    $
    (7,797
    )
    
    
    187,478Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100.6
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,364Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    188,842
  July 31, 2006Due in one year or less
    
    $
    3,365Due in one to five years
    
    
    9,952Due in five to ten years
    
    
    8,052Thereafter
    
    
    601$
    21,970
  17




---



##### 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, 2005Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    12,377
    
    
    $
    
    
    
    $
    
    
    
    $
    12,377U.S. Government, agencies and
municipalities
    
    
    10,686
    
    
    
    27
    
    
    
    (76
    )
    
    
    10,637Corporate bonds
    
    
    8,893
    
    
    
    309
    
    
    
    (145
    )
    
    
    9,057Preferred stocks
    
    
    34,319
    
    
    
    296
    
    
    
    (861
    )
    
    
    33,754Common stocks
    
    
    104,999
    
    
    
    5,465
    
    
    
    (5,486
    )
    
    
    104,978Mutual funds
    
    
    19,018
    
    
    
    86
    
    
    
    (47
    )
    
    
    19,057Insurance contracts and other
long-term investments
    
    
    568
    
    
    
    2
    
    
    
    
    
    
    
    570Trust investments
    
    $
    190,860
    
    
    $
    6,185
    
    
    $
    (6,615
    )
    
    
    190,430Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99.8
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,076Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    191,506
 (5) Cemetery Interment Rights and Perpetual Care Trusts
   18




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
 July 31, 2006Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    11,451
    
    
    $
    1
    
    
    $
    (6
    )
    
    $
    11,446U.S. Government, agencies and
municipalities
    
    
    7,881
    
    
    
    22
    
    
    
    (210
    )
    
    
    7,693Corporate bonds
    
    
    19,949
    
    
    
    1,209
    
    
    
    (128
    )
    
    
    21,030Preferred stocks
    
    
    77,683
    
    
    
    719
    
    
    
    (2,988
    )
    
    
    75,414Common stocks
    
    
    84,678
    
    
    
    9,939
    
    
    
    (5,876
    )
    
    
    88,741Mutual funds
    
    
    10,675
    
    
    
    158
    
    
    
    (272
    )
    
    
    10,561Insurance contracts and other
long-term investments
    
    
    1,002
    
    
    
    58
    
    
    
    (23
    )
    
    
    1,037Trust investments
    
    $
    213,319
    
    
    $
    12,106
    
    
    $
    (9,503
    )
    
    
    215,922Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101.2
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,305Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    217,227
  July 31, 2006Due in one year or less
    
    $
    1,025Due in one to five years
    
    
    19,549Due in five to ten years
    
    
    6,701Thereafter
    
    
    1,448$
    28,723
     19




---



##### 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, 2005Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    20,172
    
    
    $
    
    
    
    $
    
    
    
    $
    20,172U.S. Government, agencies and
municipalities
    
    
    7,077
    
    
    
    36
    
    
    
    (127
    )
    
    
    6,986Corporate bonds
    
    
    18,817
    
    
    
    1,669
    
    
    
    (156
    )
    
    
    20,330Preferred stocks
    
    
    71,168
    
    
    
    642
    
    
    
    (4,187
    )
    
    
    67,623Common stocks
    
    
    87,406
    
    
    
    10,659
    
    
    
    (5,795
    )
    
    
    92,270Mutual funds
    
    
    3,557
    
    
    
    129
    
    
    
    (72
    )
    
    
    3,614Insurance contracts and other
long-term investments
    
    
    1,132
    
    
    
    45
    
    
    
    (26
    )
    
    
    1,151Trust investments
    
    $
    209,329
    
    
    $
    13,180
    
    
    $
    (10,363
    )
    
    
    212,146Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101.3
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    942Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    213,088
 (6) Non-Controlling Interest in Funeral and Cemetery Trusts and in Perpetual Care Trusts
  Non-controlling Interest
    
    
    Non-controllingPreneed
    
    
    Preneed
    
    
    
    
    
    
    Interest in PerpetualFuneral
    
    
    Cemetery
    
    
    Total
    
    
    Care TrustsTrust assets at market value
    
    $
    440,491
    
    
    $
    188,842
    
    
    $
    629,333
    
    
    $
    217,227Less:Pending withdrawals
    
    
    (10,578
    )
    
    
    (3,977
    )
    
    
    (14,555
    )
    
    
    (1,827
    )Pending deposits
    
    
    1,954
    
    
    
    1,182
    
    
    
    3,136
    
    
    
    545Non-controlling interest
    
    $
    431,867
    
    
    $
    186,047
    
    
    $
    617,914
    
    
    $
    215,945
  Non-controlling Interest
    
    
    Non-controllingPreneed
    
    
    Preneed
    
    
    
    
    
    
    Interest in PerpetualFuneral
    
    
    Cemetery
    
    
    Total
    
    
    Care TrustsTrust assets at market value
    
    $
    446,344
    
    
    $
    191,506
    
    
    $
    637,850
    
    
    $
    213,088Less:Pending withdrawals
    
    
    (7,868
    )
    
    
    (6,104
    )
    
    
    (13,972
    )
    
    
    (1,866
    )Pending deposits
    
    
    1,648
    
    
    
    1,315
    
    
    
    2,963
    
    
    
    542Non-controlling interest
    
    $
    440,124
    
    
    $
    186,717
    
    
    $
    626,841
    
    
    $
    211,764
 20




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (6)
    
    Non-Controlling Interest in Funeral and Cemetery Trusts and in Perpetual Care
Trusts(Continued)
 Investment and other income, net
  Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005Non-controlling interest:Realized gains
    
    $
    1,145
    
    
    $
    7,375
    
    
    $
    15,489
    
    
    $
    17,482Realized losses
    
    
    (716
    )
    
    
    (669
    )
    
    
    (6,767
    )
    
    
    (10,309
    )Interest
income, dividend and other ordinary income
    
    
    6,205
    
    
    
    6,658
    
    
    
    20,901
    
    
    
    19,538Trust expenses and income taxes
    
    
    (1,978
    )
    
    
    (2,880
    )
    
    
    (8,527
    )
    
    
    (9,192
    )Net trust investment income
    
    
    4,656
    
    
    
    10,484
    
    
    
    21,096
    
    
    
    17,519Interest expense related to non-controlling
interest in funeral and cemetery trust
investments
    
    
    (2,571
    )
    
    
    (6,988
    )
    
    
    (15,970
    )
    
    
    (11,656
    )Interest expense related to non-controlling
interest in perpetual care trust
investments
    
    
    (2,085
    )
    
    
    (3,496
    )
    
    
    (5,126
    )
    
    
    (5,863
    )Total non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    508
    
    
    
    184
    
    
    
    1,628
    
    
    
    404Total investment and other income, net
    
    $
    508
    
    
    $
    184
    
    
    $
    1,628
    
    
    $
    404
 
 (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
 Henrietta Torres and Teresa Fiore, on behalf of themselves and all others similarly situated
and the General Public v. Stewart Enterprises, Inc., et al.
   21




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7) Commitments and Contingencies(Continued)
   In re: Funeral Consumer Antitrust Litigation - Funeral Consumers Alliance, Inc., et al. v. Service Corporation International,
Alderwoods Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville
Casket Co.
   Pioneer Valley Casket Co., Inc., et al. v. Service Corporation International, Alderwoods
Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville Casket Co.
    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)
 (7) Commitments and Contingencies(Continued)
  Ralph Lee Fancher, on behalf of himself and all others similarly
situated v. Service Corporation International, Alderwoods Group, Inc., Stewart Enterprises, Inc.,
Hillenbrand Industries, Inc., Aurora Casket Co., York Group, Inc., and Batesville Casket Co., ,
 State Attorney General Civil Investigative Demands
    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)
 (7) Commitments and Contingencies(Continued)
    (8) Reconciliation of Basic and Diluted Per Share Data
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended July 31, 2006Earnings from continuing operations
    
    $
    7,336Basic earnings per common share:Earnings from continuing operations
available to common shareholders
    
    $
    7,336
    
    
    
    106,177
    
    
    $
    .07Effect of dilutive securities:Time-vest stock options assumed
exercised and restricted stock
    
    
    
    
    
    
    78Diluted earnings per common share:Earnings from continuing operations
available to common shareholders
plus time-vest stock options
assumed exercised and restricted
stock
    
    $
    7,336
    
    
    
    106,255
    
    
    $
    .07
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended July 31, 2005Earnings from continuing operations
    
    $
    8,114Basic earnings per common share:Earnings from continuing operations
available to common shareholders
    
    $
    8,114
    
    
    
    109,147
    
    
    $
    .07Effect of dilutive securities:Time-vest stock options assumed
exercised and restricted stock
    
    
    
    
    
    
    119Diluted earnings per common share:Earnings from continuing operations
available to common shareholders
plus time-vest stock options
assumed exercised and restricted
stock
    
    $
    8,114
    
    
    
    109,266
    
    
    $
    .07
 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)
 (8) Reconciliation of Basic and Diluted Per Share Data(Continued)
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataNine Months Ended July 31, 2006Earnings from continuing operations
    
    $
    26,806Basic earnings per common share:Earnings from continuing operations
available to common shareholders
    
    $
    26,806
    
    
    
    107,540
    
    
    $
    .25Effect of dilutive securities:Time-vest stock options assumed
exercised and restricted stock
    
    
    
    
    
    
    30Diluted earnings per common share:Earnings from continuing operations
available to common shareholders
plus time-vest stock options
assumed exercised and restricted
stock
    
    $
    26,806
    
    
    
    107,570
    
    
    $
    .25
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataNine Months Ended July 31, 2005Earnings from continuing
operations before cumulative
effect of change in accounting
principle
    
    $
    10,754Basic earnings per common share:Earnings from continuing
operations before cumulative
effect of change in
accounting principle
available to common
shareholders
    
    $
    10,754
    
    
    
    109,243
    
    
    $
    .10Effect of dilutive securities:Time-vest stock options
assumed exercised and
restricted stock
    
    
    
    
    
    
    187Diluted earnings per common share:Earnings from continuing
operations before cumulative
effect of change in
accounting principle
available to common
shareholders plus time-vest
stock options assumed
exercised and restricted
stock
    
    $
    10,754
    
    
    
    109,430
    
    
    $
    .10
   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)
 (9) Segment Data
         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)
 (9) Segment Data(Continued)
    Funeral Revenue
    
    
    Cemetery Revenue (1)
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005Western Division
    
    $
    36,748
    
    
    $
    34,823
    
    
    $
    22,854
    
    
    $
    20,951
    
    
    $
    59,602
    
    
    $
    55,774Eastern Division
    
    
    27,630
    
    
    
    26,690
    
    
    
    35,819
    
    
    
    34,944
    
    
    
    63,449
    
    
    
    61,634Corporate Trust
Management
(2)
    
    
    4,444
    
    
    
    4,508
    
    
    
    2,026
    
    
    
    2,755
    
    
    
    6,470
    
    
    
    7,263Total
    
    $
    68,822
    
    
    $
    66,021
    
    
    $
    60,699
    
    
    $
    58,650
    
    
    $
    129,521
    
    
    $
    124,671
 Funeral Revenue
    
    
    Cemetery Revenue(1)
    
    
    Total RevenueNine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005Western Division
    
    $
    110,981
    
    
    $
    108,903
    
    
    $
    64,023
    
    
    $
    61,113
    
    
    $
    175,004
    
    
    $
    170,016Eastern Division
    
    
    87,885
    
    
    
    86,734
    
    
    
    102,877
    
    
    
    99,377
    
    
    
    190,762
    
    
    
    186,111Corporate Trust
Management
(2)
    
    
    13,697
    
    
    
    14,364
    
    
    
    7,275
    
    
    
    8,456
    
    
    
    20,972
    
    
    
    22,820Total
    
    $
    212,563
    
    
    $
    210,001
    
    
    $
    174,175
    
    
    $
    168,946
    
    
    $
    386,738
    
    
    $
    378,947
 Funeral Gross Profit
    
    
    Cemetery Gross Profit(1)
    
    
    Total Gross ProfitThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005Western Division
    
    $
    6,793
    
    
    $
    5,424
    
    
    $
    4,711
    
    
    $
    3,006
    
    
    $
    11,504
    
    
    $
    8,430Eastern Division
    
    
    2,054
    
    
    
    2,824
    
    
    
    5,608
    
    
    
    5,788
    
    
    
    7,662
    
    
    
    8,612Corporate Trust
Management
(2)
    
    
    4,307
    
    
    
    4,366
    
    
    
    1,904
    
    
    
    2,628
    
    
    
    6,211
    
    
    
    6,994Total
    
    $
    13,154
    
    
    $
    12,614
    
    
    $
    12,223
    
    
    $
    11,422
    
    
    $
    25,377
    
    
    $
    24,036
 Funeral Gross Profit
    
    
    Cemetery Gross Profit(1)
    
    
    Total Gross ProfitNine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005Western Division
    
    $
    22,576
    
    
    $
    22,046
    
    
    $
    13,021
    
    
    $
    10,935
    
    
    $
    35,597
    
    
    $
    32,981Eastern Division
    
    
    13,526
    
    
    
    14,547
    
    
    
    17,058
    
    
    
    14,968
    
    
    
    30,584
    
    
    
    29,515Corporate Trust
Management
(2)
    
    
    13,287
    
    
    
    13,920
    
    
    
    6,907
    
    
    
    8,059
    
    
    
    20,194
    
    
    
    21,979Total
    
    $
    49,389
    
    
    $
    50,513
    
    
    $
    36,986
    
    
    $
    33,962
    
    
    $
    86,375
    
    
    $
    84,475
 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)
 (9) Segment Data(Continued)
 Net Preneed Funeral Merchandise
    
    
    Net Preneed Cemetery Merchandise
    
    
    Net Total Preneed Merchandiseand Service Sales(3)
    
    
    and Service Sales(3)
    
    
    and Service Sales(3)Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005Western Division
    
    $
    14,707
    
    
    $
    14,690
    
    
    $
    4,857
    
    
    $
    4,575
    
    
    $
    19,564
    
    
    $
    19,265Eastern Division
    
    
    12,092
    
    
    
    11,305
    
    
    
    10,705
    
    
    
    11,119
    
    
    
    22,797
    
    
    
    22,424Total
    
    $
    26,799
    
    
    $
    25,995
    
    
    $
    15,562
    
    
    $
    15,694
    
    
    $
    42,361
    
    
    $
    41,689
 Net Preneed Funeral Merchandise
    
    
    Net Preneed Cemetery Merchandise
    
    
    Net Total Preneed Merchandiseand Service Sales(3)
    
    
    and Service Sales(3)
    
    
    and Service Sales(3)Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005Western Division
    
    $
    41,295
    
    
    $
    39,036
    
    
    $
    13,340
    
    
    $
    12,645
    
    
    $
    54,635
    
    
    $
    51,681Eastern Division
    
    
    33,449
    
    
    
    32,335
    
    
    
    31,409
    
    
    
    32,622
    
    
    
    64,858
    
    
    
    64,957Total
    
    $
    74,744
    
    
    $
    71,371
    
    
    $
    44,749
    
    
    $
    45,267
    
    
    $
    119,493
    
    
    $
    116,638
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of
the related geographic segment and amounted to $2,463 and $3,122 for the three months ended
July 31, 2006 and 2005, respectively, and $7,414 and $5,822 for the nine months ended July 31,
2006 and 2005, respectively.(2)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and service 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 and are paid by the trusts to the Companys subsidiary,
Investors Trust, Inc. The trust earnings represent earnings realized over the life of the
preneed contracts delivered during the relevant periods. Trust management fees included in
funeral revenue for the three months ended July 31, 2006 and 2005 were $1,342 and $1,351,
respectively, and funeral trust earnings for the three months ended July 31, 2006 and 2005
were $3,102 and $3,157, respectively. Trust management fees included in cemetery revenue for
the three months ended July 31, 2006 and 2005 were $1,202 and $1,257, respectively, and
cemetery trust earnings for the three months ended July 31, 2006 and 2005 were $824 and
$1,498, respectively. Trust management fees included in funeral revenue for the nine months
ended July 31, 2006 and 2005 were $4,109 and $4,028, respectively, and funeral trust earnings
for the nine months ended July 31, 2006 and 2005 were $9,588 and $10,336, respectively. Trust
management fees included in cemetery revenue for the nine months ended July 31, 2006 and 2005
were $3,628 and $3,721, respectively, and cemetery trust earnings for the nine months ended July
31, 2006 and 2005 were $3,647 and $4,735, respectively.(3)
    
    Preneed sales amounts represent total preneed funeral and cemetery service and
merchandise sales generated in the applicable period, net of cancellations.  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)
 (9) Segment Data(Continued)
 Three Months Ended
    
    
    Nine Months EndedJuly 31,
    
    
    July 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Gross profit for reportable segments
    
    $
    25,377
    
    
    $
    24,036
    
    
    $
    86,375
    
    
    $
    84,475Corporate general and administrative expenses
    
    
    (8,517
    )
    
    
    (5,545
    )
    
    
    (22,992
    )
    
    
    (14,343
    )Hurricane related charges, net
    
    
    1,072
    
    
    
    
    
    
    
    (1,008
    )
    
    
    Separation charges
    
    
    (680
    )
    
    
    (147
    )
    
    
    (956
    )
    
    
    (147
    )Gains on dispositions and impairment (losses), net
    
    
    (7
    )
    
    
    56
    
    
    
    152
    
    
    
    1,233Other operating income (expense), net
    
    
    (117
    )
    
    
    571
    
    
    
    897
    
    
    
    1,069Interest expense
    
    
    (7,092
    )
    
    
    (6,456
    )
    
    
    (22,301
    )
    
    
    (23,503
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (114
    )
    
    
    
    
    
    
    (32,822
    )Investment and other income, net
    
    
    508
    
    
    
    184
    
    
    
    1,628
    
    
    
    404Earnings from continuing operations before
income taxes and cumulative effect of change
in accounting principle
    
    $
    10,544
    
    
    $
    12,585
    
    
    $
    41,795
    
    
    $
    16,366
 (10) Supplementary Information
  Three Months Ended
    
    
    Nine Months EndedJuly 31,
    
    
    July 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Service revenueFuneral
    
    $
    41,110
    
    
    $
    37,860
    
    
    $
    123,730
    
    
    $
    119,502Cemetery
    
    
    15,194
    
    
    
    16,052
    
    
    
    46,728
    
    
    
    44,80356,304
    
    
    
    53,912
    
    
    
    170,458
    
    
    
    164,305Merchandise revenueFuneral
    
    
    25,722
    
    
    
    26,146
    
    
    
    82,761
    
    
    
    84,490Cemetery
    
    
    41,490
    
    
    
    38,503
    
    
    
    115,361
    
    
    
    112,41467,212
    
    
    
    64,649
    
    
    
    198,122
    
    
    
    196,904Other revenueFuneral
    
    
    1,990
    
    
    
    2,015
    
    
    
    6,072
    
    
    
    6,009Cemetery
    
    
    4,015
    
    
    
    4,095
    
    
    
    12,086
    
    
    
    11,7296,005
    
    
    
    6,110
    
    
    
    18,158
    
    
    
    17,738Total revenue
    
    $
    129,521
    
    
    $
    124,671
    
    
    $
    386,738
    
    
    $
    378,947Service costsFuneral
    
    $
    14,880
    
    
    $
    13,125
    
    
    $
    42,087
    
    
    $
    38,249Cemetery
    
    
    11,455
    
    
    
    10,772
    
    
    
    31,588
    
    
    
    30,16726,335
    
    
    
    23,897
    
    
    
    73,675
    
    
    
    68,416Merchandise costsFuneral
    
    
    15,828
    
    
    
    16,731
    
    
    
    49,853
    
    
    
    50,517Cemetery
    
    
    23,136
    
    
    
    22,906
    
    
    
    66,579
    
    
    
    65,17738,964
    
    
    
    39,637
    
    
    
    116,432
    
    
    
    115,694General and administrative expensesFuneral
    
    
    24,960
    
    
    
    23,551
    
    
    
    71,234
    
    
    
    70,722Cemetery
    
    
    13,885
    
    
    
    13,550
    
    
    
    39,022
    
    
    
    39,64038,845
    
    
    
    37,101
    
    
    
    110,256
    
    
    
    110,362Total costs
    
    $
    104,144
    
    
    $
    100,635
    
    
    $
    300,363
    
    
    $
    294,472
 (10) Supplementary Information(Continued)
  29




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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
  Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended July 31, 2006Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    64,220
    
    
    $
    4,602
    
    
    $
    
    
    
    $
    68,822Cemetery
    
    
    
    
    
    
    55,317
    
    
    
    5,382
    
    
    
    
    
    
    
    60,699
    
    
    
    119,537
    
    
    
    9,984
    
    
    
    
    
    
    
    129,521Costs and expenses:Funeral
    
    
    
    
    
    
    52,452
    
    
    
    3,216
    
    
    
    
    
    
    
    55,668Cemetery
    
    
    
    
    
    
    44,208
    
    
    
    4,268
    
    
    
    
    
    
    
    48,476
    
    
    
    96,660
    
    
    
    7,484
    
    
    
    
    
    
    
    104,144Gross profit
    
    
    
    
    
    
    22,877
    
    
    
    2,500
    
    
    
    
    
    
    
    25,377Corporate general and administrative expenses
    
    
    (8,517
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,517
    )Hurricane related charges, net
    
    
    (43
    )
    
    
    1,115
    
    
    
    
    
    
    
    
    
    
    
    1,072Separation charges
    
    
    (607
    )
    
    
    (73
    )
    
    
    
    
    
    
    
    
    
    
    (680
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    (7
    )Other operating income (expense), net
    
    
    3
    
    
    
    (214
    )
    
    
    94
    
    
    
    
    
    
    
    (117
    )Operating earnings (loss)
    
    
    (9,164
    )
    
    
    23,698
    
    
    
    2,594
    
    
    
    
    
    
    
    17,128Interest expense
    
    
    (859
    )
    
    
    (5,721
    )
    
    
    (512
    )
    
    
    
    
    
    
    (7,092
    )Investment and other income, net
    
    
    508
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    508Equity in subsidiaries
    
    
    14,093
    
    
    
    138
    
    
    
    
    
    
    
    (14,231
    )
    
    
    Earnings from continuing operations
before income taxes
    
    
    4,578
    
    
    
    18,115
    
    
    
    2,082
    
    
    
    (14,231
    )
    
    
    10,544Income tax expense (benefit)
    
    
    (2,756
    )
    
    
    5,902
    
    
    
    62
    
    
    
    
    
    
    
    3,208Earnings from continuing operations
    
    
    7,334
    
    
    
    12,213
    
    
    
    2,020
    
    
    
    (14,231
    )
    
    
    7,336Discontinued operations:Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Net earnings
    
    
    7,334
    
    
    
    12,213
    
    
    
    2,018
    
    
    
    (14,231
    )
    
    
    7,334Other comprehensive loss, net
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    3
    
    
    
    (3
    )Comprehensive income
    
    $
    7,331
    
    
    $
    12,213
    
    
    $
    2,015
    
    
    $
    (14,228
    )
    
    $
    7,331
 30




---



##### 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(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended July 31, 2005Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    61,214
    
    
    $
    4,807
    
    
    $
    
    
    
    $
    66,021Cemetery
    
    
    
    
    
    
    52,996
    
    
    
    5,654
    
    
    
    
    
    
    
    58,650
    
    
    
    114,210
    
    
    
    10,461
    
    
    
    
    
    
    
    124,671Costs and expenses:Funeral
    
    
    
    
    
    
    50,119
    
    
    
    3,288
    
    
    
    
    
    
    
    53,407Cemetery
    
    
    
    
    
    
    43,258
    
    
    
    3,970
    
    
    
    
    
    
    
    47,228
    
    
    
    93,377
    
    
    
    7,258
    
    
    
    
    
    
    
    100,635Gross profit
    
    
    
    
    
    
    20,833
    
    
    
    3,203
    
    
    
    
    
    
    
    24,036Corporate general and administrative expenses
    
    
    (5,545
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,545
    )Separation charges
    
    
    (147
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (147
    )Gains on dispositions and impairment (losses),
net
    
    
    
    
    
    
    (26
    )
    
    
    82
    
    
    
    
    
    
    
    56Other operating income, net
    
    
    79
    
    
    
    166
    
    
    
    326
    
    
    
    
    
    
    
    571Operating earnings (loss)
    
    
    (5,613
    )
    
    
    20,973
    
    
    
    3,611
    
    
    
    
    
    
    
    18,971Interest income (expense)
    
    
    14,483
    
    
    
    (18,562
    )
    
    
    (2,377
    )
    
    
    
    
    
    
    (6,456
    )Loss on early extinguishment of debt
    
    
    (114
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (114
    )Investment and other income, net
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184Equity in subsidiaries
    
    
    2,762
    
    
    
    
    
    
    
    
    
    
    
    (2,762
    )
    
    
    Earnings from continuing operations before
income taxes
    
    
    11,702
    
    
    
    2,411
    
    
    
    1,234
    
    
    
    (2,762
    )
    
    
    12,585Income taxes
    
    
    2,827
    
    
    
    792
    
    
    
    852
    
    
    
    
    
    
    
    4,471Earnings from continuing operations
    
    
    8,875
    
    
    
    1,619
    
    
    
    382
    
    
    
    (2,762
    )
    
    
    8,114Discontinued operations:Earnings (loss) from discontinued
operations before income taxes
    
    
    
    
    
    
    (281
    )
    
    
    889
    
    
    
    
    
    
    
    608Income tax benefit
    
    
    
    
    
    
    (153
    )
    
    
    
    
    
    
    
    
    
    
    (153
    )Earnings (loss) from discontinued operations
    
    
    
    
    
    
    (128
    )
    
    
    889
    
    
    
    
    
    
    
    761Net earnings
    
    
    8,875
    
    
    
    1,491
    
    
    
    1,271
    
    
    
    (2,762
    )
    
    
    8,875Other comprehensive loss, net
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )
    
    
    2
    
    
    
    (2
    )Comprehensive income
    
    $
    8,873
    
    
    $
    1,491
    
    
    $
    1,269
    
    
    $
    (2,760
    )
    
    $
    8,873
 31




---



##### 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(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Nine Months Ended July 31, 2006Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    198,145
    
    
    $
    14,418
    
    
    $
    
    
    
    $
    212,563Cemetery
    
    
    
    
    
    
    159,241
    
    
    
    14,934
    
    
    
    
    
    
    
    174,175
    
    
    
    357,386
    
    
    
    29,352
    
    
    
    
    
    
    
    386,738Costs and expenses:Funeral
    
    
    
    
    
    
    153,894
    
    
    
    9,280
    
    
    
    
    
    
    
    163,174Cemetery
    
    
    
    
    
    
    125,975
    
    
    
    11,214
    
    
    
    
    
    
    
    137,189
    
    
    
    279,869
    
    
    
    20,494
    
    
    
    
    
    
    
    300,363Gross profit
    
    
    
    
    
    
    77,517
    
    
    
    8,858
    
    
    
    
    
    
    
    86,375Corporate general and administrative expenses
    
    
    (22,992
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,992
    )Hurricane related charges, net
    
    
    (178
    )
    
    
    (830
    )
    
    
    
    
    
    
    
    
    
    
    (1,008
    )Separation charges
    
    
    (809
    )
    
    
    (147
    )
    
    
    
    
    
    
    
    
    
    
    (956
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    56
    
    
    
    96
    
    
    
    
    
    
    
    152Other operating income, net
    
    
    40
    
    
    
    651
    
    
    
    206
    
    
    
    
    
    
    
    897Operating earnings (loss)
    
    
    (23,939
    )
    
    
    77,247
    
    
    
    9,160
    
    
    
    
    
    
    
    62,468Interest income (expense)
    
    
    12,296
    
    
    
    (33,207
    )
    
    
    (1,390
    )
    
    
    
    
    
    
    (22,301
    )Investment and other income, net
    
    
    1,628
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,628Equity in subsidiaries
    
    
    33,043
    
    
    
    432
    
    
    
    
    
    
    
    (33,475
    )
    
    
    Earnings from continuing operations
before income taxes
    
    
    23,028
    
    
    
    44,472
    
    
    
    7,770
    
    
    
    (33,475
    )
    
    
    41,795Income tax expense (benefit)
    
    
    (4,142
    )
    
    
    16,780
    
    
    
    2,351
    
    
    
    
    
    
    
    14,989Earnings from continuing operations
    
    
    27,170
    
    
    
    27,692
    
    
    
    5,419
    
    
    
    (33,475
    )
    
    
    26,806Discontinued operations:Earnings from discontinued operations
before income taxes
    
    
    
    
    
    
    9
    
    
    
    334
    
    
    
    
    
    
    
    343Income tax benefit
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    (21
    )Earnings from discontinued operations
    
    
    
    
    
    
    30
    
    
    
    334
    
    
    
    
    
    
    
    364Net earnings
    
    
    27,170
    
    
    
    27,722
    
    
    
    5,753
    
    
    
    (33,475
    )
    
    
    27,170Other comprehensive loss, net
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )
    
    
    5
    
    
    
    (5
    )Comprehensive income
    
    $
    27,165
    
    
    $
    27,722
    
    
    $
    5,748
    
    
    $
    (33,470
    )
    
    $
    27,165
 32




---



##### 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(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Nine Months Ended July 31, 2005Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    194,860
    
    
    $
    15,141
    
    
    $
    
    
    
    $
    210,001Cemetery
    
    
    
    
    
    
    151,783
    
    
    
    17,163
    
    
    
    
    
    
    
    168,946
    
    
    
    346,643
    
    
    
    32,304
    
    
    
    
    
    
    
    378,947Costs and expenses:Funeral
    
    
    
    
    
    
    149,893
    
    
    
    9,595
    
    
    
    
    
    
    
    159,488Cemetery
    
    
    
    
    
    
    123,187
    
    
    
    11,797
    
    
    
    
    
    
    
    134,984
    
    
    
    273,080
    
    
    
    21,392
    
    
    
    
    
    
    
    294,472Gross profit
    
    
    
    
    
    
    73,563
    
    
    
    10,912
    
    
    
    
    
    
    
    84,475Corporate general and administrative expenses
    
    
    (14,343
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,343
    )Separation charges
    
    
    (147
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (147
    )Gains on dispositions and impairment (losses),
net
    
    
    
    
    
    
    961
    
    
    
    272
    
    
    
    
    
    
    
    1,233Other operating income, net
    
    
    240
    
    
    
    416
    
    
    
    413
    
    
    
    
    
    
    
    1,069Operating earnings (loss)
    
    
    (14,250
    )
    
    
    74,940
    
    
    
    11,597
    
    
    
    
    
    
    
    72,287Interest income (expense)
    
    
    40,043
    
    
    
    (57,375
    )
    
    
    (6,171
    )
    
    
    
    
    
    
    (23,503
    )Loss on early extinguishment of debt
    
    
    (32,822
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,822
    )Investment and other income, net
    
    
    404
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    404Equity loss in subsidiaries
    
    
    (137,703
    )
    
    
    
    
    
    
    
    
    
    
    137,703
    
    
    
    Earnings (loss) from continuing operations
before income taxes
    
    
    (144,328
    )
    
    
    17,565
    
    
    
    5,426
    
    
    
    137,703
    
    
    
    16,366Income tax expense (benefit)
    
    
    (3,009
    )
    
    
    6,129
    
    
    
    2,492
    
    
    
    
    
    
    
    5,612Earnings (loss) from continuing operations
    
    
    (141,319
    )
    
    
    11,436
    
    
    
    2,934
    
    
    
    137,703
    
    
    
    10,754Discontinued operations:Earnings (loss) from discontinued
operations before income taxes
    
    
    
    
    
    
    (246
    )
    
    
    1,321
    
    
    
    
    
    
    
    1,075Income tax benefit
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (32
    )Earnings (loss) from discontinued operations
    
    
    
    
    
    
    (214
    )
    
    
    1,321
    
    
    
    
    
    
    
    1,107Earnings (loss) before cumulative effect of
change in accounting principle
    
    
    (141,319
    )
    
    
    11,222
    
    
    
    4,255
    
    
    
    137,703
    
    
    
    11,861Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    (145,276
    )
    
    
    (7,904
    )
    
    
    
    
    
    
    (153,180
    )Net loss
    
    
    (141,319
    )
    
    
    (134,054
    )
    
    
    (3,649
    )
    
    
    137,703
    
    
    
    (141,319
    )Other comprehensive income (loss), net
    
    
    331
    
    
    
    
    
    
    
    (2
    )
    
    
    2
    
    
    
    331Comprehensive loss
    
    $
    (140,988
    )
    
    $
    (134,054
    )
    
    $
    (3,651
    )
    
    $
    137,705
    
    
    $
    (140,988
    )
 33




---



##### 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(Continued)
 Condensed Consolidating Balance Sheets
 July 31, 2006Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    39,004
    
    
    $
    3,541
    
    
    $
    1,744
    
    
    $
    
    
    
    $
    44,289Marketable securities
    
    
    
    
    
    
    
    
    
    
    1,330
    
    
    
    
    
    
    
    1,330Receivables, net of allowances
    
    
    5,233
    
    
    
    59,161
    
    
    
    3,665
    
    
    
    
    
    
    
    68,059Inventories
    
    
    311
    
    
    
    29,277
    
    
    
    2,792
    
    
    
    
    
    
    
    32,380Prepaid expenses
    
    
    483
    
    
    
    4,163
    
    
    
    26
    
    
    
    
    
    
    
    4,672Deferred income taxes, net
    
    
    2,901
    
    
    
    2,246
    
    
    
    12
    
    
    
    
    
    
    
    5,159Total current assets
    
    
    47,932
    
    
    
    98,388
    
    
    
    9,569
    
    
    
    
    
    
    
    155,889Receivables due beyond one year, net of
allowances
    
    
    7,247
    
    
    
    52,027
    
    
    
    20,728
    
    
    
    
    
    
    
    80,002Preneed funeral receivables and trust investments
    
    
    
    
    
    
    482,149
    
    
    
    10,432
    
    
    
    
    
    
    
    492,581Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    230,703
    
    
    
    14,729
    
    
    
    
    
    
    
    245,432Goodwill
    
    
    
    
    
    
    252,942
    
    
    
    19,787
    
    
    
    
    
    
    
    272,729Cemetery property, at cost
    
    
    
    
    
    
    343,371
    
    
    
    23,224
    
    
    
    
    
    
    
    366,595Property and equipment, at cost
    
    
    36,034
    
    
    
    431,958
    
    
    
    35,655
    
    
    
    
    
    
    
    503,647Less accumulated depreciation
    
    
    20,383
    
    
    
    176,619
    
    
    
    11,916
    
    
    
    
    
    
    
    208,918Net property and equipment
    
    
    15,651
    
    
    
    255,339
    
    
    
    23,739
    
    
    
    
    
    
    
    294,729Deferred income taxes, net
    
    
    7,039
    
    
    
    163,453
    
    
    
    12,369
    
    
    
    
    
    
    
    182,861Cemetery perpetual care trust investments
    
    
    
    
    
    
    217,227
    
    
    
    
    
    
    
    
    
    
    
    217,227Other assets
    
    
    5,731
    
    
    
    12,221
    
    
    
    848
    
    
    
    
    
    
    
    18,800Equity in subsidiaries
    
    
    12,258
    
    
    
    5,785
    
    
    
    
    
    
    
    (18,043
    )
    
    
    Total assets
    
    $
    95,858
    
    
    $
    2,113,605
    
    
    $
    135,425
    
    
    $
    (18,043
    )
    
    $
    2,326,845LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    2,898
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,898Accounts payable
    
    
    238
    
    
    
    14,216
    
    
    
    680
    
    
    
    
    
    
    
    15,134Accrued expenses and other current liabilities
    
    
    18,535
    
    
    
    45,208
    
    
    
    3,284
    
    
    
    
    
    
    
    67,027Total current liabilities
    
    
    21,671
    
    
    
    59,424
    
    
    
    3,964
    
    
    
    
    
    
    
    85,059Long-term debt, less current maturities
    
    
    344,655
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    374,655Intercompany payables, net
    
    
    (942,402
    )
    
    
    934,485
    
    
    
    7,917
    
    
    
    
    
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    235,049
    
    
    
    46,909
    
    
    
    
    
    
    
    281,958Deferred preneed cemetery revenue
    
    
    
    
    
    
    270,607
    
    
    
    28,592
    
    
    
    
    
    
    
    299,199Non-controlling interest in funeral and cemetery
trusts
    
    
    
    
    
    
    617,914
    
    
    
    
    
    
    
    
    
    
    
    617,914Other long-term liabilities
    
    
    10,136
    
    
    
    2,449
    
    
    
    
    
    
    
    
    
    
    
    12,585Negative equity in subsidiaries
    
    
    222,268
    
    
    
    
    
    
    
    
    
    
    
    (222,268
    )
    
    
    Total liabilities
    
    
    (343,672
    )
    
    
    2,119,928
    
    
    
    117,382
    
    
    
    (222,268
    )
    
    
    1,671,370Non-controlling interest in perpetual care trusts
    
    
    
    
    
    
    215,945
    
    
    
    
    
    
    
    
    
    
    
    215,945Common stock
    
    
    105,114
    
    
    
    426
    
    
    
    52
    
    
    
    (478
    )
    
    
    105,114Other
    
    
    334,424
    
    
    
    (222,694
    )
    
    
    17,999
    
    
    
    204,695
    
    
    
    334,424Accumulated other comprehensive loss
    
    
    (8
    )
    
    
    
    
    
    
    (8
    )
    
    
    8
    
    
    
    (8
    )Total shareholders equity
    
    
    439,530
    
    
    
    (222,268
    )
    
    
    18,043
    
    
    
    204,225
    
    
    
    439,530Total liabilities and shareholders equity
    
    $
    95,858
    
    
    $
    2,113,605
    
    
    $
    135,425
    
    
    $
    (18,043
    )
    
    $
    2,326,845
 34




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes(Continued)
 Condensed Consolidating Balance Sheets
 October 31, 2005Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    38,675
    
    
    $
    874
    
    
    $
    1,056
    
    
    $
    
    
    
    $
    40,605Marketable securities
    
    
    
    
    
    
    
    
    
    
    1,302
    
    
    
    
    
    
    
    1,302Receivables, net of allowances
    
    
    17,337
    
    
    
    56,381
    
    
    
    6,107
    
    
    
    
    
    
    
    79,825Inventories
    
    
    401
    
    
    
    26,194
    
    
    
    6,866
    
    
    
    
    
    
    
    33,461Prepaid expenses
    
    
    451
    
    
    
    2,278
    
    
    
    37
    
    
    
    
    
    
    
    2,766Deferred income taxes, net
    
    
    2,918
    
    
    
    8,196
    
    
    
    2
    
    
    
    
    
    
    
    11,116Assets held for sale
    
    
    
    
    
    
    
    
    
    
    603
    
    
    
    
    
    
    
    603Total current assets
    
    
    59,782
    
    
    
    93,923
    
    
    
    15,973
    
    
    
    
    
    
    
    169,678Receivables due beyond one year, net of allowances
    
    
    
    
    
    
    49,384
    
    
    
    19,551
    
    
    
    
    
    
    
    68,935Preneed funeral receivables and trust investments
    
    
    
    
    
    
    492,247
    
    
    
    11,221
    
    
    
    
    
    
    
    503,468Preneed cemetery receivables and trust investments
    
    
    
    
    
    
    239,027
    
    
    
    18,410
    
    
    
    
    
    
    
    257,437Goodwill
    
    
    
    
    
    
    252,942
    
    
    
    19,787
    
    
    
    
    
    
    
    272,729Cemetery property, at cost
    
    
    
    
    
    
    346,611
    
    
    
    20,165
    
    
    
    
    
    
    
    366,776Property and equipment, at cost
    
    
    35,078
    
    
    
    415,970
    
    
    
    35,817
    
    
    
    
    
    
    
    486,865Less accumulated depreciation
    
    
    19,744
    
    
    
    164,959
    
    
    
    11,038
    
    
    
    
    
    
    
    195,741Net property and equipment
    
    
    15,334
    
    
    
    251,011
    
    
    
    24,779
    
    
    
    
    
    
    
    291,124Deferred income taxes, net
    
    
    13,176
    
    
    
    160,782
    
    
    
    13,615
    
    
    
    
    
    
    
    187,573Cemetery perpetual care trust investments
    
    
    
    
    
    
    213,088
    
    
    
    
    
    
    
    
    
    
    
    213,088Other assets
    
    
    6,447
    
    
    
    13,061
    
    
    
    810
    
    
    
    
    
    
    
    20,318Equity in subsidiaries
    
    
    6,942
    
    
    
    5,353
    
    
    
    
    
    
    
    (12,295
    )
    
    
    Total assets
    
    $
    101,681
    
    
    $
    2,117,429
    
    
    $
    144,311
    
    
    $
    (12,295
    )
    
    $
    2,351,126LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    3,168
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,168Accounts payable
    
    
    513
    
    
    
    9,578
    
    
    
    667
    
    
    
    
    
    
    
    10,758Accrued expenses and other current liabilities
    
    
    15,322
    
    
    
    45,356
    
    
    
    3,188
    
    
    
    
    
    
    
    63,866Liabilities associated with assets held for sale
    
    
    
    
    
    
    
    
    
    
    374
    
    
    
    
    
    
    
    374Total current liabilities
    
    
    19,003
    
    
    
    54,934
    
    
    
    4,229
    
    
    
    
    
    
    
    78,166Long-term debt, less current maturities
    
    
    376,859
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    406,859Intercompany payables, net
    
    
    (992,609
    )
    
    
    968,998
    
    
    
    23,611
    
    
    
    
    
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    237,200
    
    
    
    46,890
    
    
    
    
    
    
    
    284,090Deferred preneed cemetery revenue
    
    
    
    
    
    
    265,225
    
    
    
    27,286
    
    
    
    
    
    
    
    292,511Non-controlling interest in funeral and cemetery
trusts
    
    
    
    
    
    
    626,841
    
    
    
    
    
    
    
    
    
    
    
    626,841Other long-term liabilities
    
    
    8,985
    
    
    
    2,457
    
    
    
    
    
    
    
    
    
    
    
    11,442Negative equity in subsidiaries
    
    
    249,990
    
    
    
    
    
    
    
    
    
    
    
    (249,990
    )
    
    
    Total liabilities
    
    
    (337,772
    )
    
    
    2,155,655
    
    
    
    132,016
    
    
    
    (249,990
    )
    
    
    1,699,909Non-controlling interest in perpetual care trusts
    
    
    
    
    
    
    211,764
    
    
    
    
    
    
    
    
    
    
    
    211,764Common stock
    
    
    108,670
    
    
    
    426
    
    
    
    52
    
    
    
    (478
    )
    
    
    108,670Other
    
    
    330,786
    
    
    
    (250,416
    )
    
    
    12,246
    
    
    
    238,170
    
    
    
    330,786Accumulated other comprehensive loss
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    3
    
    
    
    (3
    )Total shareholders equity
    
    
    439,453
    
    
    
    (249,990
    )
    
    
    12,295
    
    
    
    237,695
    
    
    
    439,453Total liabilities and shareholders equity
    
    $
    101,681
    
    
    $
    2,117,429
    
    
    $
    144,311
    
    
    $
    (12,295
    )
    
    $
    2,351,126
 35




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Nine Months Ended July 31, 2006Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    17,581
    
    
    $
    47,606
    
    
    $
    12,913
    
    
    $
    
    
    
    $
    78,100Cash flows from investing activities:Proceeds from sale of assets, net
    
    
    
    
    
    
    28
    
    
    
    733
    
    
    
    
    
    
    
    761Insurance proceeds related to hurricane
damaged properties
    
    
    
    
    
    
    5,300
    
    
    
    
    
    
    
    
    
    
    
    5,300Additions to property and equipment
    
    
    (2,797
    )
    
    
    (15,812
    )
    
    
    (571
    )
    
    
    
    
    
    
    (19,180
    )Other
    
    
    
    
    
    
    58
    
    
    
    (35
    )
    
    
    
    
    
    
    23Net cash provided by (used in) investing
activities
    
    
    (2,797
    )
    
    
    (10,426
    )
    
    
    127
    
    
    
    
    
    
    
    (13,096
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (32,474
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,474
    )Intercompany receivables (payables)
    
    
    46,865
    
    
    
    (34,513
    )
    
    
    (12,352
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    187
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187Purchase and retirement of common stock
    
    
    (21,046
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,046
    )Dividends
    
    
    (8,049
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,049
    )Other
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62Net cash used in financing activities
    
    
    (14,455
    )
    
    
    (34,513
    )
    
    
    (12,352
    )
    
    
    
    
    
    
    (61,320
    )Net increase in cash
    
    
    329
    
    
    
    2,667
    
    
    
    688
    
    
    
    
    
    
    
    3,684Cash and cash equivalents, beginning of period
    
    
    38,675
    
    
    
    874
    
    
    
    1,056
    
    
    
    
    
    
    
    40,605Cash and cash equivalents, end of period
    
    $
    39,004
    
    
    $
    3,541
    
    
    $
    1,744
    
    
    $
    
    
    
    $
    44,289
 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(Continued)
 Condensed Consolidating Statements of Cash Flows
 Nine Months Ended July 31, 2005Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating
activities
    
    $
    (4,039
    )
    
    $
    24,857
    
    
    $
    12,909
    
    
    $
    
    
    
    $
    33,727Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16Proceeds from sale of assets, net
    
    
    (328
    )
    
    
    7,594
    
    
    
    2,465
    
    
    
    
    
    
    
    9,731Additions to property and equipment
    
    
    (2,751
    )
    
    
    (11,647
    )
    
    
    (3,498
    )
    
    
    
    
    
    
    (17,896
    )Other
    
    
    
    
    
    
    98
    
    
    
    15
    
    
    
    
    
    
    
    113Net cash used in investing activities
    
    
    (3,079
    )
    
    
    (3,939
    )
    
    
    (1,018
    )
    
    
    
    
    
    
    (8,036
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    440,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    440,000Repayments of long-term debt
    
    
    (446,021
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (446,021
    )Intercompany receivables (payables)
    
    
    34,372
    
    
    
    (22,396
    )
    
    
    (11,976
    )
    
    
    
    
    
    
    Debt issue costs
    
    
    (6,247
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,247
    )Issuance of common stock
    
    
    13,541
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,541Purchase and retirement of common stock
    
    
    (13,685
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,685
    )Dividends
    
    
    (5,466
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,466
    )Other
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Net cash provided by (used in) financing
activities
    
    
    16,502
    
    
    
    (22,396
    )
    
    
    (11,976
    )
    
    
    
    
    
    
    (17,870
    )Net increase (decrease) in cash
    
    
    9,384
    
    
    
    (1,478
    )
    
    
    (85
    )
    
    
    
    
    
    
    7,821Cash and cash equivalents, beginning of period
    
    
    13,553
    
    
    
    7,625
    
    
    
    336
    
    
    
    
    
    
    
    21,514Cash and cash equivalents, end of period
    
    $
    22,937
    
    
    $
    6,147
    
    
    $
    251
    
    
    $
    
    
    
    $
    29,335
 (12) Discontinued Operations, Assets Held for Sale and Impairment Charges
   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)
 (12) Discontinued Operations, Assets Held for Sale and Impairment Charges (Continued)
  Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2006
    
    
    July 31, 2005
    
    
    July 31, 2006
    
    
    July 31, 2005Revenue:Funeral
    
    $
    
    
    
    $
    221
    
    
    $
    56
    
    
    $
    928Cemetery
    
    
    
    
    
    
    82
    
    
    
    
    
    
    
    493$
    
    
    
    $
    303
    
    
    $
    56
    
    
    $
    1,421Gross profit:Funeral
    
    $
    (2
    )
    
    $
    (41
    )
    
    $
    (60
    )
    
    $
    (225
    )Cemetery
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    165(2
    )
    
    
    (21
    )
    
    
    (60
    )
    
    
    (60
    )Gains on
dispositions and
impairment
(losses), net
    
    
    
    
    
    
    629
    
    
    
    403
    
    
    
    1,135Earnings (loss)
from
discontinued
operations
before income
taxes
    
    $
    (2
    )
    
    $
    608
    
    
    $
    343
    
    
    $
    1,075
 (13) Separation Charges
  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)
 (14) Consolidated Comprehensive Income (Loss)
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Net earnings (loss)
    
    $
    7,334
    
    
    $
    8,875
    
    
    $
    27,170
    
    
    $
    (141,319
    )Other comprehensive income (loss):Unrealized depreciation of
investments, net of deferred tax
benefit (expense) of $2 and ($1),
respectively, and $3 and ($1),
respectively
    
    
    (3
    )
    
    
    (2
    )
    
    
    (5
    )
    
    
    (2
    )Unrealized appreciation on derivative
instrument designated and qualifying
as a cash flow hedging instrument, net
of deferred tax expense of ($204)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333(Increase) reduction in net unrealized
losses associated with
available-for-sale securities of the
trusts
    
    
    (14,868
    )
    
    
    32,843
    
    
    
    7,463
    
    
    
    33,797Reclassification of the net unrealized
losses activity attributable to the
non-controlling interest holders
    
    
    14,868
    
    
    
    (32,843
    )
    
    
    (7,463
    )
    
    
    (33,797
    )Total other comprehensive income (loss)
    
    
    (3
    )
    
    
    (2
    )
    
    
    (5
    )
    
    
    331Total comprehensive income (loss)
    
    $
    7,331
    
    
    $
    8,873
    
    
    $
    27,165
    
    
    $
    (140,988
    )
 (15) Guarantees
    39




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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)
 (15) Guarantees(Continued)
   (16) Related Party Transactions
       40




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (17) Hurricane Related Charges
     41




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (17) Hurricane Related Charges(Continued)
  (18) Long-term Debt
    (19) Income Taxes
    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)
 (19) Income Taxes(Continued)
  .
     (20) Subsequent Events
  43




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
         44




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##### Table of Contents



Other Matters
   45




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##### Table of Contents



Critical Accounting Policies
  Results of Operations
  Three Months Ended July 31, 2006 Compared to Three Months Ended July 31, 2005Continuing Operations
 Funeral Operations
 Three Months Ended July 31,Increase2006
    
    
    2005
    
    
    (Decrease)(In millions)Funeral Revenue:Eastern Division
    
    $
    27.6
    
    
    $
    26.7
    
    
    $
    .9Western Division
    
    
    36.8
    
    
    
    34.8
    
    
    
    2.0Corporate Trust Management (1)
    
    
    4.4
    
    
    
    4.5
    
    
    
    (.1
    )Total Funeral Revenue
    
    $
    68.8
    
    
    $
    66.0
    
    
    $
    2.8Funeral Costs:Eastern Division
    
    $
    25.6
    
    
    $
    23.9
    
    
    $
    1.7Western Division
    
    
    30.0
    
    
    
    29.4
    
    
    
    .6Corporate Trust Management (1)
    
    
    .1
    
    
    
    .1
    
    
    
    Total Funeral Costs
    
    $
    55.7
    
    
    $
    53.4
    
    
    $
    2.3Funeral Gross Profit:Eastern Division
    
    $
    2.0
    
    
    $
    2.8
    
    
    $
    (.8
    )Western Division
    
    
    6.8
    
    
    
    5.4
    
    
    
    1.4Corporate Trust Management (1)
    
    
    4.3
    
    
    
    4.4
    
    
    
    (.1
    )Total Funeral Gross Profit
    
    $
    13.1
    
    
    $
    12.6
    
    
    $
    .5
 Same-Store Analysis (2)
 Change in Average
    
    Change in Same-Store
    
    Cremation RateRevenue Per Call
    
    Funeral Services
    
    2006
    
    2005Eastern Division
    
    
    4.9
    %
    
    
    (.9
    )%
    
    
    32.9
    %
    
    
    31.4
    %Western Division
    
    
    .5
    %
    
    
    (2.4
    )%
    
    
    43.1
    %
    
    
    41.3
    %Total
    
    
    2.3
    %
    
    
    (1.1
    )%
    
    
    38.8
    %
    
    
    37.2
    %
 46




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##### Table of Contents



(1)
    
    Corporate trust management consists of trust management fees and funeral merchandise
and service trust earnings recognized with respect to preneed contracts delivered during the
period. Trust management fees are established by us at rates consistent with industry norms
and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust earnings
represent earnings realized over the life of the preneed contracts delivered during the
relevant periods. See Notes 3 and 6 to the condensed consolidated financial statements
included herein for information regarding the cost basis and market value of the trust assets
and current performance of the trusts (i.e., current realized gains and losses, interest
income and dividends). Trust management fees included in funeral revenue for the three months
ended July 31, 2006 and 2005 were $1.3 million and $1.3 million, respectively, and funeral
trust earnings for the three months ended July 31, 2006 and 2005 were $3.1 million and $3.2
million, respectively.(2)
    
    On August 29, 2005, Hurricane Katrina struck the New Orleans metropolitan area and
severely damaged three of our funeral homes located in that area, which is part of our Western
division. This same-store analysis includes these three funeral homes which had funeral
revenue of $2.0 million and $2.5 million for the three months ended July 31, 2006 and 2005,
respectively, and performed 384 and 517 funeral services in the third quarter of 2006 and
2005, respectively. Excluding these three funeral homes, the increases in average revenue per
call for the Western division and the Company were 0.5 percent and 2.3 percent, respectively,
and the decreases in same-store funeral services for the Western division and the Company were
0.9 percent and 0.2 percent, respectively.
 Consolidated Operations  Funeral
    Segment Discussion  Funeral
  47




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##### Table of Contents



Cemetery Operations
 Three Months Ended July 31,Increase2006
    
    
    2005
    
    
    (Decrease)(In millions)Cemetery Revenue:Eastern Division
    
    $
    35.8
    
    
    $
    34.9
    
    
    $
    .9Western Division
    
    
    22.9
    
    
    
    21.0
    
    
    
    1.9Corporate Trust Management (1)
    
    
    2.0
    
    
    
    2.7
    
    
    
    (.7
    )Total Cemetery Revenue
    
    $
    60.7
    
    
    $
    58.6
    
    
    $
    2.1Cemetery Costs:Eastern Division
    
    $
    30.2
    
    
    $
    29.1
    
    
    $
    1.1Western Division
    
    
    18.2
    
    
    
    18.0
    
    
    
    .2Corporate Trust Management (1)
    
    
    .1
    
    
    
    .1
    
    
    
    Total Cemetery Costs
    
    $
    48.5
    
    
    $
    47.2
    
    
    $
    1.3Cemetery Gross Profit:Eastern Division
    
    $
    5.6
    
    
    $
    5.8
    
    
    $
    (.2
    )Western Division
    
    
    4.7
    
    
    
    3.0
    
    
    
    1.7Corporate Trust Management (1)
    
    
    1.9
    
    
    
    2.6
    
    
    
    (.7
    )Total Cemetery Gross Profit
    
    $
    12.2
    
    
    $
    11.4
    
    
    $
    .8
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and service trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by us at rates consistent with
industry norms and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust
earnings represent earnings realized over the life of the preneed contracts delivered during
the relevant periods. See Notes 4 and 6 to the condensed consolidated financial statements
included herein for information regarding the cost basis and market value of the trust assets
and current performance of the trusts (i.e., current realized gains and losses, interest
income and dividends). Trust management fees included in cemetery revenue for the three
months ended July 31, 2006 and 2005 were $1.2 million and $1.2 million, respectively, and
cemetery trust earnings for the three months ended July 31, 2006 and 2005 were $0.8 million
and $1.5 million, respectively. Perpetual care trust earnings are included in the revenues
and gross profit of the related geographic segment. Consolidated Operations  Cemetery
   48




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Segment Discussion  Cemetery
   Discontinued Operations
  Other
     49




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Preneed Sales into and Deliveries out of the Backlog
   50




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##### Table of Contents



Nine Months Ended July 31, 2006 Compared to Nine Months Ended July 31, 2005Continuing Operations
 Funeral Operations
 Nine Months Ended July 31,Increase2006
    
    
    2005
    
    
    (Decrease)(In millions)Funeral Revenue:Eastern Division
    
    $
    87.9
    
    
    $
    86.7
    
    
    $
    1.2Western Division
    
    
    111.0
    
    
    
    108.9
    
    
    
    2.1Corporate Trust Management (1)
    
    
    13.7
    
    
    
    14.4
    
    
    
    (.7
    )Total Funeral Revenue
    
    $
    212.6
    
    
    $
    210.0
    
    
    $
    2.6Funeral Costs:Eastern Division
    
    $
    74.4
    
    
    $
    72.1
    
    
    $
    2.3Western Division
    
    
    88.4
    
    
    
    86.9
    
    
    
    1.5Corporate Trust Management (1)
    
    
    .4
    
    
    
    .5
    
    
    
    (.1
    )Total Funeral Costs
    
    $
    163.2
    
    
    $
    159.5
    
    
    $
    3.7Funeral Gross Profit:Eastern Division
    
    $
    13.5
    
    
    $
    14.6
    
    
    $
    (1.1
    )Western Division
    
    
    22.6
    
    
    
    22.0
    
    
    
    .6Corporate Trust Management (1)
    
    
    13.3
    
    
    
    13.9
    
    
    
    (.6
    )Total Funeral Gross Profit
    
    $
    49.4
    
    
    $
    50.5
    
    
    $
    (1.1
    )
 Same-Store Analysis (2)
 Change in Average
    
    Change in Same-Store
    
    Cremation RateRevenue Per Call
    
    Funeral Services
    
    2006
    
    2005Eastern Division
    
    
    2.4
    %
    
    
    (.5
    )%
    
    
    33.0
    %
    
    
    30.4
    %Western Division
    
    
    .4
    %
    
    
    
    %
    
    
    42.9
    %
    
    
    41.8
    %Total
    
    
    .8
    %
    
    
    (.5
    )%
    
    
    38.7
    %
    
    
    37.0
    %
 
 (1)
    
    Corporate trust management consists of trust management fees and funeral merchandise
and service trust earnings recognized with respect to preneed contracts delivered during the
period. Trust management fees are established by us at rates consistent with industry norms
and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust earnings
represent earnings realized over the life of the preneed contracts delivered during the
relevant periods. See Notes 3 and 6 to the condensed consolidated financial statements
included herein for information regarding the cost basis and market value of the trust assets
and current performance of the trusts (i.e., current realized gains and losses, interest
income and dividends). Trust management fees included in funeral revenue for the nine months
ended July 31, 2006 and 2005 were $4.1 million and $4.0 million, respectively, and funeral
trust earnings for the nine months ended July 31, 2006 and 2005 were $9.6 million and $10.4
million, respectively.(2)
    
    On August 29, 2005, Hurricane Katrina struck the New Orleans metropolitan area and
severely damaged three of our funeral homes located in that area, which is part of our Western
division. This same-store analysis includes these three funeral homes which had funeral
revenue of $5.5 million and $7.3 million for the nine months ended July 31, 2006 and 2005,
respectively, and performed 1,168 and 1,556 funeral services for the nine months ended July
31, 2006 and 2005, respectively. Excluding these three funeral homes, the increase in average
revenue per call for the Western division and the Company was 0.7 percent and 0.9 percent,
respectively, and the increase in same-store funeral services for the Western division and the
Company was 1.5 percent and 0.5 percent, respectively. Consolidated Operations  Funeral
  51




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Segment Discussion  Funeral
   Cemetery Operations
 Nine Months Ended July 31,Increase2006
    
    
    2005
    
    
    (Decrease)(In millions)Cemetery Revenue:Eastern Division
    
    $
    102.9
    
    
    $
    99.4
    
    
    $
    3.5Western Division
    
    
    64.0
    
    
    
    61.1
    
    
    
    2.9Corporate Trust Management (1)
    
    
    7.3
    
    
    
    8.4
    
    
    
    (1.1
    )Total Cemetery Revenue
    
    $
    174.2
    
    
    $
    168.9
    
    
    $
    5.3Cemetery Costs:Eastern Division
    
    $
    85.8
    
    
    $
    84.4
    
    
    $
    1.4Western Division
    
    
    51.0
    
    
    
    50.2
    
    
    
    .8Corporate Trust Management (1)
    
    
    .4
    
    
    
    .4
    
    
    
    Total Cemetery Costs
    
    $
    137.2
    
    
    $
    135.0
    
    
    $
    2.2Cemetery Gross Profit:Eastern Division
    
    $
    17.1
    
    
    $
    15.0
    
    
    $
    2.1Western Division
    
    
    13.0
    
    
    
    10.9
    
    
    
    2.1Corporate Trust Management (1)
    
    
    6.9
    
    
    
    8.0
    
    
    
    (1.1
    )Total Cemetery Gross Profit
    
    $
    37.0
    
    
    $
    33.9
    
    
    $
    3.1
 52




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##### Table of Contents



(1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and service trust earnings
recognized with respect to preneed contracts delivered during the period. Trust management fees
are established by us at rates consistent with industry norms and are paid by the trusts to our
subsidiary, Investors Trust, Inc. The trust earnings represent earnings realized over the life
of the preneed contracts delivered during the relevant periods. See Notes 4 and 6 to the
condensed consolidated financial statements included herein for information regarding the cost
basis and market value of the trust assets and current performance of the trusts (i.e., current
realized gains and losses, interest income and dividends). Trust management fees included in
cemetery revenue for the nine months ended July 31, 2006 and 2005 were $3.6 million and $3.7
million, respectively, and cemetery trust earnings for the nine months ended July 31, 2006 and
2005 were $3.7 million and $4.7 million, respectively. Perpetual care trust earnings are
included in the revenues and gross profit of the related geographic segment. Consolidated Operations  Cemetery
    Segment Discussion  Cemetery
   Discontinued Operations
  53




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Other
          54




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##### Table of Contents



Preneed Sales into and Deliveries out of the Backlog
   Liquidity and Capital Resources
 Cash Flow
    55




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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)
    
    $
    377.6
    
    
    $
    2.9
    
    
    $
    4.7
    
    
    $
    86.6
    
    
    $
    283.4Interest on long-term debt (2)
    
    
    151.2
    
    
    
    25.8
    
    
    
    49.1
    
    
    
    48.0
    
    
    
    28.3Operating lease obligations (3)
    
    
    31.5
    
    
    
    1.2
    
    
    
    6.9
    
    
    
    4.9
    
    
    
    18.5Non-competition and other agreements (4)
    
    
    5.0
    
    
    
    .6
    
    
    
    3.5
    
    
    
    .6
    
    
    
    .3$
    565.3
    
    
    $
    30.5
    
    
    $
    64.2
    
    
    $
    140.1
    
    
    $
    330.5
 
 (1)
    
    See below for a breakdown of our future scheduled principal payments and maturities
of our long-term debt by type as of July 31, 2006.(2)
    
    Includes contractual interest payments for our revolving credit facility, Term Loan
B, senior notes and third-party debt. The interest on the revolving credit facility and Term
Loan B was calculated based on interest rates in effect as of July 31, 2006.(3)
    
    Our noncancellable operating leases are primarily for land and buildings and expire
over the next one to 13 years, except for six leases that expire between 2032 and 2039. Our
future minimum lease payments as of July 31, 2006 are $1.2 million, $3.8 million, $3.1
million, $2.7 million, $2.2 million, and $18.5 million for the years ending October 31, 2006,
2007, 2008, 2009, 2010 and later years, respectively.(4)
    
    We have entered into non-competition agreements with prior owners and key employees
of acquired subsidiaries that expire through 2012. This category also includes separation pay
related to former executive officers.   56




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##### Table of Contents



Other,PrincipallyFiscal Year
    
    Revolving
    
    
    
    
    
    
    
    
    
    
    Seller FinancingEnding
    
    Credit
    
    
    Term
    
    
    Senior
    
    
    of AcquiredOctober 31,
    
    Facility
    
    
    Loan B
    
    
    Notes
    
    
    Operations
    
    
    Total2006
    
    $
    
    
    
    $
    .6
    
    
    $
    
    
    
    $
    .1
    
    
    $
    .72007
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    .7
    
    
    
    2.92008
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    .2
    
    
    
    2.42009
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    2.22010
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    2.2Thereafter
    
    
    
    
    
    
    167.1
    
    
    
    200.0
    
    
    
    .1
    
    
    
    367.2Total long-term debt
    
    $
    
    
    
    $
    176.5
    
    
    $
    200.0
    
    
    $
    1.1
    
    
    $
    377.6
    Off-Balance Sheet Arrangements
  (1)
    
    the $41.1 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 21 to the consolidated financial
statements in our 2005 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
consolidated balance sheets, and are discussed in Note 3(i) to the consolidated
financial statements in our 2005 Form 10-K.
 Ratio of Earnings to Fixed Charges
  Nine MonthsEnded
    
    
    
    
    
    
    
    
    
    Years Ended October 31,July 31, 2006
    
    2005
    
    2004
    
    2003
    
    2002
    
    20012.75(1)
    
    
    1.36
    (2)(6)
    
    
    1.98
    (3)
    
    
    1.08
    (4)
    
    
    1.27
    (5)(6)
    
    
    
    (6)(7)
 57




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##### Table of Contents



(1)
    
    Pretax earnings for the nine months ended July 31, 2006 include $1.0 million in net
hurricane related charges, $0.1 million of gains on dispositions and impairment (losses), net
and $1.0 million in separation charges.(2)
    
    Pretax earnings for fiscal year 2005 include a charge of $9.4 million for expenses
related to Hurricane Katrina, a charge of $1.5 million for separation charges related to the
July 2005 restructuring of our divisions, $1.3 million of gains on dispositions and impairment
(losses), net and $32.8 million for the loss on early extinguishment of debt
related to the 2005 debt refinancings.(3)
    
    Pretax earnings for fiscal year 2004 includes separation charges of $3.4
million for costs related to workforce reductions and separation pay to a former executive
officer and ($0.2) million in gains on dispositions and impairment (losses), net.(4)
    
    Pretax earnings for fiscal year 2003 include a charge of $11.3 million for the loss
on early extinguishment of debt in connection with redemption of the ROARS, a noncash charge
of $10.2 million for long-lived asset impairment and a charge of $2.5 million for separation
payments to former executive officers.(5)
    
    Pretax earnings for fiscal year 2002 include a noncash charge of $18.5 million in
connection with the write-down of assets held for sale.(6)
    
    Excludes the cumulative effect of change in accounting principles.(7)
    
    Pretax earnings for fiscal year 2001 include a noncash charge of $269.2 million in
connection with the write-down of assets held for sale and other charges and a $9.1 million
charge for the loss on early extinguishment of debt. As a result of these charges, our
earnings for fiscal year 2001 were insufficient to cover our fixed charges, and an additional
$229.9 million in pretax earnings would have been required to eliminate the coverage
deficiency.  Recent Accounting Standards
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   58




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##### Table of Contents



Interest
    
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
    1.
    
    The Company did not maintain effective controls over revenue recognition related to
preneed cemetery merchandise and services contracts. Specifically, the Company did not
maintain effective controls over the reconciliation of recorded revenues to revenues based
on physical delivery of preneed cemetery merchandise to ensure completeness and accuracy of
recorded preneed cemetery merchandise revenue and deferred preneed cemetery revenue. This
control deficiency resulted in the restatement of the Companys
 59




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##### Table of Contents



2.
    
    The Company did not maintain effective controls over recognition of realized trust
earnings on preneed cemetery and funeral contracts. Specifically, the Company did not
maintain effective controls to recognize realized net trust earnings upon the delivery of
the related preneed cemetery and funeral merchandise and performance of preneed funeral
services to ensure accuracy of recorded realized trust earnings and deferred trust
earnings. This control deficiency resulted in the restatement of the Companys consolidated
financial statements for all annual and interim periods from fiscal year 2001 through
fiscal year 2004 and the first three quarters of fiscal year 2005. This control deficiency
could result in the misstatement of cemetery and funeral revenues and of the deferred
revenue associated with preneed cemetery and preneed funeral contracts sold on a preneed
basis that would result in a material misstatement to annual or interim financial
statements that would not be prevented or detected. Accordingly management determined that
this control deficiency represents a material weakness.3.
    
    The Company identified the following material weakness in the quarter ended July 31,
2006. The Company did not maintain effective controls over the completeness and accuracy
of accounts payable. Specifically, the Company did not maintain effective controls over
the accrual of small dollar disbursements incurred at its individual funeral home and
cemetery locations to ensure that accounts payable was properly stated at each balance
sheet date. This control deficiency resulted in an adjustment of accounts payable at July
31, 2006. This control deficiency could result in the misstatement of accounts payable
that would result in a material misstatement to annual or interim financial statements that
would not be prevented or detected. Accordingly, management determined that this control
deficiency represents a material weakness.
  Plan for Remediation
  Changes in Internal Control over Financial Reporting
 60




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 1A. Risk Factors
    Our company may be adversely affected if we are unable to timely complete our search for a new CEO
and successfully transition to new leadership.
   We have experienced an increase in the proportion of lower-priced, non-traditional funeral services
and direct cremations, which we believe is part of the continuing national trend toward increased
cremation.
  61




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##### Table of Contents



The application of generally accepted accounting principles to our business is complex, and we have
had significant changes in the application of generally accepted accounting principles to our
business. No assurances can be given that we will not face similar issues in the future.
  
 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
 Total number of
    
    
    Maximum approximateshares purchased
    
    
    dollar value of sharesTotal number
    
    
    
    
    
    
    as part of
    
    
    that may yet beof shares
    
    
    Average price
    
    
    publicly-announced
    
    
    purchased under thePeriod
    
    purchased
    
    
    paid per share
    
    
    plans or programs(1)
    
    
    plans or programsMay 1, 2006
through May 31,
2006
    
    
    614,500
    
    
    $
    5.73
    
    
    
    614,500
    
    
    $
    10,411,174June 1, 2006
through June 30,
2006
    
    
    759,000
    
    
    $
    5.67
    
    
    
    759,000
    
    
    $
    6,111,472July 1, 2006
through July 31,
2006
    
    
    920,400
    
    
    $
    5.45
    
    
    
    920,400
    
    
    $
    1,098,093Total
    
    
    2,293,900
    
    
    $
    5.60
    
    
    
    2,293,900
    
    
    $
    1,098,093
 
 (1)
    
    On March 28, 2005, we announced a new stock repurchase program, authorizing the
investment of up to $30.0 million in the repurchase of our common stock. Repurchases under the
new program will be limited to our 62




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##### Table of Contents



Item 6. Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
April 20, 20063.2
    
    By-laws of the Company, as amended and restated as of April 20, 20064.1
    
    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 4.2 to
Amendment No. 3 to the Companys Registration Statement on Form S-1 (Registration No.
33-42336) filed with the Commission on October 7, 1991)4.3
    
    Rights Agreement, dated as of October 28, 1999, between Stewart Enterprises, Inc. and
ChaseMellon Shareholder Services, L.L.C. as Rights Agent (incorporated by reference to Exhibit
1 to the Companys Form 8-A dated November 3, 1999)4.4
    
    Amended and Restated Credit Agreement dated November 19, 2004 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 dated November 22, 2004)4.5
    
    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 dated February 11, 2005)4.6
    
    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 dated February 11, 2005)4.7
    
    Registration Rights Agreement, dated as of February 11, 2005, by and among Stewart
Enterprises, Inc., the guarantors party thereto, and Banc of America Securities LLC, Bear,
Stearns & Co. Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Calyon Securities
(USA) Inc. and SunTrust Capital Markets, Inc. (incorporated by reference to Exhibit 10.1 to
the Companys Current Report on Form 8-K dated February 11, 2005)31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Acting
Chief Executive Officer and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Acting
Chief Executive Officer and Chief Financial Officer
 63




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.September 15, 2006
    
    /s/ THOMAS M. KITCHENThomas M. KitchenActing Chief Executive Officer andChief Financial OfficerSeptember 15, 2006
    
    /s/ ANGELA M. LACOURAngela M. LacourVice PresidentCorporate ControllerChief Accounting Officer
 64




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##### Table of Contents



Exhibit Index
 31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Acting
Chief Executive Officer and Chief Financial Officer
 32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Acting
Chief Executive Officer and Chief Financial Officer