##### 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, 2009
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For
the transition period from  to
 
 Commission File Number: 1-15449
 
 STEWART ENTERPRISES, INC.
  LOUISIANA
(State or other jurisdiction of incorporation or organization)
    
    72-0693290
(I.R.S. Employer Identification No.)1333 South Clearview Parkway 
Jefferson, Louisiana
(Address of principal executive offices)
    
    70121
(Zip Code)
 
 Registrants telephone number, including area code: (504) 729-1400
 
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 INDEX
  
 PagePart I.
    
    Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings 
Three Months Ended July 31, 2009 and 2008
    
    
    3Condensed Consolidated Statements of Earnings 
Nine Months Ended July 31, 2009 and 2008
    
    
    4Condensed Consolidated Balance Sheets 
July 31, 2009 and October 31, 2008
    
    
    5Condensed Consolidated Statement of Shareholders Equity 
Nine Months Ended July 31, 2009
    
    
    7Condensed Consolidated Statements of Cash Flows 
Nine Months Ended July 31, 2009 and 2008
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    50Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    64Item 4. Controls and Procedures
    
    
    64Part II.
    
    Other InformationItem 1. Legal Proceedings
    
    
    65Item 1A. Risk Factors
    
    
    65Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
    
    
    65Item 6. Exhibits
    
    
    66Signatures
    
    
    68EX-31.1EX-31.2EX-32.1
  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 31,2009
    
    
    2008Revenues:Funeral
    
    $
    66,017
    
    
    $
    68,558Cemetery
    
    
    51,735
    
    
    
    61,870117,752
    
    
    
    130,428Costs and expenses:Funeral
    
    
    51,607
    
    
    
    53,524Cemetery
    
    
    46,812
    
    
    
    48,90698,419
    
    
    
    102,430Gross profit
    
    
    19,333
    
    
    
    27,998Corporate general and administrative expenses
    
    
    (8,089
    )
    
    
    (8,188
    )Hurricane related charges, net
    
    
    (46
    )
    
    
    (341
    )Gains on dispositions and impairment (losses), net
    
    
    (117
    )
    
    
    25Other operating income, net
    
    
    397
    
    
    
    407Operating earnings
    
    
    11,478
    
    
    
    19,901Interest expense
    
    
    (5,299
    )
    
    
    (6,000
    )Gain on early extinguishment of debt
    
    
    8,533
    
    
    
    Investment and other income, net
    
    
    12
    
    
    
    593Earnings before income taxes
    
    
    14,724
    
    
    
    14,494Income taxes
    
    
    3,886
    
    
    
    5,365Net earnings
    
    $
    10,838
    
    
    $
    9,129Net earnings per common share:Basic
    
    $
    .12
    
    
    $
    .10Diluted
    
    $
    .12
    
    
    $
    .10Weighted average common shares outstanding (in thousands):Basic
    
    
    91,936
    
    
    
    92,203Diluted
    
    
    92,118
    
    
    
    92,414Dividends 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 31,2009
    
    
    2008Revenues:Funeral
    
    $
    209,007
    
    
    $
    218,862Cemetery
    
    
    154,693
    
    
    
    178,658363,700
    
    
    
    397,520Costs and expenses:Funeral
    
    
    157,817
    
    
    
    163,260Cemetery
    
    
    137,872
    
    
    
    143,558295,689
    
    
    
    306,818Gross profit
    
    
    68,011
    
    
    
    90,702Corporate general and administrative expenses
    
    
    (22,601
    )
    
    
    (24,226
    )Hurricane related charges, net
    
    
    (566
    )
    
    
    (351
    )Separation charges
    
    
    (275
    )
    
    
    Gains on dispositions and impairment (losses), net
    
    
    (215
    )
    
    
    153Other operating income, net
    
    
    960
    
    
    
    753Operating earnings
    
    
    45,314
    
    
    
    67,031Interest expense
    
    
    (17,088
    )
    
    
    (17,981
    )Gain on early extinguishment of debt
    
    
    17,204
    
    
    
    Investment and other income, net
    
    
    85
    
    
    
    1,670Earnings before income taxes
    
    
    45,515
    
    
    
    50,720Income taxes
    
    
    15,759
    
    
    
    18,766Net earnings
    
    $
    29,756
    
    
    $
    31,954Net earnings per common share:Basic
    
    $
    .32
    
    
    $
    .34Diluted
    
    $
    .32
    
    
    $
    .34Weighted average common shares outstanding (in thousands):Basic
    
    
    91,883
    
    
    
    94,504Diluted
    
    
    91,936
    
    
    
    94,676Dividends declared per common share
    
    $
    .075
    
    
    $
    .075
  4




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
(Dollars in thousands, except per share amounts)
 July 31, 2009
    
    
    October 31, 2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    71,214
    
    
    $
    72,574Marketable securities
    
    
    
    
    
    
    55Receivables, net of allowances
    
    
    62,205
    
    
    
    59,129Inventories
    
    
    36,256
    
    
    
    35,870Prepaid expenses
    
    
    9,279
    
    
    
    7,317Deferred income taxes, net
    
    
    18,604
    
    
    
    8,798Total current assets
    
    
    197,558
    
    
    
    183,743Receivables due beyond one year, net of allowances
    
    
    63,142
    
    
    
    70,671Preneed funeral receivables and trust investments
    
    
    378,096
    
    
    
    368,412Preneed cemetery receivables and trust investments
    
    
    191,135
    
    
    
    182,141Goodwill
    
    
    247,236
    
    
    
    247,236Cemetery property, at cost
    
    
    385,946
    
    
    
    377,271Property and equipment, at cost:Land
    
    
    42,244
    
    
    
    42,244Buildings
    
    
    327,243
    
    
    
    319,463Equipment and other
    
    
    184,571
    
    
    
    178,534554,058
    
    
    
    540,241Less accumulated depreciation
    
    
    254,618
    
    
    
    236,066Net property and equipment
    
    
    299,440
    
    
    
    304,175Deferred income taxes, net
    
    
    134,658
    
    
    
    179,515Cemetery perpetual care trust investments
    
    
    197,858
    
    
    
    173,090Non-current assets held for sale
    
    
    1,663
    
    
    
    1,787Other assets
    
    
    15,695
    
    
    
    16,474Total assets
    
    $
    2,112,427
    
    
    $
    2,104,515
  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, 2009
    
    
    October 31, 2008LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5
    
    
    $
    20Accounts payable
    
    
    23,828
    
    
    
    27,652Accrued payroll and other benefits
    
    
    14,824
    
    
    
    14,133Accrued insurance
    
    
    20,765
    
    
    
    21,287Accrued interest
    
    
    6,310
    
    
    
    5,864Estimated obligation to fund cemetery perpetual care trust
    
    
    14,134
    
    
    
    13,281Other current liabilities
    
    
    14,260
    
    
    
    16,198Income taxes payable
    
    
    2,302
    
    
    
    2,061Total current liabilities
    
    
    96,428
    
    
    
    100,496Long-term debt, less current maturities
    
    
    391,747
    
    
    
    450,095Deferred preneed funeral revenue
    
    
    245,411
    
    
    
    245,182Deferred preneed cemetery revenue
    
    
    272,685
    
    
    
    275,835Deferred preneed funeral and cemetery receipts held in trust
    
    
    499,362
    
    
    
    475,420Perpetual care trusts corpus
    
    
    196,835
    
    
    
    171,371Other long-term liabilities
    
    
    21,471
    
    
    
    20,479Total liabilities
    
    
    1,723,939
    
    
    
    1,738,878Commitments and contingenciesShareholders equity:Preferred stock, $1.00 par value, 5,000,000 shares authorized;
no shares issued
    
    
    
    
    
    
    Common stock, $1.00 stated value:Class A authorized 200,000,000 shares; issued and
outstanding 89,119,832 and 88,693,127 shares at July
31, 2009 and October 31, 2008, respectively
    
    
    89,120
    
    
    
    88,693Class B authorized 5,000,000 shares; issued and
outstanding 3,555,020 shares at July 31, 2009 and
October 31, 2008; 10 votes per share convertible into
an equal number of Class A shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    529,574
    
    
    
    536,902Accumulated deficit
    
    
    (233,794
    )
    
    
    (263,550
    )Accumulated other comprehensive income:Unrealized appreciation of investments
    
    
    33
    
    
    
    37Total accumulated other comprehensive income
    
    
    33
    
    
    
    37Total shareholders equity
    
    
    388,488
    
    
    
    365,637Total liabilities and shareholders equity
    
    $
    2,112,427
    
    
    $
    2,104,515
  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)
 Additional
    
    
    
    
    
    
    Unrealized
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Accumulated
    
    
    Appreciation of
    
    
    ShareholdersStock(1)
    
    
    Capital
    
    
    Deficit
    
    
    Investments
    
    
    EquityBalance October 31, 2008
    
    $
    92,248
    
    
    $
    536,902
    
    
    $
    (263,550
    )
    
    $
    37
    
    
    $
    365,637Comprehensive income (loss):Net earnings
    
    
    
    
    
    
    
    
    
    
    29,756
    
    
    
    
    
    
    
    29,756Other comprehensive loss:Unrealized depreciation of
investments, net of
deferred tax benefit of $2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Total other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Total comprehensive income
(loss)
    
    
    
    
    
    
    
    
    
    
    29,756
    
    
    
    (4
    )
    
    
    29,752Restricted stock activity
    
    
    273
    
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    457Issuance of common stock
    
    
    166
    
    
    
    364
    
    
    
    
    
    
    
    
    
    
    
    530Stock option expense
    
    
    
    
    
    
    896
    
    
    
    
    
    
    
    
    
    
    
    896Tax benefit associated with
stock activity
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    
    
    
    
    (120
    )Purchase and retirement of
common stock
    
    
    (12
    )
    
    
    (40
    )
    
    
    
    
    
    
    
    
    
    
    (52
    )Retirement of call options,
net of tax expense of $1,789
    
    
    
    
    
    
    3,322
    
    
    
    
    
    
    
    
    
    
    
    3,322Retirement of common stock
warrants
    
    
    
    
    
    
    (4,981
    )
    
    
    
    
    
    
    
    
    
    
    (4,981
    )Dividends ($.075 per share)
    
    
    
    
    
    
    (6,953
    )
    
    
    
    
    
    
    
    
    
    
    (6,953
    )Balance July 31, 2009
    
    $
    92,675
    
    
    $
    529,574
    
    
    $
    (233,794
    )
    
    $
    33
    
    
    $
    388,488
 
 (1)
    
    Amount includes 89,120 and 88,693 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of July 31, 2009 and October 31, 2008, 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 31,2009
    
    
    2008Cash flows from operating activities:Net earnings
    
    $
    29,756
    
    
    $
    31,954Adjustments to reconcile net earnings to net cash provided by operating activities:(Gains) on dispositions and impairment losses, net
    
    
    215
    
    
    
    (153
    )Gain on early extinguishment of debt
    
    
    (17,204
    )
    
    
    Depreciation and amortization
    
    
    22,060
    
    
    
    21,188Provision for doubtful accounts
    
    
    6,610
    
    
    
    5,742Share-based compensation
    
    
    1,732
    
    
    
    2,519Excess tax benefits from share-based payment arrangements
    
    
    
    
    
    
    (171
    )Provision for deferred income taxes
    
    
    12,994
    
    
    
    5,844Estimated obligation to fund cemetery perpetual care trust
    
    
    3,222
    
    
    
    Other
    
    
    146
    
    
    
    (115
    )Changes in assets and liabilities:(Increase) decrease in receivables
    
    
    6,736
    
    
    
    (3,902
    )Increase in prepaid expenses
    
    
    (1,962
    )
    
    
    (2,574
    )Decrease in inventories and cemetery property
    
    
    (639
    )
    
    
    (2,072
    )Federal income tax refund
    
    
    12,000
    
    
    
    Decrease in accounts payable and accrued expenses
    
    
    (8,068
    )
    
    
    (477
    )Net effect of preneed funeral production and maturities:Decrease in preneed funeral receivables and trust investments
    
    
    16,245
    
    
    
    7,711Increase (decrease) in deferred preneed funeral revenue
    
    
    229
    
    
    
    (5,767
    )Decrease in deferred preneed funeral receipts held in trust
    
    
    (13,288
    )
    
    
    (5,395
    )Net effect of preneed cemetery production and deliveries:(Increase) decrease in preneed cemetery receivables and trust investments
    
    
    7,530
    
    
    
    (52
    )Decrease in deferred preneed cemetery revenue
    
    
    (10,620
    )
    
    
    (4,652
    )Increase (decrease) in deferred preneed cemetery receipts held in trust
    
    
    (5,222
    )
    
    
    3,712Increase (decrease) in other
    
    
    1,118
    
    
    
    (1,087
    )Net cash provided by operating activities
    
    
    63,590
    
    
    
    52,253Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    250
    
    
    
    20,219Purchases of marketable securities
    
    
    (199
    )
    
    
    (19,955
    )Proceeds from sale of assets
    
    
    494
    
    
    
    358Purchase of subsidiaries and other investments, net of cash acquired
    
    
    (1,923
    )
    
    
    (1,378
    )Additions to property and equipment
    
    
    (15,029
    )
    
    
    (20,370
    )Other
    
    
    37
    
    
    
    75Net cash used in investing activities
    
    
    (16,370
    )
    
    
    (21,051
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (39,901
    )
    
    
    (190
    )Issuance of common stock
    
    
    225
    
    
    
    1,659Retirement of call options
    
    
    5,111
    
    
    
    Purchase and retirement of common stock
    
    
    (52
    )
    
    
    (48,627
    )Retirement of common stock warrants
    
    
    (4,981
    )
    
    
    Debt refinancing costs
    
    
    (2,029
    )
    
    
    Dividends
    
    
    (6,953
    )
    
    
    (7,067
    )Excess tax benefits from share-based payment arrangements
    
    
    
    
    
    
    171Net cash used in financing activities
    
    
    (48,580
    )
    
    
    (54,054
    )Net decrease in cash
    
    
    (1,360
    )
    
    
    (22,852
    )Cash and cash equivalents, beginning of period
    
    
    72,574
    
    
    
    71,545Cash and cash equivalents, end of period
    
    $
    71,214
    
    
    $
    48,693Supplemental cash flow information:Cash paid (received) during the period for:Income taxes, net
    
    $
    (8,168
    )
    
    $
    11,767Interest
    
    $
    15,647
    
    
    $
    15,799Non-cash investing and financing activities:Issuance of common stock to executive officers and directors
    
    $
    305
    
    
    $
    923Issuance of restricted stock, net of forfeitures
    
    $
    22
    
    
    $
    260
  8




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##### Table of Contents



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




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis of Presentation(Continued)
    Number of Shares
    
    Exercise PriceGrant Type
    
    Granted
    
    per Share
    
    Vesting Period
    
    Vesting ConditionStock options
    
    586,750
    
    $2.65
    
    Equal one-fourth portions over 4 years
    
    Service conditionStock options
    
    390,000
    
    $3.09
    
    Equal one-fourth portions over 4 years
    
    Service conditionRestricted stock
    
    102,000
    
    $2.65
    
    Equal one-third  portions  over 3 years
    
    Market conditionRestricted stock
    
    195,000
    
    $3.09
    
    Equal one-third portions  over 3 years
    
    Market conditionRestricted stock
    
    56,000
    
    $3.09
    
    Equal one-third portions over 3 years
    
    Service condition
  Goodwill
  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)
 Reclassifications
    (2) New Accounting Principles
  
    
    Level 1inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets;
 
    
    Level 2inputs to the valuation methodology include quoted prices for similar assets or
liabilities in active markets, and inputs that are observable for the asset or liability,
either directly or indirectly, for substantially the full term of the financial instrument;
quoted prices for identical or similar assets or liabilities in markets that are not
active; inputs other than quoted prices that are observable; inputs that are derived
principally from or corroborated by observable market data by correlation or other means;
and
 
    
    Level 3inputs to the valuation methodology are unobservable and significant to the
fair value measurement.
  11




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2) New Accounting Principles(Continued)
     12




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2) New Accounting Principles(Continued)
     Other, not yet adopted
  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) New Accounting Principles(Continued)
      14




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2) New Accounting Principles(Continued)
   (3) Preneed Funeral Activities
  Preneed Funeral Receivables and Trust Investments
  July 31,
    
    
    October 31,2009
    
    
    2008Trust assets
    
    $
    347,525
    
    
    $
    336,782Receivables from customers
    
    
    42,617
    
    
    
    44,796390,142
    
    
    
    381,578Allowance for cancellations
    
    
    (12,046
    )
    
    
    (13,166
    )Preneed funeral receivables and trust investments
    
    $
    378,096
    
    
    $
    368,412
  15




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
 July 31, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    40,982
    
    
    $
    
    
    
    $
    
    
    
    $
    40,982U.S. Government, agencies and
municipalities
    
    
    7,046
    
    
    
    236
    
    
    
    (1
    )
    
    
    7,281Corporate bonds
    
    
    52,176
    
    
    
    1,490
    
    
    
    (3,534
    )
    
    
    50,132Preferred stocks
    
    
    63,015
    
    
    
    25
    
    
    
    (11,071
    )
    
    
    51,969Common stocks
    
    
    257,069
    
    
    
    886
    
    
    
    (114,129
    )
    
    
    143,826Mutual funds:Equity
    
    
    28,865
    
    
    
    14
    
    
    
    (8,262
    )
    
    
    20,617Fixed income
    
    
    15,964
    
    
    
    109
    
    
    
    (1,114
    )
    
    
    14,959Insurance contracts and other long-term investments
    
    
    19,245
    
    
    
    109
    
    
    
    (2,603
    )
    
    
    16,751Trust investments
    
    $
    484,362
    
    
    $
    2,869
    
    
    $
    (140,714
    )
    
    
    346,517Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71.5
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,008Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    347,525
  October 31, 2008Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other short-term investments
    
    $
    35,355
    
    
    $
    
    
    
    $
    
    
    
    $
    35,355U.S. Government, agencies and
municipalities
    
    
    11,585
    
    
    
    157
    
    
    
    (4
    )
    
    
    11,738Corporate bonds
    
    
    56,661
    
    
    
    67
    
    
    
    (9,078
    )
    
    
    47,650Preferred stocks
    
    
    68,300
    
    
    
    12
    
    
    
    (21,906
    )
    
    
    46,406Common stocks
    
    
    272,598
    
    
    
    1,847
    
    
    
    (124,156
    )
    
    
    150,289Mutual funds:Equity
    
    
    28,972
    
    
    
    10
    
    
    
    (9,680
    )
    
    
    19,302Fixed income
    
    
    6,256
    
    
    
    1
    
    
    
    (1,084
    )
    
    
    5,173Insurance contracts and other
long-term investments
    
    
    19,645
    
    
    
    104
    
    
    
    (63
    )
    
    
    19,686Trust investments
    
    $
    499,372
    
    
    $
    2,198
    
    
    $
    (165,971
    )
    
    $
    335,599Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67.2
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,183Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    336,782
 16




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
  July 31, 2009Due in one year or less
    
    $
    2,449Due in one to five years
    
    
    34,961Due in five to ten years
    
    
    19,975Thereafter
    
    
    28$
    57,413
      17




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
  July 31, 2009SignificantQuoted Market
    
    
    Other
    
    
    SignificantPrices in Active
    
    
    Observable
    
    
    UnobservableMarkets
    
    
    Inputs
    
    
    Inputs
    
    
    Fair Market(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueTrust investments
    
    $
    228,424
    
    
    $
    109,382
    
    
    $
    8,711
    
    
    $
    346,517
  Fair market value, November 1, 2008
    
    $
    11,299Total unrealized losses included in other comprehensive income (1)
    
    
    (2,554
    )Purchases, sales, contributions, and distributions, net
    
    
    (34
    )Fair market value, July 31, 2009
    
    $
    8,711
 
 (1)
    
    All gains (losses) recognized in other comprehensive income for funeral trust
investments are attributable to the Companys preneed customers and are offset by a
corresponding increase (decrease) in deferred preneed funeral
receipts held in trust.  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Purchases
    
    $
    10,198
    
    
    $
    10,153
    
    
    $
    11,776
    
    
    $
    19,009Sales
    
    
    15,372
    
    
    
    7,743
    
    
    
    24,500
    
    
    
    20,517Realized gains from sales of investments
    
    
    710
    
    
    
    731
    
    
    
    1,702
    
    
    
    2,169Realized losses from sales of
investments and other
    
    
    (511
    ) (1)
    
    
    (309
    )
    
    
    (9,404
    ) (2)
    
    
    (620
    )Deposits
    
    
    6,442
    
    
    
    8,129
    
    
    
    19,456
    
    
    
    24,111Withdrawals
    
    
    9,202
    
    
    
    11,362
    
    
    
    32,101
    
    
    
    35,499
 
 (1)
    
    Includes $477 in losses from the sale of investments and $34 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined during the quarter ended July 31, 2009 it did not have
the intent to hold until they recover in value.(2)
    
    Includes $964 in losses from the sale of investments and $8,440 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined during the nine months ended July 31, 2009 it did not
have the intent to hold until they recover in value.  18




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3)
    
    Preneed Funeral Activities(Continued)
 July 31, 2009Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    
    
    
    $
    
    
    
    $
    20
    
    
    $
    (1
    )
    
    $
    20
    
    
    $
    (1
    )Corporate bonds
    
    
    914
    
    
    
    (37
    )
    
    
    18,276
    
    
    
    (3,497
    )
    
    
    19,190
    
    
    
    (3,534
    )Preferred stocks
    
    
    2,083
    
    
    
    (130
    )
    
    
    49,097
    
    
    
    (10,941
    )
    
    
    51,180
    
    
    
    (11,071
    )Common stocks
    
    
    11,411
    
    
    
    (3,729
    )
    
    
    120,511
    
    
    
    (110,400
    )
    
    
    131,922
    
    
    
    (114,129
    )Mutual funds:Equity
    
    
    4,836
    
    
    
    (1,309
    )
    
    
    15,663
    
    
    
    (6,953
    )
    
    
    20,499
    
    
    
    (8,262
    )Fixed income
    
    
    1,311
    
    
    
    (4
    )
    
    
    4,320
    
    
    
    (1,110
    )
    
    
    5,631
    
    
    
    (1,114
    )Insurance contracts
and other long-term
investments
    
    
    
    
    
    
    
    
    
    
    3,219
    
    
    
    (2,603
    )
    
    
    3,219
    
    
    
    (2,603
    )Total
    
    $
    20,555
    
    
    $
    (5,209
    )
    
    $
    211,106
    
    
    $
    (135,505
    )
    
    $
    231,661
    
    
    $
    (140,714
    )
 October 31, 2008Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S.
Government,
agencies and
municipalities
    
    $
    1,147
    
    
    $
    (3
    )
    
    $
    21
    
    
    $
    (1
    )
    
    $
    1,168
    
    
    $
    (4
    )Corporate bonds
    
    
    20,609
    
    
    
    (2,027
    )
    
    
    21,258
    
    
    
    (7,051
    )
    
    
    41,867
    
    
    
    (9,078
    )Preferred stocks
    
    
    9,055
    
    
    
    (6,686
    )
    
    
    36,445
    
    
    
    (15,220
    )
    
    
    45,500
    
    
    
    (21,906
    )Common stocks
    
    
    51,658
    
    
    
    (25,033
    )
    
    
    86,718
    
    
    
    (99,123
    )
    
    
    138,376
    
    
    
    (124,156
    )Mutual funds:Equity
    
    
    16,557
    
    
    
    (8,200
    )
    
    
    2,628
    
    
    
    (1,480
    )
    
    
    19,185
    
    
    
    (9,680
    )Fixed income
    
    
    67
    
    
    
    
    
    
    
    5,079
    
    
    
    (1,084
    )
    
    
    5,146
    
    
    
    (1,084
    )Insurance contracts
and other long-term
investments
    
    
    3,510
    
    
    
    
    
    
    
    58
    
    
    
    (63
    )
    
    
    3,568
    
    
    
    (63
    )Total
    
    $
    102,603
    
    
    $
    (41,949
    )
    
    $
    152,207
    
    
    $
    (124,022
    )
    
    $
    254,810
    
    
    $
    (165,971
    )
   19




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3)
    
    Preneed Funeral Activities(Continued)
  (4)
    
    Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  July 31,
    
    
    October 31,2009
    
    
    2008Trust assets
    
    $
    161,015
    
    
    $
    148,533Receivables from customers
    
    
    36,891
    
    
    
    39,868197,906
    
    
    
    188,401Allowance for cancellations
    
    
    (6,771
    )
    
    
    (6,260
    )Preneed cemetery receivables and trust investments
    
    $
    191,135
    
    
    $
    182,141
  July 31, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    22,347
    
    
    $
    
    
    
    $
    
    
    
    $
    22,347U.S. Government, agencies and
municipalities
    
    
    10,870
    
    
    
    673
    
    
    
    
    
    
    
    11,543Corporate bonds
    
    
    10,688
    
    
    
    508
    
    
    
    (427
    )
    
    
    10,769Preferred stocks
    
    
    23,643
    
    
    
    25
    
    
    
    (4,558
    )
    
    
    19,110Common stocks
    
    
    131,969
    
    
    
    612
    
    
    
    (59,329
    )
    
    
    73,252Mutual funds:Equity
    
    
    30,291
    
    
    
    3
    
    
    
    (10,884
    )
    
    
    19,410Fixed income
    
    
    3,555
    
    
    
    17
    
    
    
    (6
    )
    
    
    3,566Other long-term investments
    
    
    623
    
    
    
    
    
    
    
    (9
    )
    
    
    614Trust investments
    
    $
    233,986
    
    
    $
    1,838
    
    
    $
    (75,213
    )
    
    
    160,611Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68.6
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    404Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    161,015
 20




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4)
    
    Preneed Cemetery Merchandise and Service Activities(Continued)
  October 31, 2008Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other short-term investments
    
    $
    15,939
    
    
    $
    
    
    
    $
    
    
    
    $
    15,939U.S. Government, agencies and
municipalities
    
    
    12,960
    
    
    
    647
    
    
    
    (5
    )
    
    
    13,602Corporate bonds
    
    
    12,399
    
    
    
    15
    
    
    
    (1,859
    )
    
    
    10,555Preferred stocks
    
    
    25,589
    
    
    
    1
    
    
    
    (8,828
    )
    
    
    16,762Common stocks
    
    
    140,654
    
    
    
    303
    
    
    
    (67,576
    )
    
    
    73,381Mutual funds:Equity
    
    
    30,291
    
    
    
    
    
    
    
    (12,575
    )
    
    
    17,716Fixed income
    
    
    19
    
    
    
    
    
    
    
    (6
    )
    
    
    13Other long-term investments
    
    
    107
    
    
    
    
    
    
    
    (15
    )
    
    
    92Trust investments
    
    $
    237,958
    
    
    $
    966
    
    
    $
    (90,864
    )
    
    $
    148,060Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62.2
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    473Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    148,533
  July 31, 2009Due in one year or less
    
    $
    3,592Due in one to five years
    
    
    12,012Due in five to ten years
    
    
    6,534Thereafter
    
    
    174$
    22,312
    21




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4)
    
    Preneed Cemetery Merchandise and Service Activities(Continued)
    July 31, 2009SignificantQuoted Market
    
    
    Other
    
    
    SignificantPrices in Active
    
    
    Observable
    
    
    UnobservableMarkets
    
    
    Inputs
    
    
    Inputs
    
    
    Fair Market(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueTrust investments
    
    $
    119,076
    
    
    $
    41,535
    
    
    $
    
    
    
    $
    160,611
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Purchases
    
    $
    4,444
    
    
    $
    7,302
    
    
    $
    7,870
    
    
    $
    13,933Sales
    
    
    6,966
    
    
    
    3,356
    
    
    
    11,464
    
    
    
    10,014Realized gains from sales of investments
    
    
    233
    
    
    
    501
    
    
    
    611
    
    
    
    1,339Realized losses from sales of
investments and other
    
    
    (776
    ) (1)
    
    
    (89
    )
    
    
    (6,526
    ) (2)
    
    
    (285
    )Deposits
    
    
    4,370
    
    
    
    4,815
    
    
    
    12,692
    
    
    
    13,432Withdrawals
    
    
    4,641
    
    
    
    4,327
    
    
    
    13,023
    
    
    
    14,897
 
 (1)
    
    Includes $756 in losses from the sale of investments and $20 in losses related to certain
investments that were rendered worthless or practically worthless and to certain investments
that the Company determined during the quarter ended July 31, 2009 it did not have the intent
to hold until they recover in value.(2)
    
    Includes $3,230 in losses from the sale of investments and $3,296 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined during the nine months ended July 31, 2009 it did not
have the intent to hold until they recover in value.  22




---



##### 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, 2009Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate bonds
    
    $
    
    
    
    $
    
    
    
    $
    2,129
    
    
    $
    (427
    )
    
    $
    2,129
    
    
    $
    (427
    )Preferred stocks
    
    
    827
    
    
    
    (36
    )
    
    
    17,977
    
    
    
    (4,522
    )
    
    
    18,804
    
    
    
    (4,558
    )Common stocks
    
    
    9,692
    
    
    
    (3,485
    )
    
    
    58,485
    
    
    
    (55,844
    )
    
    
    68,177
    
    
    
    (59,329
    )Mutual funds:Equity
    
    
    457
    
    
    
    (126
    )
    
    
    18,825
    
    
    
    (10,758
    )
    
    
    19,282
    
    
    
    (10,884
    )Fixed income
    
    
    583
    
    
    
    (2
    )
    
    
    15
    
    
    
    (4
    )
    
    
    598
    
    
    
    (6
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    (9
    )
    
    
    10
    
    
    
    (9
    )Total
    
    $
    11,559
    
    
    $
    (3,649
    )
    
    $
    97,441
    
    
    $
    (71,564
    )
    
    $
    109,000
    
    
    $
    (75,213
    )
 October 31, 2008Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    458
    
    
    $
    (3
    )
    
    $
    201
    
    
    $
    (2
    )
    
    $
    659
    
    
    $
    (5
    )Corporate bonds
    
    
    5,371
    
    
    
    (312
    )
    
    
    3,819
    
    
    
    (1,547
    )
    
    
    9,190
    
    
    
    (1,859
    )Preferred stocks
    
    
    4,587
    
    
    
    (3,128
    )
    
    
    12,069
    
    
    
    (5,700
    )
    
    
    16,656
    
    
    
    (8,828
    )Common stocks
    
    
    18,227
    
    
    
    (12,604
    )
    
    
    51,495
    
    
    
    (54,972
    )
    
    
    69,722
    
    
    
    (67,576
    )Mutual funds:Equity
    
    
    13,599
    
    
    
    (10,201
    )
    
    
    4,117
    
    
    
    (2,374
    )
    
    
    17,716
    
    
    
    (12,575
    )Fixed income
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    (6
    )
    
    
    13
    
    
    
    (6
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    (15
    )
    
    
    40
    
    
    
    (15
    )Total
    
    $
    42,242
    
    
    $
    (26,248
    )
    
    $
    71,754
    
    
    $
    (64,616
    )
    
    $
    113,996
    
    
    $
    (90,864
    )
   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)
 (4)
    
    Preneed Cemetery Merchandise and Service Activities(Continued)
  (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts
   July 31, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    16,513
    
    
    $
    
    
    
    $
    
    
    
    $
    16,513U.S. Government, agencies and
municipalities
    
    
    5,530
    
    
    
    377
    
    
    
    (86
    )
    
    
    5,821Corporate bonds
    
    
    47,236
    
    
    
    1,653
    
    
    
    (2,063
    )
    
    
    46,826Preferred stocks
    
    
    63,639
    
    
    
    
    
    
    
    (17,107
    )
    
    
    46,532Common stocks
    
    
    106,119
    
    
    
    2,960
    
    
    
    (45,975
    )
    
    
    63,104Mutual funds:Equity
    
    
    6,821
    
    
    
    
    
    
    
    (1,742
    )
    
    
    5,079Fixed income
    
    
    12,137
    
    
    
    1,139
    
    
    
    (409
    )
    
    
    12,867Other long-term investments
    
    
    486
    
    
    
    1
    
    
    
    (183
    )
    
    
    304Trust investments
    
    $
    258,481
    
    
    $
    6,130
    
    
    $
    (67,565
    )
    
    
    197,046Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76.2
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    812Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    197,858
 24




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  October 31, 2008Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    16,920
    
    
    $
    
    
    
    $
    
    
    
    $
    16,920U.S. Government, agencies and
municipalities
    
    
    8,739
    
    
    
    292
    
    
    
    (96
    )
    
    
    8,935Corporate bonds
    
    
    44,287
    
    
    
    397
    
    
    
    (5,709
    )
    
    
    38,975Preferred stocks
    
    
    67,514
    
    
    
    
    
    
    
    (26,299
    )
    
    
    41,215Common stocks
    
    
    106,347
    
    
    
    3,427
    
    
    
    (50,431
    )
    
    
    59,343Mutual funds:Equity
    
    
    6,740
    
    
    
    
    
    
    
    (2,103
    )
    
    
    4,637Fixed income
    
    
    2,086
    
    
    
    
    
    
    
    (472
    )
    
    
    1,614Other long-term investments
    
    
    594
    
    
    
    28
    
    
    
    (11
    )
    
    
    611Trust investments
    
    $
    253,227
    
    
    $
    4,144
    
    
    $
    (85,121
    )
    
    $
    172,250Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68.0
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    840Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    173,090
  July 31, 2009Due in one year or less
    
    $
    2,864Due in one to five years
    
    
    33,072Due in five to ten years
    
    
    16,160Thereafter
    
    
    551$
    52,647
    25




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
    July 31, 2009SignificantQuoted Market
    
    Other
    
    SignificantPrices in Active
    
    Observable
    
    UnobservableMarkets
    
    Inputs
    
    Inputs
    
    Fair market(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    valueTrust investments
    
    $
    97,663
    
    
    $
    99,179
    
    
    $
    204
    
    
    $
    197,046
  Fair market value, November 1, 2008
    
    $
    611Total unrealized losses included in other comprehensive income (1)
    
    
    (177
    )Transfers out of Level 3 category
    
    
    (230
    )Fair market value, July 31, 2009
    
    $
    204
 
 (1)

    
    All gains (losses) recognized in other comprehensive income for cemetery perpetual
care trust investments are attributable to the Companys customers and are offset by a
corresponding increase (decrease) in perpetual care trusts corpus.  26




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  Three Months Ended July 31,
    
    Nine Months Ended July 31,2009
    
    2008
    
    2009
    
    2008Purchases
    
    $
    1,721
    
    
    $
    16,376
    
    
    $
    9,590
    
    
    $
    46,640Sales
    
    
    1,492
    
    
    
    17,841
    
    
    
    3,345
    
    
    
    42,899Realized gains from sales of investments
    
    
    85
    
    
    
    865
    
    
    
    619
    
    
    
    3,063Realized losses from sales of
investments and other
    
    
    (26
    )(1)
    
    
    
    
    
    
    (3,235
    )(2)
    
    
    (7
    )Deposits
    
    
    2,526
    
    
    
    2,186
    
    
    
    6,747
    (3)
    
    
    6,147Withdrawals
    
    
    1,182
    
    
    
    2,350
    
    
    
    4,136
    
    
    
    7,351
 
 (1)
    
    Includes $23 in losses related to certain investments that were rendered worthless or
practically worthless and to certain investments that the Company determined during the
quarter ended July 31, 2009 it did not have the intent to hold until they recover in value.(2)
    
    Includes $16 in losses from the sale of investments and $3,219 in losses related to certain
investments that were rendered worthless or practically worthless and to certain investments
that the Company determined during the nine months ended July 31, 2009 it did not have the
intent to hold until they recover in value.(3)
    
    Includes $734 that the Company contributed to the cemetery perpetual care trusts as part of
its funding obligation during the nine months ended July 31, 2009, respectively.   July 31, 2009Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government, agencies
and municipalities
    
    $
    146
    
    
    $
    (4
    )
    
    $
    131
    
    
    $
    (82
    )
    
    $
    277
    
    
    $
    (86
    )Corporate bonds
    
    
    5,958
    
    
    
    (948
    )
    
    
    8,640
    
    
    
    (1,115
    )
    
    
    14,598
    
    
    
    (2,063
    )Preferred stocks
    
    
    1,942
    
    
    
    (4,415
    )
    
    
    44,589
    
    
    
    (12,692
    )
    
    
    46,531
    
    
    
    (17,107
    )Common stocks
    
    
    5,809
    
    
    
    (1,107
    )
    
    
    50,642
    
    
    
    (44,868
    )
    
    
    56,451
    
    
    
    (45,975
    )Mutual funds:Equity
    
    
    1,642
    
    
    
    (452
    )
    
    
    3,271
    
    
    
    (1,290
    )
    
    
    4,913
    
    
    
    (1,742
    )Fixed income
    
    
    8
    
    
    
    
    
    
    
    1,034
    
    
    
    (409
    )
    
    
    1,042
    
    
    
    (409
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    201
    
    
    
    (183
    )
    
    
    201
    
    
    
    (183
    )Total
    
    $
    15,505
    
    
    $
    (6,926
    )
    
    $
    108,508
    
    
    $
    (60,639
    )
    
    $
    124,013
    
    
    $
    (67,565
    )
 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)
 (5) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
 October 31, 2008Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    324
    
    
    $
    (1
    )
    
    $
    627
    
    
    $
    (95
    )
    
    $
    951
    
    
    $
    (96
    )Corporate bonds
    
    
    15,652
    
    
    
    (2,352
    )
    
    
    12,281
    
    
    
    (3,357
    )
    
    
    27,933
    
    
    
    (5,709
    )Preferred stocks
    
    
    8,752
    
    
    
    (6,227
    )
    
    
    32,463
    
    
    
    (20,072
    )
    
    
    41,215
    
    
    
    (26,299
    )Common stocks
    
    
    17,832
    
    
    
    (8,252
    )
    
    
    34,352
    
    
    
    (42,179
    )
    
    
    52,184
    
    
    
    (50,431
    )Mutual funds:Equity
    
    
    4,501
    
    
    
    (2,075
    )
    
    
    90
    
    
    
    (28
    )
    
    
    4,591
    
    
    
    (2,103
    )Fixed income
    
    
    258
    
    
    
    (14
    )
    
    
    1,078
    
    
    
    (458
    )
    
    
    1,336
    
    
    
    (472
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    (11
    )
    
    
    (12
    )
    
    
    (11
    )Total
    
    $
    47,319
    
    
    $
    (18,921
    )
    
    $
    80,879
    
    
    $
    (66,200
    )
    
    $
    128,198
    
    
    $
    (85,121
    )
   (6) Deferred
Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care Trusts Corpus
  Deferred Receipts Held in TrustPreneed
    
    
    PreneedFuneral
    
    
    Cemetery
    
    
    TotalTrust assets at market value
    
    $
    347,525
    
    
    $
    161,015
    
    
    $
    508,540Less:Pending withdrawals
    
    
    (7,716
    )
    
    
    (6,423
    )
    
    
    (14,139
    )Pending deposits
    
    
    2,818
    
    
    
    2,143
    
    
    
    4,961Deferred receipts held in trust
    
    $
    342,627
    
    
    $
    156,735
    
    
    $
    499,362
 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)
 (6) Deferred
Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual
Care Trusts Corpus(Continued)
  Perpetual CareTrusts CorpusTrust assets at market value
    
    $
    197,858Less:Pending withdrawals
    
    
    (1,862
    )Pending deposits
    
    
    839Perpetual care trusts corpus
    
    $
    196,835
 Investment and other income, net
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Realized gains from sales of investments
    
    $
    1,028
    
    
    $
    2,097
    
    
    $
    2,932
    
    
    $
    6,571Realized losses from sales of investments and
other
    
    
    (1,313
    )
    
    
    (398
    )
    
    
    (19,165
    )
    
    
    (912
    )Interest income, dividend and other ordinary
income
    
    
    6,355
    
    
    
    7,876
    
    
    
    19,544
    
    
    
    23,292Trust expenses and income taxes
    
    
    (2,106
    )
    
    
    (2,639
    )
    
    
    (6,203
    )
    
    
    (8,415
    )Net trust investment income (loss)
    
    
    3,964
    
    
    
    6,936
    
    
    
    (2,892
    )
    
    
    20,536Investment income (loss) of deferred
preneed funeral and cemetery receipts
held in trust
    
    
    (2,453
    )
    
    
    (4,259
    )
    
    
    5,160
    
    
    
    (11,947
    )Investment loss of perpetual care trusts
corpus
    
    
    (1,511
    )
    
    
    (2,677
    )
    
    
    (2,268
    )
    
    
    (8,589
    )Total deferred preneed funeral and cemetery
receipts held in trust and perpetual care
trusts corpus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    12
    
    
    
    593
    
    
    
    85
    
    
    
    1,670Total investment and other income, net
    
    $
    12
    
    
    
    593
    
    
    $
    85
    
    
    
    1,670
 
 (1)
    
    Investment and other income, net consists of interest income primarily on the
Companys cash, cash equivalents and marketable securities not held in trust. (7) Commitments and Contingencies
 Litigation
 Funeral Consumers Alliance, Inc., et al. v. Service Corporation International, Alderwoods
Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville Casket Co.
 29




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7) Commitments
and Contingencies(Continued)
       In Re: State Attorney General Civil Investigative Demands
 Other Litigation
  Other Commitments and Contingencies
  30




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7) Commitments
and Contingencies(Continued)
    (8) Reconciliation of Basic and Diluted Per Share Data
 Earnings
    
    
    Shares
    
    
    Per ShareThree Months Ended July 31, 2009
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataNet earnings
    
    $
    10,838Basic earnings per common share:Net earnings available to common shareholders
    
    $
    10,838
    
    
    
    91,936
    
    
    $
    .12Effect of dilutive securities:Stock options assumed exercised and restricted stock
    
    
    
    
    
    
    182Diluted earnings per common share:Net earnings available to common shareholders plus
stock options assumed exercised and restricted
stock
    
    $
    10,838
    
    
    
    92,118
    
    
    $
    .12
 Earnings
    
    
    Shares
    
    
    Per ShareThree Months Ended July 31, 2008
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataNet earnings
    
    $
    9,129Basic earnings per common share:Net earnings available to common shareholders
    
    $
    9,129
    
    
    
    92,203
    
    
    $
    .10Effect of dilutive securities:Stock options assumed exercised and restricted stock
    
    
    
    
    
    
    211Diluted earnings per common share:Net earnings available to common shareholders plus
stock options assumed exercised and restricted
stock
    
    $
    9,129
    
    
    
    92,414
    
    
    $
    .10
 31




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8) Reconciliation
of Basic and Diluted Per Share Data(Continued)
 Earnings
    
    
    Shares
    
    
    Per ShareNine Months Ended July 31, 2009
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataNet earnings
    
    $
    29,756Basic earnings per common share:Net earnings available to common shareholders
    
    $
    29,756
    
    
    
    91,883
    
    
    $
    .32Effect of dilutive securities:Stock options assumed exercised and restricted stock
    
    
    
    
    
    
    53Diluted earnings per common share:Net earnings available to common shareholders plus
stock options assumed exercised and restricted
stock
    
    $
    29,756
    
    
    
    91,936
    
    
    $
    .32
 Earnings
    
    
    Shares
    
    
    Per ShareNine Months Ended July 31, 2008
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataNet earnings
    
    $
    31,954Basic earnings per common share:Net earnings available to common shareholders
    
    $
    31,954
    
    
    
    94,504
    
    
    $
    .34Effect of dilutive securities:Stock options assumed exercised and restricted stock
    
    
    
    
    
    
    172Diluted earnings per common share:Net earnings available to common shareholders plus
stock options assumed exercised and restricted
stock
    
    $
    31,954
    
    
    
    94,676
    
    
    $
    .34
     32




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8)
    
    Reconciliation of Basic and Diluted Per Share Data(Continued)
   (9)
    
    Segment Data
   Total Revenue
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2009
    
    
    July 31, 2008
    
    
    July 31, 2009
    
    
    July 31, 2008Funeral
    
    $
    62,476
    
    
    $
    63,948
    
    
    $
    197,698
    
    
    $
    204,747Cemetery(1)
    
    
    49,779
    
    
    
    59,577
    
    
    
    149,069
    
    
    
    171,666Corporate Trust Management(2)
    
    
    5,497
    
    
    
    6,903
    
    
    
    16,933
    
    
    
    21,107Total
    
    $
    117,752
    
    
    $
    130,428
    
    
    $
    363,700
    
    
    $
    397,520
 33




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9)
    
    Segment Data(Continued)
 Total Gross Profit
    
    
    Total Gross ProfitThree Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2009
    
    
    July 31, 2008
    
    
    July 31, 2009
    
    
    July 31, 2008Funeral
    
    $
    11,112
    
    
    $
    10,632
    
    
    $
    40,513
    
    
    $
    42,135Cemetery(1)
    
    
    3,202
    
    
    
    10,902
    
    
    
    11,914
    
    
    
    28,855Corporate Trust Management(2)
    
    
    5,019
    
    
    
    6,464
    
    
    
    15,584
    
    
    
    19,712Total
    
    $
    19,333
    
    
    $
    27,998
    
    
    $
    68,011
    
    
    $
    90,702
 Net Total Preneed Merchandise
    
    
    Net Total Preneed Merchandiseand Service Sales(3)
    
    

and Service Sales(3)Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2009
    
    
    July 31, 2008
    
    
    July 31, 2009
    
    
    July 31, 2008Funeral
    
    $
    27,121
    
    
    $
    26,004
    
    
    $
    70,343
    
    
    $
    72,963Cemetery(1)
    
    
    13,454
    
    
    
    14,244
    
    
    
    36,154
    
    
    
    40,567Total
    
    $
    40,575
    
    
    $
    40,248
    
    
    $
    106,497
    
    
    $
    113,530
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of the
cemetery segment and amounted to $1,541 and $2,635 for the three months ended July 31, 2009
and 2008, respectively, and $5,342 and $8,040 for the nine months ended July 31, 2009 and
2008, respectively.(2)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and services trust earnings recognized with respect to preneed contracts
delivered during the period. Trust management fees are established by the Company at rates
consistent with industry norms based on the fair market value of the assets managed and are
paid by the trusts to the Companys subsidiary, Investors Trust, Inc. The trust earnings
represent earnings 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, 2009 and 2008 were $1,010 and $1,264, respectively, and funeral trust earnings
for the three months ended July 31, 2009 and 2008 were $2,531 and $3,346, respectively. Trust
management fees included in cemetery revenue for the three months ended July 31, 2009 and 2008
were $1,060 and $1,255, respectively, and cemetery trust earnings for the three months ended
July 31, 2009 and 2008 were $896 and $1,038, respectively. Trust management fees included in
funeral revenue for the nine months ended July 31, 2009 and 2008 were $2,832 and $3,957,
respectively, and funeral trust earnings for the nine months ended July 31, 2009 and 2008 were
$8,477 and $10,158, respectively. Trust management fees included in cemetery revenue for the
nine months ended July 31, 2009 and 2008 were $2,923 and $3,844, respectively, and cemetery
trust earnings for the nine months ended July 31, 2009 and 2008 were $2,701 and $3,148,
respectively.(3)
    
    Preneed sales amounts represent total preneed funeral trust and insurance sales and
cemetery service and merchandise trust sales generated in the applicable period, net of
cancellations. 34




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9)
    
    Segment Data(Continued)
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Gross profit for reportable segments
    
    $
    19,333
    
    
    $
    27,998
    
    
    $
    68,011
    
    
    $
    90,702Corporate general and administrative expenses
    
    
    (8,089
    )
    
    
    (8,188
    )
    
    
    (22,601
    )
    
    
    (24,226
    )Hurricane related charges, net
    
    
    (46
    )
    
    
    (341
    )
    
    
    (566
    )
    
    
    (351
    )Separation charges
    
    
    
    
    
    
    
    
    
    
    (275
    )
    
    
    Gains on dispositions and impairment
(losses), net
    
    
    (117
    )
    
    
    25
    
    
    
    (215
    )
    
    
    153Other operating income, net
    
    
    397
    
    
    
    407
    
    
    
    960
    
    
    
    753Interest expense
    
    
    (5,299
    )
    
    
    (6,000
    )
    
    
    (17,088
    )
    
    
    (17,981
    )Gain on early extinguishment of debt
    
    
    8,533
    
    
    
    
    
    
    
    17,204
    
    
    
    Investment and other income, net
    
    
    12
    
    
    
    593
    
    
    
    85
    
    
    
    1,670Earnings before income taxes
    
    $
    14,724
    
    
    $
    14,494
    
    
    $
    45,515
    
    
    $
    50,720
 35




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (10)
    
    Supplementary Information
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Service revenueFuneral
    
    $
    41,821
    
    
    $
    42,795
    
    
    $
    132,658
    
    
    $
    136,202Cemetery
    
    
    13,952
    
    
    
    15,726
    
    
    
    44,062
    
    
    
    48,59255,773
    
    
    
    58,521
    
    
    
    176,720
    
    
    
    184,794Merchandise revenueFuneral
    
    
    22,631
    
    
    
    23,872
    
    
    
    71,861
    
    
    
    76,800Cemetery
    
    
    34,315
    
    
    
    42,227
    
    
    
    100,456
    
    
    
    118,29956,946
    
    
    
    66,099
    
    
    
    172,317
    
    
    
    195,099Other revenueFuneral
    
    
    1,565
    
    
    
    1,891
    
    
    
    4,488
    
    
    
    5,860Cemetery
    
    
    3,468
    
    
    
    3,917
    
    
    
    10,175
    
    
    
    11,7675,033
    
    
    
    5,808
    
    
    
    14,663
    
    
    
    17,627Total revenue
    
    $
    117,752
    
    
    $
    130,428
    
    
    $
    363,700
    
    
    $
    397,520Service costsFuneral
    
    $
    14,497
    
    
    $
    15,403
    
    
    $
    43,883
    
    
    $
    45,979Cemetery
    
    
    10,568
    
    
    
    11,515
    
    
    
    29,941
    
    
    
    32,04325,065
    
    
    
    26,918
    
    
    
    73,824
    
    
    
    78,022Merchandise costsFuneral
    
    
    14,073
    
    
    
    15,116
    
    
    
    43,647
    
    
    
    47,094Cemetery
    
    
    22,479
    
    
    
    23,615
    
    
    
    67,419
    
    
    
    69,81836,552
    
    
    
    38,731
    
    
    
    111,066
    
    
    
    116,912Facility expensesFuneral
    
    
    23,037
    
    
    
    23,005
    
    
    
    70,287
    
    
    
    70,187Cemetery
    
    
    13,765
    
    
    
    13,776
    
    
    
    40,512
    
    
    
    41,69736,802
    
    
    
    36,781
    
    
    
    110,799
    
    
    
    111,884Total costs
    
    $
    98,419
    
    
    $
    102,430
    
    
    $
    295,689
    
    
    $
    306,818
  36




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes
  Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended July 31, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    61,217
    
    
    $
    497
    
    
    $
    4,303
    
    
    $
    
    
    
    $
    66,017Cemetery
    
    
    
    
    
    
    46,813
    
    
    
    786
    
    
    
    4,136
    
    
    
    
    
    
    
    51,735
    
    
    
    108,030
    
    
    
    1,283
    
    
    
    8,439
    
    
    
    
    
    
    
    117,752Costs and expenses:Funeral
    
    
    
    
    
    
    48,093
    
    
    
    314
    
    
    
    3,200
    
    
    
    
    
    
    
    51,607Cemetery
    
    
    
    
    
    
    42,379
    
    
    
    673
    
    
    
    3,760
    
    
    
    
    
    
    
    46,812
    
    
    
    90,472
    
    
    
    987
    
    
    
    6,960
    
    
    
    
    
    
    
    98,419Gross profit
    
    
    
    
    
    
    17,558
    
    
    
    296
    
    
    
    1,479
    
    
    
    
    
    
    
    19,333Corporate general and administrative expenses
    
    
    (8,089
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,089
    )Hurricane related charges, net
    
    
    (44
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46
    )Gains on dispositions and impairment (losses), net
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (119
    )
    
    
    
    
    
    
    (117
    )Other operating income, net
    
    
    20
    
    
    
    317
    
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    397Operating earnings (loss)
    
    
    (8,113
    )
    
    
    17,875
    
    
    
    296
    
    
    
    1,420
    
    
    
    
    
    
    
    11,478Interest income (expense)
    
    
    1,211
    
    
    
    (5,990
    )
    
    
    (28
    )
    
    
    (492
    )
    
    
    
    
    
    
    (5,299
    )Gain on early extinguishment of debt
    
    
    8,533
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,533Investment and other income, net
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Equity in subsidiaries
    
    
    8,354
    
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    (8,386
    )
    
    
    Earnings before income taxes
    
    
    9,997
    
    
    
    11,917
    
    
    
    268
    
    
    
    928
    
    
    
    (8,386
    )
    
    
    14,724Income tax expense (benefit)
    
    
    (841
    )
    
    
    4,401
    
    
    
    86
    
    
    
    240
    
    
    
    
    
    
    
    3,886Net earnings
    
    
    10,838
    
    
    
    7,516
    
    
    
    182
    
    
    
    688
    
    
    
    (8,386
    )
    
    
    10,838Other comprehensive loss, net
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    1
    
    
    
    (1
    )Comprehensive income
    
    $
    10,837
    
    
    $
    7,516
    
    
    $
    182
    
    
    $
    687
    
    
    $
    (8,385
    )
    
    $
    10,837
 37




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended July 31, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    63,398
    
    
    $
    381
    
    
    $
    4,779
    
    
    $
    
    
    
    $
    68,558Cemetery
    
    
    
    
    
    
    56,046
    
    
    
    842
    
    
    
    4,982
    
    
    
    
    
    
    
    61,870
    
    
    
    119,444
    
    
    
    1,223
    
    
    
    9,761
    
    
    
    
    
    
    
    130,428Costs and expenses:Funeral
    
    
    
    
    
    
    49,648
    
    
    
    265
    
    
    
    3,611
    
    
    
    
    
    
    
    53,524Cemetery
    
    
    
    
    
    
    44,114
    
    
    
    698
    
    
    
    4,094
    
    
    
    
    
    
    
    48,906
    
    
    
    93,762
    
    
    
    963
    
    
    
    7,705
    
    
    
    
    
    
    
    102,430Gross profit
    
    
    
    
    
    
    25,682
    
    
    
    260
    
    
    
    2,056
    
    
    
    
    
    
    
    27,998Corporate general and administrative
expenses
    
    
    (8,188
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,188
    )Hurricane related recoveries (charges), net
    
    
    (402
    )
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    (341
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Other operating income, net
    
    
    22
    
    
    
    341
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    407Operating earnings (loss)
    
    
    (8,568
    )
    
    
    26,048
    
    
    
    321
    
    
    
    2,100
    
    
    
    
    
    
    
    19,901Interest expense
    
    
    (1,585
    )
    
    
    (3,869
    )
    
    
    (40
    )
    
    
    (506
    )
    
    
    
    
    
    
    (6,000
    )Investment and other income, net
    
    
    563
    
    
    
    29
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    593Equity (loss) in subsidiaries
    
    
    16,458
    
    
    
    (74
    )
    
    
    
    
    
    
    
    
    
    
    (16,384
    )
    
    
    Earnings before income taxes
    
    
    6,868
    
    
    
    22,134
    
    
    
    281
    
    
    
    1,595
    
    
    
    (16,384
    )
    
    
    14,494Income tax expense (benefit)
    
    
    (2,261
    )
    
    
    7,236
    
    
    
    195
    
    
    
    195
    
    
    
    
    
    
    
    5,365Net earnings
    
    
    9,129
    
    
    
    14,898
    
    
    
    86
    
    
    
    1,400
    
    
    
    (16,384
    )
    
    
    9,129Other comprehensive loss, net
    
    
    (26
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    4
    
    
    
    (26
    )Comprehensive income
    
    $
    9,103
    
    
    $
    14,898
    
    
    $
    86
    
    
    $
    1,396
    
    
    $
    (16,380
    )
    
    $
    9,103
 38




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Nine Months Ended July 31, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    194,481
    
    
    $
    1,397
    
    
    $
    13,129
    
    
    $
    
    
    
    $
    209,007Cemetery
    
    
    
    
    
    
    139,701
    
    
    
    2,200
    
    
    
    12,792
    
    
    
    
    
    
    
    154,693
    
    
    
    334,182
    
    
    
    3,597
    
    
    
    25,921
    
    
    
    
    
    
    
    363,700Costs and expenses:Funeral
    
    
    
    
    
    
    147,551
    
    
    
    880
    
    
    
    9,386
    
    
    
    
    
    
    
    157,817Cemetery
    
    
    
    
    
    
    125,322
    
    
    
    1,905
    
    
    
    10,645
    
    
    
    
    
    
    
    137,872
    
    
    
    272,873
    
    
    
    2,785
    
    
    
    20,031
    
    
    
    
    
    
    
    295,689Gross profit
    
    
    
    
    
    
    61,309
    
    
    
    812
    
    
    
    5,890
    
    
    
    
    
    
    
    68,011Corporate general and administrative expenses
    
    
    (22,601
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,601
    )Hurricane related recoveries (charges), net
    
    
    (670
    )
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (566
    )Separation charges
    
    
    (55
    )
    
    
    (220
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (275
    )Gains on dispositions and impairment (losses), net
    
    
    (8
    )
    
    
    (88
    )
    
    
    
    
    
    
    (119
    )
    
    
    
    
    
    
    (215
    )Other operating income, net
    
    
    39
    
    
    
    804
    
    
    
    1
    
    
    
    116
    
    
    
    
    
    
    
    960Operating earnings (loss)
    
    
    (23,295
    )
    
    
    61,909
    
    
    
    813
    
    
    
    5,887
    
    
    
    
    
    
    
    45,314Interest income (expense)
    
    
    2,782
    
    
    
    (18,264
    )
    
    
    (90
    )
    
    
    (1,516
    )
    
    
    
    
    
    
    (17,088
    )Gain on early extinguishment of debt
    
    
    17,204
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,204Investment and other income, net
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85Equity in subsidiaries
    
    
    32,661
    
    
    
    455
    
    
    
    
    
    
    
    
    
    
    
    (33,116
    )
    
    
    Earnings before income taxes
    
    
    29,437
    
    
    
    44,100
    
    
    
    723
    
    
    
    4,371
    
    
    
    (33,116
    )
    
    
    45,515Income tax expense (benefit)
    
    
    (319
    )
    
    
    14,804
    
    
    
    202
    
    
    
    1,072
    
    
    
    
    
    
    
    15,759Net earnings
    
    
    29,756
    
    
    
    29,296
    
    
    
    521
    
    
    
    3,299
    
    
    
    (33,116
    )
    
    
    29,756Other comprehensive loss, net
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    4
    
    
    
    (4
    )Comprehensive income
    
    $
    29,752
    
    
    $
    29,296
    
    
    $
    521
    
    
    $
    3,295
    
    
    $
    (33,112
    )
    
    $
    29,752
 39




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors
of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Nine Months Ended July 31, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    202,495
    
    
    $
    1,410
    
    
    $
    14,957
    
    
    $
    
    
    
    $
    218,862Cemetery
    
    
    
    
    
    
    161,205
    
    
    
    2,565
    
    
    
    14,888
    
    
    
    
    
    
    
    178,658
    
    
    
    363,700
    
    
    
    3,975
    
    
    
    29,845
    
    
    
    
    
    
    
    397,520Costs and expenses:Funeral
    
    
    
    
    
    
    151,970
    
    
    
    898
    
    
    
    10,392
    
    
    
    
    
    
    
    163,260Cemetery
    
    
    
    
    
    
    129,453
    
    
    
    2,155
    
    
    
    11,950
    
    
    
    
    
    
    
    143,558
    
    
    
    281,423
    
    
    
    3,053
    
    
    
    22,342
    
    
    
    
    
    
    
    306,818Gross profit
    
    
    
    
    
    
    82,277
    
    
    
    922
    
    
    
    7,503
    
    
    
    
    
    
    
    90,702Corporate general and administrative expenses
    
    
    (24,226
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,226
    )Hurricane related recoveries (charges), net
    
    
    (779
    )
    
    
    37
    
    
    
    391
    
    
    
    
    
    
    
    
    
    
    
    (351
    )Gains on dispositions and impairment (losses), net
    
    
    
    
    
    
    153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153Other operating income, net
    
    
    79
    
    
    
    509
    
    
    
    1
    
    
    
    164
    
    
    
    
    
    
    
    753Operating earnings (loss)
    
    
    (24,926
    )
    
    
    82,976
    
    
    
    1,314
    
    
    
    7,667
    
    
    
    
    
    
    
    67,031Interest expense
    
    
    (3,318
    )
    
    
    (12,916
    )
    
    
    (113
    )
    
    
    (1,634
    )
    
    
    
    
    
    
    (17,981
    )Investment and other income, net
    
    
    1,614
    
    
    
    50
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    1,670Equity in subsidiaries
    
    
    54,263
    
    
    
    418
    
    
    
    
    
    
    
    
    
    
    
    (54,681
    )
    
    
    Earnings before income taxes
    
    
    27,633
    
    
    
    70,528
    
    
    
    1,201
    
    
    
    6,039
    
    
    
    (54,681
    )
    
    
    50,720Income tax expense (benefit)
    
    
    (4,321
    )
    
    
    21,280
    
    
    
    399
    
    
    
    1,408
    
    
    
    
    
    
    
    18,766Net earnings
    
    
    31,954
    
    
    
    49,248
    
    
    
    802
    
    
    
    4,631
    
    
    
    (54,681
    )
    
    
    31,954Other comprehensive income, net
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    (17
    )
    
    
    17Comprehensive income
    
    $
    31,971
    
    
    $
    49,248
    
    
    $
    802
    
    
    $
    4,648
    
    
    $
    (54,698
    )
    
    $
    31,971
 40




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 July 31, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    63,984
    
    
    $
    5,420
    
    
    $
    43
    
    
    $
    1,767
    
    
    $
    
    
    
    $
    71,214Receivables, net of allowances
    
    
    10,659
    
    
    
    47,470
    
    
    
    293
    
    
    
    3,783
    
    
    
    
    
    
    
    62,205Inventories
    
    
    299
    
    
    
    33,530
    
    
    
    305
    
    
    
    2,122
    
    
    
    
    
    
    
    36,256Prepaid expenses
    
    
    1,397
    
    
    
    6,151
    
    
    
    62
    
    
    
    1,669
    
    
    
    
    
    
    
    9,279Deferred income taxes, net
    
    
    5,698
    
    
    
    11,266
    
    
    
    40
    
    
    
    1,600
    
    
    
    
    
    
    
    18,604Total current assets
    
    
    82,037
    
    
    
    103,837
    
    
    
    743
    
    
    
    10,941
    
    
    
    
    
    
    
    197,558Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    48,472
    
    
    
    432
    
    
    
    14,238
    
    
    
    
    
    
    
    63,142Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    368,638
    
    
    
    
    
    
    
    9,458
    
    
    
    
    
    
    
    378,096Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    182,983
    
    
    
    1,125
    
    
    
    7,027
    
    
    
    
    
    
    
    191,135Goodwill
    
    
    
    
    
    
    227,401
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,236Cemetery property, at cost
    
    
    
    
    
    
    348,618
    
    
    
    11,351
    
    
    
    25,977
    
    
    
    
    
    
    
    385,946Property and equipment, at cost
    
    
    53,389
    
    
    
    460,655
    
    
    
    2,128
    
    
    
    37,886
    
    
    
    
    
    
    
    554,058Less accumulated depreciation
    
    
    34,627
    
    
    
    204,160
    
    
    
    951
    
    
    
    14,880
    
    
    
    
    
    
    
    254,618Net property and equipment
    
    
    18,762
    
    
    
    256,495
    
    
    
    1,177
    
    
    
    23,006
    
    
    
    
    
    
    
    299,440Deferred income taxes, net
    
    
    13,845
    
    
    
    113,076
    
    
    
    
    
    
    
    10,917
    
    
    
    (3,180
    )
    
    
    134,658Cemetery perpetual care trust investments
    
    
    
    
    
    
    186,329
    
    
    
    7,962
    
    
    
    3,567
    
    
    
    
    
    
    
    197,858Non-current assets held for sale
    
    
    
    
    
    
    1,433
    
    
    
    
    
    
    
    230
    
    
    
    
    
    
    
    1,663Other assets
    
    
    9,269
    
    
    
    5,365
    
    
    
    6
    
    
    
    1,055
    
    
    
    
    
    
    
    15,695Intercompany receivables
    
    
    770,304
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (770,304
    )
    
    
    Equity in subsidiaries
    
    
    31,443
    
    
    
    7,829
    
    
    
    
    
    
    
    
    
    
    
    (39,272
    )
    
    
    Total assets
    
    $
    925,660
    
    
    $
    1,850,476
    
    
    $
    22,844
    
    
    $
    126,203
    
    
    $
    (812,756
    )
    
    $
    2,112,427LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5Accounts payable
    
    
    2,854
    
    
    
    19,493
    
    
    
    145
    
    
    
    1,336
    
    
    
    
    
    
    
    23,828Accrued expenses and other current
liabilities
    
    
    14,220
    
    
    
    54,883
    
    
    
    14
    
    
    
    3,478
    
    
    
    
    
    
    
    72,595Total current liabilities
    
    
    17,079
    
    
    
    74,376
    
    
    
    159
    
    
    
    4,814
    
    
    
    
    
    
    
    96,428Long-term debt, less current maturities
    
    
    391,747
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    391,747Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    3,180
    
    
    
    
    
    
    
    (3,180
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    761,757
    
    
    
    3,054
    
    
    
    5,493
    
    
    
    (770,304
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    198,693
    
    
    
    104
    
    
    
    46,614
    
    
    
    
    
    
    
    245,411Deferred preneed cemetery revenue
    
    
    
    
    
    
    244,636
    
    
    
    325
    
    
    
    27,724
    
    
    
    
    
    
    
    272,685Deferred preneed funeral and cemetery
receipts held in trust
    
    
    
    
    
    
    492,708
    
    
    
    1,048
    
    
    
    5,606
    
    
    
    
    
    
    
    499,362Perpetual care trusts corpus
    
    
    
    
    
    
    185,283
    
    
    
    7,990
    
    
    
    3,562
    
    
    
    
    
    
    
    196,835Other long-term liabilities
    
    
    17,205
    
    
    
    4,164
    
    
    
    
    
    
    
    102
    
    
    
    
    
    
    
    21,471Negative equity in subsidiaries
    
    
    111,141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (111,141
    )
    
    
    Total liabilities
    
    
    537,172
    
    
    
    1,961,617
    
    
    
    15,860
    
    
    
    93,915
    
    
    
    (884,625
    )
    
    
    1,723,939Common stock
    
    
    92,675
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    92,675Other
    
    
    295,780
    
    
    
    (111,243
    )
    
    
    6,660
    
    
    
    32,203
    
    
    
    72,380
    
    
    
    295,780Accumulated other comprehensive income
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    (33
    )
    
    
    33Total shareholders equity
    
    
    388,488
    
    
    
    (111,141
    )
    
    
    6,984
    
    
    
    32,288
    
    
    
    71,869
    
    
    
    388,488Total liabilities and shareholders equity
    
    $
    925,660
    
    
    $
    1,850,476
    
    
    $
    22,844
    
    
    $
    126,203
    
    
    $
    (812,756
    )
    
    $
    2,112,427
 41




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 October 31, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    65,593
    
    
    $
    4,332
    
    
    $
    22
    
    
    $
    2,627
    
    
    $
    
    
    
    $
    72,574Marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    55Receivables, net of allowances
    
    
    2,987
    
    
    
    51,137
    
    
    
    546
    
    
    
    4,459
    
    
    
    
    
    
    
    59,129Inventories
    
    
    300
    
    
    
    32,821
    
    
    
    361
    
    
    
    2,388
    
    
    
    
    
    
    
    35,870Prepaid expenses
    
    
    1,282
    
    
    
    4,618
    
    
    
    37
    
    
    
    1,380
    
    
    
    
    
    
    
    7,317Deferred income taxes, net
    
    
    1,395
    
    
    
    6,117
    
    
    
    55
    
    
    
    1,231
    
    
    
    
    
    
    
    8,798Total current assets
    
    
    71,557
    
    
    
    99,025
    
    
    
    1,021
    
    
    
    12,140
    
    
    
    
    
    
    
    183,743Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    54,326
    
    
    
    404
    
    
    
    15,941
    
    
    
    
    
    
    
    70,671Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    358,891
    
    
    
    
    
    
    
    9,521
    
    
    
    
    
    
    
    368,412Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    173,484
    
    
    
    1,047
    
    
    
    7,610
    
    
    
    
    
    
    
    182,141Goodwill
    
    
    
    
    
    
    227,401
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,236Cemetery property, at cost
    
    
    
    
    
    
    340,232
    
    
    
    11,424
    
    
    
    25,615
    
    
    
    
    
    
    
    377,271Property and equipment, at cost
    
    
    49,583
    
    
    
    450,617
    
    
    
    1,932
    
    
    
    38,109
    
    
    
    
    
    
    
    540,241Less accumulated depreciation
    
    
    30,479
    
    
    
    190,645
    
    
    
    824
    
    
    
    14,118
    
    
    
    
    
    
    
    236,066Net property and equipment
    
    
    19,104
    
    
    
    259,972
    
    
    
    1,108
    
    
    
    23,991
    
    
    
    
    
    
    
    304,175Deferred income taxes, net
    
    
    25,853
    
    
    
    148,403
    
    
    
    
    
    
    
    8,527
    
    
    
    (3,268
    )
    
    
    179,515Cemetery perpetual care trust investments
    
    
    
    
    
    
    162,789
    
    
    
    7,137
    
    
    
    3,164
    
    
    
    
    
    
    
    173,090Non-current assets held for sale
    
    
    
    
    
    
    1,787
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,787Other assets
    
    
    9,451
    
    
    
    5,937
    
    
    
    16
    
    
    
    1,070
    
    
    
    
    
    
    
    16,474Intercompany receivables
    
    
    837,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (837,282
    )
    
    
    Equity in subsidiaries
    
    
    28,082
    
    
    
    7,374
    
    
    
    
    
    
    
    
    
    
    
    (35,456
    )
    
    
    Total assets
    
    $
    991,329
    
    
    $
    1,839,621
    
    
    $
    22,205
    
    
    $
    127,366
    
    
    $
    (876,006
    )
    
    $
    2,104,515LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    20
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    20Accounts payable
    
    
    2,530
    
    
    
    23,237
    
    
    
    167
    
    
    
    1,718
    
    
    
    
    
    
    
    27,652Accrued expenses and other current
liabilities
    
    
    15,496
    
    
    
    54,683
    
    
    
    13
    
    
    
    2,632
    
    
    
    
    
    
    
    72,824Total current liabilities
    
    
    18,046
    
    
    
    77,920
    
    
    
    180
    
    
    
    4,350
    
    
    
    
    
    
    
    100,496Long-term debt, less current maturities
    
    
    450,095
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,095Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    3,268
    
    
    
    
    
    
    
    (3,268
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    819,691
    
    
    
    3,939
    
    
    
    13,652
    
    
    
    (837,282
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    199,867
    
    
    
    
    
    
    
    45,315
    
    
    
    
    
    
    
    245,182Deferred preneed cemetery revenue
    
    
    
    
    
    
    248,098
    
    
    
    324
    
    
    
    27,413
    
    
    
    
    
    
    
    275,835Deferred preneed funeral and cemetery
receipts held in trust
    
    
    
    
    
    
    470,167
    
    
    
    899
    
    
    
    4,354
    
    
    
    
    
    
    
    475,420Perpetual care trusts corpus
    
    
    
    
    
    
    161,074
    
    
    
    7,132
    
    
    
    3,165
    
    
    
    
    
    
    
    171,371Other long-term liabilities
    
    
    17,114
    
    
    
    3,241
    
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    20,479Negative equity in subsidiaries
    
    
    140,437
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140,437
    )
    
    
    Total liabilities
    
    
    625,692
    
    
    
    1,980,058
    
    
    
    15,742
    
    
    
    98,373
    
    
    
    (980,987
    )
    
    
    1,738,878Common stock
    
    
    92,248
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    92,248Other
    
    
    273,352
    
    
    
    (140,539
    )
    
    
    6,139
    
    
    
    28,904
    
    
    
    105,496
    
    
    
    273,352Accumulated other comprehensive income
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    (37
    )
    
    
    37Total shareholders equity
    
    
    365,637
    
    
    
    (140,437
    )
    
    
    6,463
    
    
    
    28,993
    
    
    
    104,981
    
    
    
    365,637Total liabilities and shareholders equity
    
    $
    991,329
    
    
    $
    1,839,621
    
    
    $
    22,205
    
    
    $
    127,366
    
    
    $
    (876,006
    )
    
    $
    2,104,515
 42




---



##### Table of Contents



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




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Nine Months Ended July 31, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent

    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating
activities
    
    $
    (22,882
    )
    
    $
    63,484
    
    
    $
    464
    
    
    $
    11,187
    
    
    $
    
    
    
    $
    52,253Cash flows from investing activities:Proceeds from sales of marketable
securities
    
    
    19,969
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    20,219Purchases of marketable securities
    
    
    (19,952
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (19,955
    )Proceeds from sale of assets
    
    
    
    
    
    
    358
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    358Purchase of subsidiaries and other
investments, net of cash acquired
    
    
    (1,378
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,378
    )Additions to property and equipment
    
    
    (5,147
    )
    
    
    (14,399
    )
    
    
    (42
    )
    
    
    (782
    )
    
    
    
    
    
    
    (20,370
    )Other
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75Net cash used in investing activities
    
    
    (6,508
    )
    
    
    (13,966
    )
    
    
    (42
    )
    
    
    (535
    )
    
    
    
    
    
    
    (21,051
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (190
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (190
    )Intercompany receivables (payables)
    
    
    59,113
    
    
    
    (48,314
    )
    
    
    (425
    )
    
    
    (10,374
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    1,659
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,659Purchase and retirement of common stock
    
    
    (48,627
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,627
    )Dividends
    
    
    (7,067
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,067
    )Excess tax benefits from share-based
payment arrangements
    
    
    171
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    171Net cash provided by (used in)
financing activities
    
    
    5,059
    
    
    
    (48,314
    )
    
    
    (425
    )
    
    
    (10,374
    )
    
    
    
    
    
    
    (54,054
    )Net increase (decrease) in cash
    
    
    (24,331
    )
    
    
    1,204
    
    
    
    (3
    )
    
    
    278
    
    
    
    
    
    
    
    (22,852
    )Cash and cash equivalents, beginning of
period
    
    
    63,202
    
    
    
    6,685
    
    
    
    36
    
    
    
    1,622
    
    
    
    
    
    
    
    71,545Cash and cash equivalents, end of period
    
    $
    38,871
    
    
    $
    7,889
    
    
    $
    33
    
    
    $
    1,900
    
    
    $
    
    
    
    $
    48,693
 44




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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)
    
    Dispositions and Acquisitions
    (13)
    
    Consolidated Comprehensive Income
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net earnings
    
    $
    10,838
    
    
    $
    9,129
    
    
    $
    29,756
    
    
    $
    31,954Other comprehensive income (loss):Unrealized appreciation (depreciation) of
investments, net of deferred tax (expense)
benefit of $0, $17, $2 and ($9),
respectively
    
    
    (1
    )
    
    
    (26
    )
    
    
    (4
    )
    
    
    17(Increase) reduction in net unrealized
losses associated with available-for-sale
securities of the trusts
    
    
    74,562
    
    
    
    (63,723
    )
    
    
    61,993
    
    
    
    (136,026
    )Reclassification of the net unrealized
(increases) losses activity attributable
to the deferred preneed funeral and
cemetery receipts held in trust and
perpetual care trusts corpus
    
    
    (74,562
    )
    
    
    63,723
    
    
    
    (61,993
    )
    
    
    136,026Total other comprehensive income (loss)
    
    
    (1
    )
    
    
    (26
    )
    
    
    (4
    )
    
    
    17Total comprehensive income
    
    $
    10,837
    
    
    $
    9,103
    
    
    $
    29,752
    
    
    $
    31,971
 (14)
    
    Hurricane Related Charges
  45




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (14)
    
    Hurricane Related Charges(Continued)
   (15)
    
    Separation Charges
   (16)
    
    Long-term Debt
 July 31, 2009
    
    
    October 31, 2008Long-term debt:3.125% senior convertible notes due 2014
    
    $
    109,221
    
    
    $
    125,0003.375% senior convertible notes due 2016
    
    
    82,435
    
    
    
    125,000Senior secured revolving credit facility
    
    
    
    
    
    
    6.25% senior notes due 2013
    
    
    200,000
    
    
    
    200,000Other, principally seller financing of
acquired operations or assumption upon
acquisition, weighted average interest
rates of 8.0% and 7.7% as of July 31,
2009 and October 31, 2008,
respectively, partially secured by
assets of subsidiaries, with maturities
through 2022
    
    
    96
    
    
    
    115Total long-term debt
    
    
    391,752
    
    
    
    450,115Less current maturities
    
    
    5
    
    
    
    20$
    391,747
    
    
    $
    450,095
 46




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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)
 (16) Long-term Debt(Continued)
 Fair Value
  Senior Convertible Notes
   Senior Secured Revolving Credit Facility
   47




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (16) Long-term Debt(Continued)
  
    
    Maintenance on a rolling four quarter basis of a maximum consolidated senior secured
leverage ratio (total funded senior secured debt divided by EBITDA (as defined))  Maximum
1.25x;
    
    Maintenance on a rolling four quarter basis of a minimum consolidated interest coverage
ratio (EBITDAR (as defined) divided by interest expense paid in cash plus rent expense) 
Minimum 2.50x through January 31, 2010 and 2.60x thereafter and
    
    Maintenance at all times of a minimum cash balance of the greater of $20,000 and the
then outstanding amount of all letters of credit obligations.
  
    
    Maintenance on a rolling four quarter basis of a maximum consolidated leverage ratio
(funded debt (net of domestic cash, cash equivalents and marketable securities) divided by
EBITDA (as defined))  Maximum 5.0x through January 31, 2010, 4.75x from February 1, 2010
through January 31, 2011 and 4.50x thereafter.
    48




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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) Income Taxes
    (18) Significant Risks and Uncertainties
  (19) Subsequent Events
    49




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
 General
  Financial Summary
  50




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##### Table of Contents



51




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##### Table of Contents



52




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##### Table of Contents



Funeral and CemeteryMerchandise and
    
    Cemetery PerpetualServices Trusts
    
    Care TrustsFor the quarter ended July 31, 2009
    
    
    13.6
    %
    
    
    16.2
    %For the nine months ended July 31, 2009
    
    
    11.2
    %
    
    
    15.5
    %For the last three years ended July 31, 2009
    
    
    (2.8
    )%
    
    
    (.8
    )%For the last five years ended July 31, 2009
    
    
    .8
    %
    
    
    1.4
    %
  Critical Accounting Policies
  Results of Operations
  53




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##### Table of Contents



Three Months Ended July 31, 2009 Compared to Three Months Ended July 31, 2008
 Funeral Operations
 Three Months Ended July 31,Increase2009
    
    
    2008
    
    
    (Decrease)(In millions)Funeral Revenue:Funeral Home Locations
    
    $
    62.5
    
    
    $
    63.9
    
    
    $
    (1.4
    )Corporate Trust Management (1)
    
    
    3.5
    
    
    
    4.6
    
    
    
    (1.1
    )Total Funeral Revenue
    
    $
    66.0
    
    
    $
    68.5
    
    
    $
    (2.5
    )Funeral Costs:Funeral Home Locations
    
    $
    51.4
    
    
    $
    53.3
    
    
    $
    (1.9
    )Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Funeral Costs
    
    $
    51.6
    
    
    $
    53.5
    
    
    $
    (1.9
    )Funeral Gross Profit:Funeral Home Locations
    
    $
    11.1
    
    
    $
    10.6
    
    
    $
    .5Corporate Trust Management (1)
    
    
    3.3
    
    
    
    4.4
    
    
    
    (1.1
    )Total Funeral Gross Profit
    
    $
    14.4
    
    
    $
    15.0
    
    
    $
    (.6
    )
 Same-Store Analysis for the Three Months Ended July 31, 2009 and 2008
 Change in Average Revenue
    
    Change in Same-StorePer Funeral Service
    
    Funeral Services
    
    Same-Store Cremation Rate2009
    
    20082.3% (1)
    
    (6.3)%
    
    41.8%
    
    39.9%
 
 (1)
    
    Corporate trust management consists of the trust management fees and funeral
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
earnings realized by the trusts over the life of the preneed contracts and allocated to those
products and services delivered during the relevant periods. See Notes 3 and 6 to the
condensed consolidated financial statements included herein for information regarding the cost
basis and market value of the trust assets and current performance of the trusts (i.e.,
current realized gains and losses, interest income and dividends). Trust management fees
included in funeral revenue for the three months ended July 31, 2009 and 2008 were $1.0
million and $1.3 million, respectively. As corporate trust management is considered a
separate operating segment, trust earnings are included in the total average revenue per
funeral service presented. Funeral trust earnings recognized with respect to preneed
contracts delivered included in funeral revenue for the three months ended July 31, 2009 and
2008 were $2.5 million and $3.3 million, respectively.  54




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##### Table of Contents



Cemetery Operations
 Three Months Ended July 31,2009
    
    
    2008
    
    
    Decrease(In millions)Cemetery Revenue:Cemetery Locations
    
    $
    49.8
    
    
    $
    59.6
    
    
    $
    (9.8
    )Corporate Trust Management (1)
    
    
    1.9
    
    
    
    2.3
    
    
    
    (.4
    )Total Cemetery Revenue
    
    $
    51.7
    
    
    $
    61.9
    
    
    $
    (10.2
    )Cemetery Costs:Cemetery Locations
    
    $
    46.6
    
    
    $
    48.7
    
    
    $
    (2.1
    )Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Cemetery Costs
    
    $
    46.8
    
    
    $
    48.9
    
    
    $
    (2.1
    )Cemetery Gross Profit:Cemetery Locations
    
    $
    3.2
    
    
    $
    10.9
    
    
    $
    (7.7
    )Corporate Trust Management (1)
    
    
    1.7
    
    
    
    2.1
    
    
    
    (.4
    )Total Cemetery Gross Profit
    
    $
    4.9
    
    
    $
    13.0
    
    
    $
    (8.1
    )
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
earnings realized by the trusts over the life of the preneed contracts and allocated to those
products and services delivered during the relevant periods. See Notes 4 and 6 to the
condensed consolidated financial statements included herein for information regarding the cost
basis and market value of the trust assets and current performance of the trusts (i.e.,
current realized gains and losses, interest income and dividends). Trust management fees
included in cemetery revenue for the three months ended July 31, 2009 and 2008 were $1.0
million and $1.3 million, respectively, and cemetery trust earnings recognized with respect to
preneed contracts delivered included in cemetery revenue for the three months ended July 31,
2009 and 2008 were $0.9 million and $1.0 million, respectively. Perpetual care trust earnings
are included in the revenues and gross profit of the cemetery segment. See Notes 5 and 6 to
the condensed consolidated financial statements included herein for information regarding the
cemetery perpetual care trusts.   55




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##### Table of Contents



Other
     Preneed Sales into the Backlog
   Nine Months Ended July 31, 2009 Compared to Nine Months Ended July 31, 2008
 Funeral Operations
 Nine Months Ended July 31,2009
    
    
    2008
    
    
    Decrease(In millions)Funeral Revenue:Funeral Home Locations
    
    $
    197.7
    
    
    $
    204.8
    
    
    $
    (7.1
    )Corporate Trust Management (1)
    
    
    11.3
    
    
    
    14.1
    
    
    
    (2.8
    )Total Funeral Revenue
    
    $
    209.0
    
    
    $
    218.9
    
    
    $
    (9.9
    )Funeral Costs:Funeral Home Locations
    
    $
    157.2
    
    
    $
    162.7
    
    
    $
    (5.5
    )Corporate Trust Management (1)
    
    
    .6
    
    
    
    .6
    
    
    
    Total Funeral Costs
    
    $
    157.8
    
    
    $
    163.3
    
    
    $
    (5.5
    )Funeral Gross Profit:Funeral Home Locations
    
    $
    40.5
    
    
    $
    42.1
    
    
    $
    (1.6
    )Corporate Trust Management (1)
    
    
    10.7
    
    
    
    13.5
    
    
    
    (2.8
    )Total Funeral Gross Profit
    
    $
    51.2
    
    
    $
    55.6
    
    
    $
    (4.4
    )
 56




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##### Table of Contents



Same-Store Analysis for the Nine Months Ended July 31, 2009 and 2008
 Change in AverageRevenue Per Funeral
    
    Change in Same-StoreService
    
    Funeral Services
    
    Same-Store Cremation Rate2009
    
    20083.6% (1)
    
    (7.5)%
    
    41.2%
    
    40.0%
 
 (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 the Company at rates consistent with
industry norms based on the fair market value of assets managed and are paid by the trusts to
our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of earnings
realized by the trusts over the life of the preneed contracts and allocated to those products
and services delivered during the relevant periods. See Notes 3 and 6 to the condensed
consolidated financial statements included herein for information regarding the cost basis and
market value of the trust assets and current performance of the trusts (i.e., current realized
gains and losses, interest income and dividends). Trust management fees included in funeral
revenue for the nine months ended July 31, 2009 and 2008 were $2.8 million and $4.0 million,
respectively. As corporate trust management is considered a separate operating segment, trust
earnings are included in the total average revenue per funeral service presented above.
Funeral trust earnings recognized with respect to preneed contracts delivered included in
funeral revenue for the nine months ended July 31, 2009 and 2008 were $8.5 million and $10.1
million, respectively. Consolidated OperationsFuneral
   57




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##### Table of Contents



Cemetery Operations
 Nine Months Ended July 31,2009
    
    
    2008
    
    
    Decrease(In millions)Cemetery Revenue:Cemetery Locations
    
    $
    149.1
    
    
    $
    171.7
    
    
    $
    (22.6
    )Corporate Trust Management (1)
    
    
    5.6
    
    
    
    7.0
    
    
    
    (1.4
    )Total Cemetery Revenue
    
    $
    154.7
    
    
    $
    178.7
    
    
    $
    (24.0
    )Cemetery Costs:Cemetery Locations
    
    $
    137.2
    
    
    $
    142.9
    
    
    $
    (5.7
    )Corporate Trust Management (1)
    
    
    .7
    
    
    
    .7
    
    
    
    Total Cemetery Costs
    
    $
    137.9
    
    
    $
    143.6
    
    
    $
    (5.7
    )Cemetery Gross Profit:Cemetery Locations
    
    $
    11.9
    
    
    $
    28.8
    
    
    $
    (16.9
    )Corporate Trust Management (1)
    
    
    4.9
    
    
    
    6.3
    
    
    
    (1.4
    )Total Cemetery Gross Profit
    
    $
    16.8
    
    
    $
    35.1
    
    
    $
    (18.3
    )
 
 (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 the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
earnings realized by the trusts over the life of the preneed contracts and allocated to those
products and services delivered during the relevant periods. See Notes 4 and 6 to the
condensed consolidated financial statements included herein for information regarding the cost
basis and market value of the trust assets and current performance of the trusts (i.e.,
current realized gains and losses, interest income and dividends). Trust management fees
included in cemetery revenue for the nine months ended July 31, 2009 and 2008 were $2.9
million and $3.8 million, respectively, and cemetery trust earnings recognized with respect to
preneed contracts delivered included in cemetery revenue for the nine months ended July 31,
2009 and 2008 were $2.7 million and $3.2 million, respectively. Perpetual care trust earnings
are included in the revenues and gross profit of the cemetery segment. See Notes 5 and 6 to
the condensed consolidated financial statements included herein for information regarding the
cemetery perpetual care trusts. Consolidated OperationsCemetery
    58




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Other
        59




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##### Table of Contents



Preneed Sales into the Backlog
   Liquidity and Capital Resources
 General
    60




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##### Table of Contents



Cash Flow
  61




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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)
    
    $
    391.7
    
    
    $
    
    
    
    $
    
    
    
    $
    309.2
    
    
    $
    82.5Interest on long-term debt (2)
    
    
    86.6
    
    
    
    18.7
    
    
    
    37.4
    
    
    
    24.9
    
    
    
    5.6Operating and capital lease obligations (3)
    
    
    28.6
    
    
    
    1.2
    
    
    
    6.1
    
    
    
    3.6
    
    
    
    17.7Non-competition and other agreements (4)
    
    
    1.7
    
    
    
    .2
    
    
    
    .8
    
    
    
    .2
    
    
    
    .5$
    508.6
    
    
    $
    20.1
    
    
    $
    44.3
    
    
    $
    337.9
    
    
    $
    106.3
 
 (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, 2009.(2)
    
    Includes contractual interest payments for our senior convertible notes, senior
notes and third-party debt.(3)

    
    Our noncancellable operating leases are primarily for land and buildings and expire
over the next one to 14 years, except for eight leases that expire between 2032 and 2039. Our
future minimum lease payments as of July 31, 2009 are $1.2 million, $3.5 million, $2.6
million, $2.0 million, $1.6 million and $17.7 million for the years ending October 31, 2009,
2010, 2011, 2012, 2013 and later years, respectively.(4)

    
    This category includes payments pursuant to non-competition agreements with prior
owners and key employees of acquired businesses and separation pay related to former executive
officers.  62




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##### Table of Contents



Expiration by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Contingent Obligations
    
    Total
    
    
    year
    
    
    1  3 years
    
    
    3  5 years
    
    
    yearsCemetery perpetual
care trust funding
obligations(1)
    
    $
    14.1
    
    
    $
    14.1
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term obligations
related to uncertain
tax positions(2)
    
    
    4.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.7$
    18.8
    
    
    $
    14.1
    
    
    $
    
    
    
    $
    
    
    
    $
    4.7
 
 (1)
    
    In those states where we have withdrawn realized net capital gains in the past
from our cemetery perpetual care trusts, regulators may seek replenishment of the realized net
capital losses either by requiring a cash deposit to the trust or by prohibiting or
restricting withdrawals of future earnings until they cover the loss. The estimated probable
funding obligation in the cemetery perpetual care trusts in these states was $14.1 million as
of July 31, 2009. As of July 31, 2009, we had unrealized losses of $52.0 million in the
trusts in these states. Because some of these trusts currently have assets with a fair market
value less than the aggregate amounts required to be contributed to the trust, any additional
realized net capital losses in these trusts may result in a corresponding funding liability
and increase in cemetery costs. In those states where realized net capital gains have not
been withdrawn, we believe it is reasonably possible that additional funding obligations may
exist with an estimated amount of approximately $3.5 million.(2)
    
    We adopted the provisions of FASB Interpretation No. 48, Accounting for Income
Taxes  an Interpretation of FASB Statement No. 109 (FIN 48), on November 1, 2007. In
accordance with the provisions of FIN 48, as of July 31, 2009, we have recorded $4.7 million
of unrecognized tax benefits and related interest and penalties. Due to the uncertainty
regarding the timing and completion of audits and possible outcomes, it is not possible to
estimate the range of increase and decrease and the timing thereof of any potential cash
payments.  Other,Senior
    
    
    
    
    
    
    
    
    
    
    PrincipallySecured
    
    
    
    
    
    
    
    
    
    
    SellerRevolving
    
    
    Senior
    
    
    
    
    
    
    FinancingCredit
    
    
    Convertible
    
    
    Senior
    
    
    of AcquiredFiscal Years Ending October 31,
    
    Facility
    
    
    Notes
    
    
    Notes
    
    
    Operations
    
    
    Total2009
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2013
    
    
    
    
    
    
    
    
    
    
    200.0
    
    
    
    
    
    
    
    200.0Thereafter
    
    
    
    
    
    
    191.6
    
    
    
    
    
    
    
    .1
    
    
    
    191.7Total long-term debt
    
    $
    
    
    
    $
    191.6
    
    
    $
    200.0
    
    
    $
    .1
    
    
    $
    391.7
  Off-Balance Sheet Arrangements
  63




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##### Table of Contents



(1)
    
    the $27.0 million bond we are required to maintain to guarantee our obligations
relating to funds we withdrew in fiscal year 2001 from our preneed funeral trusts in
Florida, which is discussed above and in Note 20 to the consolidated financial
statements in our 2008 Form 10-K; and(2)
    
    the insurance-funded preneed funeral contracts, which will be funded by life
insurance or annuity contracts issued by third-party insurers, are not reflected in our
condensed consolidated balance sheets, and are discussed in Note 2(i) to the
consolidated financial statements in our 2008 Form 10-K.
 Recent Accounting Standards
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4.
    
    Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  64




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
    
 Item 1A.
    
    Risk Factors
   
 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
    
    
    Maximumshares
    
    
    approximate dollarpurchased as
    
    
    value of shares thatTotal number
    
    
    Average
    
    
    part of publicly-
    
    
    may yet beof shares
    
    
    price paid
    
    
    announced plans
    
    
    purchased under thePeriod
    
    purchased
    
    
    per share
    
    
    or programs
    
    
    plans or programs(2)May 1, 2009 through May 31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    26,571,185June 1, 2009 through June 30, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    26,571,185July 1, 2009 through July 31, 2009
    
    
    11,465
    (1)
    
    $
    4.51
    
    
    
    11,465
    
    
    $
    26,519,479Total
    
    
    11,465
    
    
    $
    4.51
    
    
    
    11,465
    
    
    $
    26,519,479
 
 (1)
    
    As described in Note 16 to the condensed consolidated financial statements included
herein, during the nine months ended July 31, 2009, we purchased $15.8 million aggregate
principal amount of our 3.125 percent 65




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##### Table of Contents



senior convertible notes due 2014 and $42.5 million aggregate principal amount of our 3.375
percent senior convertible notes due 2016 on the open market. In connection with these debt
purchases, corresponding call options and common stock warrants were also terminated. As a
result of the debt purchases that occurred during the third quarter of 2009, the value of the
call options was greater than the value of the warrants, and Bank of America/Merrill Lynch owed
us less than $0.1 million. This amount was settled by Bank of America/Merrill Lynch delivering
11,465 shares to us. Other than this transaction, there were no other stock repurchases
occurring during the three months ended July 31, 2009 under the $75.0 stock repurchase program.(2)
    
    We announced a $25.0 million stock repurchase program on September 19, 2007, which
was increased by $25.0 million in December 2007 and June 2008, resulting in $75.0 million
program. 
 Item 6.
    
    Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
April 3, 2008 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended April 30, 2008)3.2
    
    By-laws of the Company, as amended and restated as of September 8, 2008 (incorporated by
reference to Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended
July 31, 2008)4.1
    
    See Exhibits 3.1 and 3.2 for provisions of the Companys Amended and Restated Articles of
Incorporation, as amended, and By-laws, as amended, defining the rights of holders of Class A
and Class B common stock4.2
    
    Specimen of Class A common stock certificate (incorporated by reference to Exhibit 3 to the
Companys Registration Statement on Form 8-A/A filed with the Commission on June 21, 2007)4.3
    
    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 filed November 4, 1999)4.4
    
    Amendment No. 1 to the Rights Agreement dated June 26, 2007 between Stewart Enterprises, Inc.
and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.4 to the Companys
Current Report on Form 8-K filed June 27, 2007)4.5
    
    Second Amended and Restated Credit Agreement dated June 2, 2009 by and among the Company,
Empresas Stewart-Cementerios and Empresas Stewart-Funerarias, as Borrowers, Bank of America,
N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer and The
Other Lenders party hereto (incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K filed June 3, 2009)4.6
    
    Indenture dated as of February 11, 2005 by and among Stewart Enterprises, Inc., the
Guarantors thereunder and U.S. Bank National Association, as Trustee, with respect to the 6.25
percent Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K filed February 14, 2005)4.7
    
    Form of 6.25 percent Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed February 14, 2005)4.8
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.125 percent Senior
Convertible Notes due 2014 (including Form of 3.125 percent Senior Convertible Notes due 2014)
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed
June 27, 2007)4.9
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.375 percent Senior
Convertible Notes due
 66




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##### Table of Contents



2016 (including Form of 3.375 percent Senior Convertible Notes due 2016) (incorporated by
reference to Exhibit 4.2 to the Companys Current Report on Form 8-K filed June 27, 2007)
 31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
 67




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.September 9, 2009
    
    /s/ THOMAS M. KITCHENThomas M. KitchenSenior Executive Vice President and
Chief Financial OfficerSeptember 9, 2009
    
    /s/ ANGELA M. LACOURAngela M. LacourVice President
Corporate Controller
Chief Accounting Officer 68




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##### Table of Contents



Exhibit Index
 31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
 69