##### 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 January 31, 2010
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period fromto
 Commission File Number: 1-15449
 
 STEWART ENTERPRISES, INC.
  LOUISIANA
(State or other jurisdiction of incorporation or organization)
    
    72-0693290
(I.R.S. Employer Identification No.)1333 South Clearview Parkway 
Jefferson, Louisiana
(Address of principal executive offices)
    
    70121
(Zip Code)
 
 Registrants telephone number, including area code: (504) 729-1400
 
 þ o
 o o
  Large accelerated filer o
    

Accelerated filer þ
    

Non-accelerated filer o
(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 January 31, 2010 and 2009
    
    
    3Condensed Consolidated Balance Sheets 
January 31, 2010 and October 31, 2009
    
    
    4Condensed Consolidated Statement of Shareholders Equity 
Three Months Ended January 31, 2010
    
    
    6Condensed Consolidated Statements of Cash Flows 
Three Months Ended January 31, 2010 and 2009
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    43Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    51Item 4. Controls and Procedures
    
    
    51Part II. Other InformationItem 1. Legal Proceedings
    
    
    52Item 1A. Risk Factors
    
    
    52Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    52Item 6. Exhibits
    
    
    53Signatures
    
    
    54EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended January 31,2010
    
    
    2009(As Adjusted)Revenues:Funeral
    
    $
    72,108
    
    
    $
    71,750Cemetery
    
    
    52,292
    
    
    
    47,580124,400
    
    
    
    119,330Costs and expenses:Funeral
    
    
    52,911
    
    
    
    53,495Cemetery
    
    
    46,320
    
    
    
    42,75299,231
    
    
    
    96,247Gross profit
    
    
    25,169
    
    
    
    23,083Corporate general and administrative expenses
    
    
    (6,554
    )
    
    
    (7,506
    )Hurricane related charges, net
    
    
    
    
    
    
    (315
    )Net impairment losses on dispositions
    
    
    
    
    
    
    (63
    )Other operating income, net
    
    
    179
    
    
    
    259Operating earnings
    
    
    18,794
    
    
    
    15,458Interest expense
    
    
    (6,456
    )
    
    
    (7,395
    )Gain on early extinguishment of debt
    
    
    17
    
    
    
    Investment and other income, net
    
    
    24
    
    
    
    41Earnings before income taxes
    
    
    12,379
    
    
    
    8,104Income taxes
    
    
    4,892
    
    
    
    3,338Net earnings
    
    $
    7,487
    
    
    $
    4,766Net earnings per common share:Basic
    
    $
    .08
    
    
    $
    .05Diluted
    
    $
    .08
    
    
    $
    .05Weighted average common shares outstanding (in thousands):Basic
    
    
    92,053
    
    
    
    91,824Diluted
    
    
    92,234
    
    
    
    91,843Dividends declared per common share
    
    $
    .030
    
    
    $
    .025
  3




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 January 31, 2010
    
    
    October 31, 2009(As Adjusted)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    52,780
    
    
    $
    62,808Certificates of deposit
    
    
    5,000
    
    
    
    Receivables, net of allowances
    
    
    59,331
    
    
    
    59,439Inventories
    
    
    35,947
    
    
    
    36,156Prepaid expenses
    
    
    11,574
    
    
    
    6,748Deferred income taxes, net
    
    
    21,645
    
    
    
    21,715Total current assets
    
    
    186,277
    
    
    
    186,866Receivables due beyond one year, net of allowances
    
    
    62,062
    
    
    
    63,011Preneed funeral receivables and trust investments
    
    
    397,454
    
    
    
    389,512Preneed cemetery receivables and trust investments
    
    
    196,797
    
    
    
    193,417Goodwill
    
    
    247,236
    
    
    
    247,236Cemetery property, at cost
    
    
    386,189
    
    
    
    385,977Property and equipment, at cost:Land
    
    
    43,677
    
    
    
    43,677Buildings
    
    
    332,061
    
    
    
    329,685Equipment and other
    
    
    188,092
    
    
    
    187,100563,830
    
    
    
    560,462Less accumulated depreciation
    
    
    267,234
    
    
    
    261,005Net property and equipment
    
    
    296,596
    
    
    
    299,457Deferred income taxes, net
    
    
    109,866
    
    
    
    113,398Cemetery perpetual care trust investments
    
    
    214,460
    
    
    
    205,476Other assets
    
    
    14,139
    
    
    
    14,654Total assets
    
    $
    2,111,076
    
    
    $
    2,099,004
  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)
 January 31, 2010
    
    
    October 31, 2009(As Adjusted)LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    3
    
    
    $
    5Accounts payable and accrued expenses
    
    
    21,260
    
    
    
    25,604Accrued payroll and other benefits
    
    
    11,938
    
    
    
    15,200Accrued insurance
    
    
    20,139
    
    
    
    20,504Accrued interest
    
    
    6,181
    
    
    
    4,561Estimated obligation to fund cemetery perpetual care trust
    
    
    13,642
    
    
    
    14,010Other current liabilities
    
    
    11,982
    
    
    
    14,099Income taxes payable
    
    
    3,143
    
    
    
    2,028Total current liabilities
    
    
    88,288
    
    
    
    96,011Long-term debt, less current maturities
    
    
    339,934
    
    
    
    339,721Deferred preneed funeral revenue
    
    
    245,584
    
    
    
    247,825Deferred preneed cemetery revenue
    
    
    263,388
    
    
    
    266,964Deferred preneed funeral and cemetery receipts held in trust
    
    
    526,424
    
    
    
    514,787Perpetual care trusts corpus
    
    
    212,076
    
    
    
    204,168Other long-term liabilities
    
    
    21,032
    
    
    
    20,871Total liabilities
    
    
    1,696,726
    
    
    
    1,690,347Commitments and contingenciesShareholders equity:Preferred stock, $1.00 par value, 5,000,000 shares
authorized; no shares issued
    
    
    
    
    
    
    Common stock, $1.00 stated value:Class A authorized 200,000,000 shares; issued and
outstanding 89,566,742 and 89,128,700 shares at
January 31, 2010 and October 31, 2009, respectively
    
    
    89,567
    
    
    
    89,129Class B authorized 5,000,000 shares; issued and
outstanding 3,555,020 shares at January 31, 2010 and
October 31, 2009; 10 votes per share convertible into
an equal number of Class A shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    558,832
    
    
    
    561,063Accumulated deficit
    
    
    (237,638
    )
    
    
    (245,125
    )Accumulated other comprehensive income:Unrealized appreciation of investments
    
    
    34
    
    
    
    35Total accumulated other comprehensive income
    
    
    34
    
    
    
    35Total shareholders equity
    
    
    414,350
    
    
    
    408,657Total liabilities and shareholders equity
    
    $
    2,111,076
    
    
    $
    2,099,004
  5




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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)
 UnrealizedAppreciationCommon
    
    
    Additional Paid-In
    
    
    
    
    
    
    (Depreciation) of
    
    
    Total ShareholdersStock(1)
    
    
    Capital
    
    
    Accumulated Deficit
    
    
    Investments
    
    
    EquityBalance October 31, 2009, as
previously reported
    
    $
    92,684
    
    
    $
    526,062
    
    
    $
    (227,897
    )
    
    $
    35
    
    
    $
    390,884Adoption of convertible debt
standard (See Note 2)
    
    
    
    
    
    
    35,001
    
    
    
    (17,228
    )
    
    
    
    
    
    
    17,773Balance October 31, 2009, as
adjusted
    
    $
    92,684
    
    
    $
    561,063
    
    
    $
    (245,125
    )
    
    $
    35
    
    
    $
    408,657Comprehensive income (loss):Net earnings
    
    
    
    
    
    
    
    
    
    
    7,487
    
    
    
    
    
    
    
    7,487Other comprehensive loss:Unrealized depreciation of
investments, net of deferred
tax benefit of $1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Total other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Total comprehensive income
(loss)
    
    
    
    
    
    
    
    
    
    
    7,487
    
    
    
    (1
    )
    
    
    7,486Restricted stock activity
    
    
    317
    
    
    
    (87
    )
    
    
    
    
    
    
    
    
    
    
    230Issuance of common stock
    
    
    109
    
    
    
    388
    
    
    
    
    
    
    
    
    
    
    
    497Stock options exercised
    
    
    12
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    32Stock option expense
    
    
    
    
    
    
    275
    
    
    
    
    
    
    
    
    
    
    
    275Tax benefit associated with
stock activity
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    17Retirement of call options,
net of tax expense of $37
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    70Retirement of common stock
warrants
    
    
    
    
    
    
    (107
    )
    
    
    
    
    
    
    
    
    
    
    (107
    )Repurchase of convertible
notes, net of tax benefit of
$7
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    (13
    )Dividends ($.030 per share)
    
    
    
    
    
    
    (2,794
    )
    
    
    
    
    
    
    
    
    
    
    (2,794
    )Balance January 31, 2010
    
    $
    93,122
    
    
    $
    558,832
    
    
    $
    (237,638
    )
    
    $
    34
    
    
    $
    414,350
 
 (1)
    
    Amount includes 89,567 and 89,129 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of January 31, 2010 and October 31, 2009,
respectively, and includes 3,555 shares (in thousands) of Class B common stock.  6




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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)
 Three Months Ended January 31,2010
    
    
    2009(As Adjusted)Cash flows from operating activities:Net earnings
    
    $
    7,487
    
    
    $
    4,766Adjustments to reconcile net earnings to net cash provided by operating activities:Net impairment losses on dispositions
    
    
    
    
    
    
    63Gain on early extinguishment of debt
    
    
    (17
    )
    
    
    Depreciation and amortization
    
    
    6,587
    
    
    
    6,971Non-cash interest and amortization of discount on senior convertible notes
    
    
    1,521
    
    
    
    1,907Provision for doubtful accounts
    
    
    1,674
    
    
    
    2,215Share-based compensation
    
    
    962
    
    
    
    802Excess tax benefits from share-based payment arrangements
    
    
    (20
    )
    
    
    Provision (benefit) for deferred income taxes
    
    
    3,569
    
    
    
    (749
    )Estimated obligation to fund cemetery perpetual care trust
    
    
    
    
    
    
    88Other
    
    
    20
    
    
    
    66Changes in assets and liabilities:(Increase) decrease in receivables
    
    
    (1,648
    )
    
    
    2,993Increase in prepaid expenses
    
    
    (4,825
    )
    
    
    (5,050
    )Increase in inventories and cemetery property
    
    
    (3
    )
    
    
    (1,043
    )Decrease in accounts payable and accrued expenses
    
    
    (7,204
    )
    
    
    (7,629
    )Net effect of preneed funeral production and maturities:Decrease in preneed funeral receivables and trust investments
    
    
    3,031
    
    
    
    3,910Decrease in deferred preneed funeral revenue
    
    
    (2,240
    )
    
    
    (2,054
    )Decrease in deferred preneed funeral receipts held in trust
    
    
    (3,324
    )
    
    
    (1,996
    )Net effect of preneed cemetery production and deliveries:Decrease in preneed cemetery receivables and trust investments
    
    
    781
    
    
    
    1,934Decrease in deferred preneed cemetery revenue
    
    
    (3,575
    )
    
    
    (1,645
    )Increase (decrease) in deferred preneed cemetery receipts held in trust
    
    
    (173
    )
    
    
    81Increase in other
    
    
    170
    
    
    
    1,654Net cash provided by operating activities
    
    
    2,773
    
    
    
    7,284Cash flows from investing activities:Purchases of certificates of deposit
    
    
    (5,000
    )
    
    
    Proceeds from sale of assets
    
    
    
    
    
    
    292Purchase of subsidiaries and other investments, net of cash acquired
    
    
    
    
    
    
    (1,623
    )Additions to property and equipment
    
    
    (4,297
    )
    
    
    (4,789
    )Other
    
    
    39
    
    
    
    1Net cash used in investing activities
    
    
    (9,258
    )
    
    
    (6,119
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (846
    )
    
    
    (9
    )Retirement of common stock warrants
    
    
    (107
    )
    
    
    Issuance of common stock
    
    
    115
    
    
    
    83Retirement of call options
    
    
    107
    
    
    
    Debt refinancing costs
    
    
    (38
    )
    
    
    Dividends
    
    
    (2,794
    )
    
    
    (2,318
    )Excess tax benefits from share-based payment arrangements
    
    
    20
    
    
    
    Net cash used in financing activities
    
    
    (3,543
    )
    
    
    (2,244
    )Net decrease in cash
    
    
    (10,028
    )
    
    
    (1,079
    )Cash and cash equivalents, beginning of period
    
    
    62,808
    
    
    
    72,574Cash and cash equivalents, end of period
    
    $
    52,780
    
    
    $
    71,495Supplemental cash flow information:Cash paid (received) during the period for:Income taxes, net
    
    $
    (44
    )
    
    $
    874Interest
    
    $
    3,191
    
    
    $
    5,125Non-cash investing and financing activities:Issuance of common stock to executive officers and directors
    
    $
    414
    
    
    $
    305Issuance of restricted stock, net of forfeitures
    
    $
    1,024
    
    
    $
    312
  7




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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
  8




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




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2) New Accounting Principles(Continued)
 Effects of theAdoption ofOctober 31, 2009
    
    Convertible Debt
    
    October 31, 2009Balance Sheet:
    
    As Reported
    
    Guidance
    
    As AdjustedDeferred tax assets
    
    $
    145,110
    
    
    $
    (9,997
    )
    
    $
    135,113Long-term debt
    
    
    367,496
    
    
    
    (27,770
    )
    
    
    339,726Additional paid-in capital
    
    
    526,062
    
    
    
    35,001
    
    
    
    561,063Accumulated deficit
    
    
    (227,897
    )
    
    
    (17,228
    )
    
    
    (245,125
    )
 Effects of the
    
    
    
    
    
    
    Three MonthsThree Months Ended
    
    
    Adoption of
    
    
    Effects of Adoption
    
    
    EndedJanuary 31, 2009
    
    
    Convertible Debt
    
    
    of Participating
    
    
    January 31, 2009Statement of earnings:
    
    As Reported
    
    
    Guidance
    
    
    Share Guidance
    
    
    As AdjustedInterest expense
    
    $
    5,910
    
    
    $
    1,485
    
    
    
    
    
    
    $
    7,395Income taxes
    
    
    3,873
    
    
    
    (535
    )
    
    
    
    
    
    
    3,338Net earnings
    
    
    5,716
    
    
    
    (950
    )
    
    
    
    
    
    
    4,766Basic earnings per share
    
    $
    .06
    
    
    $
    (.01
    )
    
    
    
    
    
    $
    .05Diluted earnings per share
    
    $
    .06
    
    
    $
    (.01
    )
    
    
    
    
    
    $
    .05Weighted average basic
shares outstanding
    
    
    91,824
    
    
    
    
    
    
    
    
    
    
    
    91,824Weighted average diluted
shares outstanding
    
    
    91,896
    
    
    
    
    
    
    
    (53
    )
    
    
    91,843
 Effects of theYear Ended
    
    
    Adoption of
    
    
    Effects of Adoption
    
    
    Year Ended OctoberOctober 31, 2009
    
    
    Convertible Debt
    
    
    of Participating
    
    
    31, 2009Statement of earnings:
    
    As Reported
    
    
    Guidance
    
    
    Share Guidance
    
    
    As AdjustedInterest expense
    
    $
    22,353
    
    
    $
    5,423
    
    
    
    
    
    
    $
    27,776Gain on early
extinguishment of debt
    
    
    20,078
    
    
    
    (13,932
    )
    
    
    
    
    
    
    6,146Income taxes
    
    
    19,611
    
    
    
    (6,968
    )
    
    
    
    
    
    
    12,643Net earnings
    
    
    35,653
    
    
    
    (12,387
    )
    
    
    
    
    
    
    23,266Basic earnings per share
    
    $
    .39
    
    
    $
    (.14
    )
    
    
    
    
    
    $
    .25Diluted earnings per share
    
    $
    .39
    
    
    $
    (.14
    )
    
    
    
    
    
    $
    .25Weighted average basic
shares outstanding
    
    
    91,898
    
    
    
    
    
    
    
    
    
    
    
    91,898Weighted average diluted
shares outstanding
    
    
    91,995
    
    
    
    
    
    
    
    (17
    )
    
    
    91,978
  11




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2) New Accounting Principles(Continued)
    (3) Preneed Funeral Activities
  Preneed Funeral Receivables and Trust Investments
  January 31,
    
    
    October 31,2010
    
    
    2009Trust assets
    
    $
    366,900
    
    
    $
    358,430Receivables from customers
    
    
    42,448
    
    
    
    43,225409,348
    
    
    
    401,655Allowance for cancellations
    
    
    (11,894
    )
    
    
    (12,143
    )Preneed funeral receivables and trust investments
    
    $
    397,454
    
    
    $
    389,512
 12




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
  January 31, 2010Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short- term investments
    
    $
    29,830
    
    
    $
    
    
    
    $
    
    
    
    $
    29,830U.S. Government, agencies and
municipalities
    
    
    5,888
    
    
    
    166
    
    
    
    (1
    )
    
    
    6,053Corporate bonds
    
    
    38,247
    
    
    
    1,883
    
    
    
    (874
    )
    
    
    39,256Preferred stocks
    
    
    56,785
    
    
    
    34
    
    
    
    (7,985
    )
    
    
    48,834Common stocks
    
    
    247,824
    
    
    
    973
    
    
    
    (100,269
    )
    
    
    148,528Mutual funds:Equity
    
    
    28,839
    
    
    
    24
    
    
    
    (6,360
    )
    
    
    22,503Fixed income
    
    
    54,755
    
    
    
    485
    
    
    
    (915
    )
    
    
    54,325Insurance contracts and other
long-term investments
    
    
    19,088
    
    
    
    112
    
    
    
    (2,637
    )
    
    
    16,563Trust investments
    
    $
    481,256
    
    
    $
    3,677
    
    
    $
    (119,041
    )
    
    
    365,892Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76.0
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,008Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    366,900
  October 31, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short- term investments
    
    $
    28,979
    
    
    $
    
    
    
    $
    
    
    
    $
    28,979U.S. Government, agencies and
municipalities
    
    
    6,044
    
    
    
    214
    
    
    
    (1
    )
    
    
    6,257Corporate bonds
    
    
    39,007
    
    
    
    1,650
    
    
    
    (1,458
    )
    
    
    39,199Preferred stocks
    
    
    56,885
    
    
    
    9
    
    
    
    (10,394
    )
    
    
    46,500Common stocks
    
    
    248,750
    
    
    
    848
    
    
    
    (106,788
    )
    
    
    142,810Mutual funds:Equity
    
    
    28,841
    
    
    
    20
    
    
    
    (7,486
    )
    
    
    21,375Fixed income
    
    
    56,193
    
    
    
    448
    
    
    
    (916
    )
    
    
    55,725Insurance contracts and other
long-term investments
    
    
    19,054
    
    
    
    112
    
    
    
    (2,594
    )
    
    
    16,572Trust investments
    
    $
    483,753
    
    
    $
    3,301
    
    
    $
    (129,637
    )
    
    $
    357,417Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73.9
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,013Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    358,430
 13




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
  January 31, 2010Due in one year or less
    
    $
    1,331Due in one to five years
    
    
    31,699Due in five to ten years
    
    
    12,255Thereafter
    
    
    24$
    45,309
      Quoted MarketPrices in Active
    
    Significant Other
    
    SignificantMarkets
    
    Observable Inputs
    
    Unobservable Inputs
    
    Fair Market(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    ValueTrust investmentsJanuary 31, 2010
    
    $
    263,014
    
    
    $
    94,143
    
    
    $
    8,735
    
    
    $
    365,892Trust investmentsOctober 31, 2009
    
    $
    256,799
    
    
    $
    91,956
    
    
    $
    8,662
    
    
    $
    357,417
 14




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
  Three Months Ended January 31,2010
    
    
    2009Fair market value, beginning balance
    
    $
    8,662
    
    
    $
    11,299Total unrealized losses included in other comprehensive income (1)
    
    
    
    
    
    
    (1,714
    )Purchases, sales, contributions and distributions, net
    
    
    73
    
    
    
    (515
    )Fair market value, ending balance
    
    $
    8,735
    
    
    $
    9,070
 
 (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 January 31,2010
    
    2009Purchases
    
    $
    849
    
    
    $
    641Sales
    
    
    4,349
    
    
    
    4,616Realized gains from sales of investments
    
    
    628
    
    
    
    508Realized losses from sales of investments and other
    
    
    (516
    )
    
    
    (8,501
    )(1)Interest income, dividends and other ordinary income
    
    
    2,346
    
    
    
    3,153Deposits
    
    
    8,015
    
    
    
    6,359Withdrawals
    
    
    11,977
    
    
    
    11,052
 
 (1)
    
    Includes $195 in losses from the sale of investments and $8,306 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined it did not have the intent to hold until they recover
in value.  January 31, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S.
Government,
agencies and
municipalities
    
    $
    
    
    
    $
    
    
    
    $
    21
    
    
    $
    (1
    )
    
    $
    21
    
    
    $
    (1
    )Corporate bonds
    
    
    462
    
    
    
    (136
    )
    
    
    8,920
    
    
    
    (738
    )
    
    
    9,382
    
    
    
    (874
    )Preferred stocks
    
    
    491
    
    
    
    (9
    )
    
    
    44,518
    
    
    
    (7,976
    )
    
    
    45,009
    
    
    
    (7,985
    )Common stocks
    
    
    1,934
    
    
    
    (110
    )
    
    
    136,357
    
    
    
    (100,159
    )
    
    
    138,291
    
    
    
    (100,269
    )Mutual funds:Equity
    
    
    3
    
    
    
    
    
    
    
    22,357
    
    
    
    (6,360
    )
    
    
    22,360
    
    
    
    (6,360
    )Fixed income
    
    
    7,712
    
    
    
    (30
    )
    
    
    4,584
    
    
    
    (885
    )
    
    
    12,296
    
    
    
    (915
    )Insurance contracts
and other long-term
investments
    
    
    
    
    
    
    
    
    
    
    3,219
    
    
    
    (2,637
    )
    
    
    3,219
    
    
    
    (2,637
    )Total
    
    $
    10,602
    
    
    $
    (285
    )
    
    $
    219,976
    
    
    $
    (118,756
    )
    
    $
    230,578
    
    
    $
    (119,041
    )
 15




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
 October 31, 2009Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S.
Government,
agencies and
municipalities
    
    $
    
    
    
    $
    
    
    
    $
    21
    
    
    $
    (1
    )
    
    $
    21
    
    
    $
    (1
    )Corporate bonds
    
    
    
    
    
    
    
    
    
    
    10,154
    
    
    
    (1,458
    )
    
    
    10,154
    
    
    
    (1,458
    )Preferred stocks
    
    
    493
    
    
    
    (7
    )
    
    
    43,519
    
    
    
    (10,387
    )
    
    
    44,012
    
    
    
    (10,394
    )Common stocks
    
    
    1,000
    
    
    
    (276
    )
    
    
    133,428
    
    
    
    (106,512
    )
    
    
    134,428
    
    
    
    (106,788
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    21,237
    
    
    
    (7,486
    )
    
    
    21,237
    
    
    
    (7,486
    )Fixed income
    
    
    318
    
    
    
    (1
    )
    
    
    4,539
    
    
    
    (915
    )
    
    
    4,857
    
    
    
    (916
    )Insurance contracts
and other long-term
investments
    
    
    1,203
    
    
    
    (1,060
    )
    
    
    2,016
    
    
    
    (1,534
    )
    
    
    3,219
    
    
    
    (2,594
    )Total
    
    $
    3,014
    
    
    $
    (1,344
    )
    
    $
    214,914
    
    
    $
    (128,293
    )
    
    $
    217,928
    
    
    $
    (129,637
    )
    (4) Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  16




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
 January 31,2010
    
    
    October 31, 2009Trust assets
    
    $
    169,260
    
    
    $
    163,938Receivables from customers
    
    
    33,740
    
    
    
    35,718203,000
    
    
    
    199,656Allowance for cancellations
    
    
    (6,203
    )
    
    
    (6,239
    )Preneed cemetery receivables and trust investments
    
    $
    196,797
    
    
    $
    193,417
  January 31, 2010Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short- term investments
    
    $
    17,148
    
    
    $
    
    
    
    $
    
    
    
    $
    17,148U.S. Government, agencies and
municipalities
    
    
    8,751
    
    
    
    632
    
    
    
    
    
    
    
    9,383Corporate bonds
    
    
    7,491
    
    
    
    619
    
    
    
    (74
    )
    
    
    8,036Preferred stocks
    
    
    20,831
    
    
    
    64
    
    
    
    (3,498
    )
    
    
    17,397Common stocks
    
    
    127,715
    
    
    
    846
    
    
    
    (51,495
    )
    
    
    77,066Mutual funds:Equity
    
    
    30,291
    
    
    
    16
    
    
    
    (9,554
    )
    
    
    20,753Fixed income
    
    
    18,530
    
    
    
    143
    
    
    
    (17
    )
    
    
    18,656Other long-term investments
    
    
    495
    
    
    
    
    
    
    
    (75
    )
    
    
    420Trust investments
    
    $
    231,252
    
    
    $
    2,320
    
    
    $
    (64,713
    )
    
    
    168,859Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73.0
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    401Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    169,260
 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)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
  October 31, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other short-
term investments
    
    $
    15,123
    
    
    $
    
    
    
    $
    
    
    
    $
    15,123U.S. Government, agencies and municipalities
    
    
    9,259
    
    
    
    678
    
    
    
    
    
    
    
    9,937Corporate bonds
    
    
    7,554
    
    
    
    552
    
    
    
    (74
    )
    
    
    8,032Preferred stocks
    
    
    20,831
    
    
    
    46
    
    
    
    (4,363
    )
    
    
    16,514Common stocks
    
    
    127,942
    
    
    
    714
    
    
    
    (54,254
    )
    
    
    74,402Mutual funds:Equity
    
    
    30,291
    
    
    
    15
    
    
    
    (9,980
    )
    
    
    20,326Fixed income
    
    
    18,530
    
    
    
    125
    
    
    
    (4
    )
    
    
    18,651Other long-term investments
    
    
    562
    
    
    
    
    
    
    
    (8
    )
    
    
    554Trust investments
    
    $
    230,092
    
    
    $
    2,130
    
    
    $
    (68,683
    )
    
    $
    163,539Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71.1
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    399Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    163,938
  January 31, 2010Due in one year or less
    
    $
    2,974Due in one to five years
    
    
    9,137Due in five to ten years
    
    
    5,153Thereafter
    
    
    155$
    17,419
    18




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
   Quoted
    
    SignificantMarket
    
    Other
    
    SignificantPrices in Active
    
    Observable
    
    UnobservableMarkets
    
    Inputs
    
    Inputs
    
    Fair Market(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    ValueTrust investmentsJanuary 31, 2010
    
    $
    134,140
    
    
    $
    34,719
    
    
    $
    
    
    
    $
    168,859Trust investmentsOctober 31, 2009
    
    $
    129,032
    
    
    $
    34,507
    
    
    $
    
    
    
    $
    163,539
  Three Months Ended January 31,2010
    
    2009Purchases
    
    $
    2,046
    
    
    $
    1,153Sales
    
    
    2,320
    
    
    
    2,456Realized gains from sales of investments
    
    
    423
    
    
    
    104Realized losses from sales of investments and other
    
    
    (881
    )
    
    
    (4,464
    )
    (1)Interest income, dividends and other ordinary income
    
    
    1,152
    
    
    
    1,300Deposits
    
    
    5,693
    
    
    
    4,033Withdrawals
    
    
    4,404
    
    
    
    3,768
 
 (1)
    
    Includes $1,243 in losses from the sale of investments and $3,221 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined it did not have the intent to hold until they recover
in value. 19




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
  January 31, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    41
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    41
    
    
    $
    Corporate bonds
    
    
    220
    
    
    
    (44
    )
    
    
    670
    
    
    
    (30
    )
    
    
    890
    
    
    
    (74
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    17,221
    
    
    
    (3,498
    )
    
    
    17,221
    
    
    
    (3,498
    )Common stocks
    
    
    2,257
    
    
    
    (19
    )
    
    
    68,299
    
    
    
    (51,476
    )
    
    
    70,556
    
    
    
    (51,495
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    20,612
    
    
    
    (9,554
    )
    
    
    20,612
    
    
    
    (9,554
    )Fixed income
    
    
    2,979
    
    
    
    (14
    )
    
    
    15
    
    
    
    (3
    )
    
    
    2,994
    
    
    
    (17
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    (75
    )Total
    
    $
    5,497
    
    
    $
    (77
    )
    
    $
    106,817
    
    
    $
    (64,636
    )
    
    $
    112,314
    
    
    $
    (64,713
    )
 October 31, 2009Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate bonds
    
    $
    
    
    
    $
    
    
    
    $
    1,045
    
    
    $
    (74
    )
    
    $
    1,045
    
    
    $
    (74
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    16,356
    
    
    
    (4,363
    )
    
    
    16,356
    
    
    
    (4,363
    )Common stocks
    
    
    1,755
    
    
    
    (464
    )
    
    
    67,374
    
    
    
    (53,790
    )
    
    
    69,129
    
    
    
    (54,254
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    20,186
    
    
    
    (9,980
    )
    
    
    20,186
    
    
    
    (9,980
    )Fixed income
    
    
    20
    
    
    
    
    
    
    
    15
    
    
    
    (4
    )
    
    
    35
    
    
    
    (4
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (8
    )Total
    
    $
    1,775
    
    
    $
    (464
    )
    
    $
    104,976
    
    
    $
    (68,219
    )
    
    $
    106,751
    
    
    $
    (68,683
    )
   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)
   (5) Cemetery Interment Rights and Perpetual Care Trusts
   January 31, 2010Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short- term investments
    
    $
    33,444
    
    
    $
    
    
    
    $
    
    
    
    $
    33,444U.S. Government, agencies and
municipalities
    
    
    6,508
    
    
    
    368
    
    
    
    (80
    )
    
    
    6,796Corporate bonds
    
    
    31,843
    
    
    
    1,570
    
    
    
    (1,065
    )
    
    
    32,348Preferred stocks
    
    
    57,893
    
    
    
    5
    
    
    
    (13,397
    )
    
    
    44,501Common stocks
    
    
    96,517
    
    
    
    2,746
    
    
    
    (39,965
    )
    
    
    59,298Mutual funds:Equity
    
    
    8,869
    
    
    
    37
    
    
    
    (1,478
    )
    
    
    7,428Fixed income
    
    
    29,729
    
    
    
    290
    
    
    
    (397
    )
    
    
    29,622Other long-term investments
    
    
    513
    
    
    
    1
    
    
    
    (196
    )
    
    
    318Trust investments
    
    $
    265,316
    
    
    $
    5,017
    
    
    $
    (56,578
    )
    
    
    213,755Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80.6
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    705Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    214,460
 21




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 (5) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  October 31, 2009Cost Basis
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    MarketCash, money market and other
short- term investments
    
    $
    17,784
    
    
    $
    
    
    
    $
    
    
    
    $
    17,784U.S. Government, agencies and
municipalities
    
    
    5,416
    
    
    
    394
    
    
    
    (82
    )
    
    
    5,728Corporate bonds
    
    
    42,735
    
    
    
    2,088
    
    
    
    (1,085
    )
    
    
    43,738Preferred stocks
    
    
    58,421
    
    
    
    2
    
    
    
    (17,137
    )
    
    
    41,286Common stocks
    
    
    96,831
    
    
    
    2,663
    
    
    
    (42,792
    )
    
    
    56,702Mutual funds:Equity
    
    
    6,838
    
    
    
    25
    
    
    
    (1,560
    )
    
    
    5,303Fixed income
    
    
    32,561
    
    
    
    1,340
    
    
    
    (342
    )
    
    
    33,559Other long-term investments
    
    
    766
    
    
    
    4
    
    
    
    (177
    )
    
    
    593Trust investments
    
    $
    261,352
    
    
    $
    6,516
    
    
    $
    (63,175
    )
    
    $
    204,693Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78.3
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    783Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    205,476
  January 31, 2010Due in one year or less
    
    $
    10,259Due in one to five years
    
    
    19,974Due in five to ten years
    
    
    8,424Thereafter
    
    
    487$
    39,144
    22




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Cemetery
Interment Rights and Perpetual Care Trusts(Continued)
    Quoted MarketPrices in Active
    
    Significant Other
    
    SignificantMarkets
    
    Observable Inputs
    
    Unobservable Inputs
    
    Fair Market(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    ValueTrust investmentsJanuary 31, 2010
    
    $
    129,942
    
    
    $
    83,645
    
    
    $
    168
    
    
    $
    213,755Trust investmentsOctober 31, 2009
    
    $
    113,715
    
    
    $
    90,752
    
    
    $
    226
    
    
    $
    204,693
  Three Months Ended January 31,2010
    
    
    2009Fair market value, beginning balance
    
    $
    226
    
    
    $
    611Total unrealized losses included in other comprehensive income (1)
    
    
    
    
    
    
    (118
    )Transfers out of Level 3 category and other
    
    
    (58
    )
    
    
    (250
    )Fair market value, ending balance
    
    $
    168
    
    
    $
    243
 
 (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.  23




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Cemetery
Interment Rights and Perpetual Care Trusts(Continued)
  Three Months Ended January 31,2010
    
    2009Purchases
    
    $
    16,172
    
    
    $
    329Sales
    
    
    28,885
    
    
    
    1,806Realized gains from sales of investments
    
    
    2,025
    
    
    
    359Realized losses from sales of investments and other
    
    
    (550
    )
    
    
    (96
    ) (1)Interest income, dividends and other ordinary income
    
    
    2,161
    
    
    
    2,284Deposits
    
    
    1,838
    
    
    
    2,454
    (2)Withdrawals
    
    
    888
    
    
    
    1,587
 
 (1)
    
    Includes $84 in losses related to certain investments that were rendered worthless
or practically worthless.(2)
    
    Includes $734 that the Company contributed to the cemetery perpetual care trusts as
part of its funding obligation during the three months ended January 31, 2009.   January 31, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    
    
    
    $
    
    
    
    $
    270
    
    
    $
    (80
    )
    
    $
    270
    
    
    $
    (80
    )Corporate bonds
    
    
    514
    
    
    
    (92
    )
    
    
    2,178
    
    
    
    (973
    )
    
    
    2,692
    
    
    
    (1,065
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    42,898
    
    
    
    (13,397
    )
    
    
    42,898
    
    
    
    (13,397
    )Common stocks
    
    
    1,716
    
    
    
    (16
    )
    
    
    51,118
    
    
    
    (39,949
    )
    
    
    52,834
    
    
    
    (39,965
    )Mutual funds:Equity
    
    
    1,949
    
    
    
    (53
    )
    
    
    5,188
    
    
    
    (1,425
    )
    
    
    7,137
    
    
    
    (1,478
    )Fixed income
    
    
    5,416
    
    
    
    (51
    )
    
    
    1,074
    
    
    
    (346
    )
    
    
    6,490
    
    
    
    (397
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    201
    
    
    
    (196
    )
    
    
    201
    
    
    
    (196
    )Total
    
    $
    9,595
    
    
    $
    (212
    )
    
    $
    102,927
    
    
    $
    (56,366
    )
    
    $
    112,522
    
    
    $
    (56,578
    )
 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, 2009Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    270
    
    
    $
    (81
    )
    
    $
    6
    
    
    $
    (1
    )
    
    $
    276
    
    
    $
    (82
    )Corporate bonds
    
    
    600
    
    
    
    (124
    )
    
    
    1,732
    
    
    
    (961
    )
    
    
    2,332
    
    
    
    (1,085
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    40,784
    
    
    
    (17,137
    )
    
    
    40,784
    
    
    
    (17,137
    )Common stocks
    
    
    (38
    )
    
    
    (473
    )
    
    
    50,445
    
    
    
    (42,319
    )
    
    
    50,407
    
    
    
    (42,792
    )Mutual funds:Equity
    
    
    43
    
    
    
    (11
    )
    
    
    5,034
    
    
    
    (1,549
    )
    
    
    5,077
    
    
    
    (1,560
    )Fixed income
    
    
    118
    
    
    
    
    
    
    
    1,096
    
    
    
    (342
    )
    
    
    1,214
    
    
    
    (342
    )Other long-term investments
    
    
    201
    
    
    
    (177
    )
    
    
    
    
    
    
    
    
    
    
    201
    
    
    
    (177
    )Total
    
    $
    1,194
    
    
    $
    (866
    )
    
    $
    99,097
    
    
    $
    (62,309
    )
    
    $
    100,291
    
    
    $
    (63,175
    )
   (6) Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care
Trusts Corpus
  Deferred Receipts Held in TrustPreneed
    
    
    PreneedFuneral
    
    
    Cemetery
    
    
    TotalTrust assets at market value
    
    $
    366,900
    
    
    $
    169,260
    
    
    $
    536,160Less:Pending withdrawals
    
    
    (7,387
    )
    
    
    (5,015
    )
    
    
    (12,402
    )Pending deposits
    
    
    1,627
    
    
    
    1,039
    
    
    
    2,666Deferred receipts held in trust
    
    $
    361,140
    
    
    $
    165,284
    
    
    $
    526,424
 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)
 (6) Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care Trusts Corpus-(Continued)
  Perpetual CareTrusts CorpusTrust assets at market value
    
    $
    214,460Less:Pending withdrawals
    
    
    (3,164
    )Pending deposits
    
    
    780Perpetual care trusts corpus
    
    $
    212,076
 Investment and other income, net
  Three Months Ended January 31,2010
    
    
    2009Realized gains from sales of investments
    
    $
    3,076
    
    
    $
    971Realized losses from sales of investments and other
    
    
    (1,947
    )
    
    
    (13,061
    )Interest income, dividends and other ordinary income
    
    
    5,659
    
    
    
    6,737Trust expenses and income taxes
    
    
    (2,538
    )
    
    
    (2,134
    )Net trust investment income (loss)
    
    
    4,250
    
    
    
    (7,487
    )Reclassification to deferred preneed funeral and
cemetery receipts held in trust
    
    
    (1,350
    )
    
    
    9,273Reclassification to perpetual care trusts corpus
    
    
    (2,900
    )
    
    
    (1,786
    )Total deferred preneed funeral and cemetery receipts
held in trust and perpetual care trusts corpus
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    24
    
    
    
    41Total investment and other income, net
    
    $
    24
    
    
    $
    41
 
 (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.
  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)
 (7) Commitments and Contingencies-(Continued)
        Other Litigation
   Other Commitments and Contingencies
  27




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7) Commitments and Contingencies-(Continued)
    (8) Reconciliation of Basic and Diluted Per Share Data
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended January 31, 2010Net earnings
    
    $
    7,487Allocation of earnings to nonvested restricted stock
    
    
    (83
    )Basic earnings per common share:Net earnings available to common shareholders
    
    $
    7,404
    
    
    
    92,053
    
    
    $
    .08Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    181Diluted earnings per common share:Net earnings available to common shareholders
plus stock options assumed exercised
    
    $
    7,404
    
    
    
    92,234
    
    
    $
    .08
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended January 31, 2009Net earnings
    
    $
    4,766Allocation of earnings to nonvested restricted stock
    
    
    (44
    )Basic earnings per common share:Net earnings available to common shareholders
    
    $
    4,722
    
    
    
    91,824
    
    
    $
    .05Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    19Diluted earnings per common share:Net earnings available to common shareholders
plus stock options assumed exercised
    
    $
    4,722
    
    
    
    91,843
    
    
    $
    .05
  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)
 (8) Reconciliation of Basic and Diluted Per Share Data-(Continued)
      (9) Segment Data
  Total RevenueThree MonthsEnded
    
    
    Three Months EndedJanuary 31, 2010
    
    
    January 31, 2009Funeral
    
    $
    68,029
    
    
    $
    68,146Cemetery(1)
    
    
    50,508
    
    
    
    45,690Corporate Trust Management(2)
    
    
    5,863
    
    
    
    5,494Total
    
    $
    124,400
    
    
    $
    119,330
 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)
 (9) Segment Data-(Continued)
 Total Gross ProfitThree Months Ended
    
    
    Three Months EndedJanuary 31, 2010
    
    
    January 31, 2009Funeral
    
    $
    15,347
    
    
    $
    14,842Cemetery(1)
    
    
    4,411
    
    
    
    3,187Corporate Trust Management(2)
    
    
    5,411
    
    
    
    5,054Total
    
    $
    25,169
    
    
    $
    23,083
 Net Total Preneed Merchandise andService Sales(3)Three Months Ended
    
    
    Three Months EndedJanuary 31, 2010
    
    
    January 31, 2009Funeral
    
    $
    18,111
    
    
    $
    18,732Cemetery(1)
    
    
    10,204
    
    
    
    10,779Total
    
    $
    28,315
    
    
    $
    29,511
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of the
cemetery segment and amounted to $2,473 and $1,722 for the three months ended January 31, 2010
and 2009, respectively.(2)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and services trust earnings recognized with respect to preneed contracts
delivered during the period. Trust management fees are established by the Company at rates
consistent with industry norms based on the fair market value of the assets managed and are
paid by the trusts to the Companys subsidiary, Investors Trust, Inc. The trust earnings
represent earnings generated over the life of the preneed contracts delivered during the
relevant periods and distributable to the Company based upon the Companys respective trust
agreements. Trust management fees included in funeral revenue for the three months ended
January 31, 2010 and 2009 were $1,115 and $937, respectively, and funeral trust earnings
recognized with respect to preneed contracts delivered included in funeral revenue for the
three months ended January 31, 2010 and 2009 were $2,963 and $2,667, respectively. Trust
management fees included in cemetery revenue for the three months ended January 31, 2010 and
2009 were $1,189 and $952, respectively, and cemetery trust earnings recognized with respect
to preneed contracts delivered included in cemetery revenue for the three months ended January
31, 2010 and 2009 were $596 and $938, 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. 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)
 (9) Segment Data-(Continued)
  Three Months Ended January 31,2010
    
    
    2009Gross profit for reportable segments
    
    $
    25,169
    
    
    $
    23,083Corporate general and administrative expenses
    
    
    (6,554
    )
    
    
    (7,506
    )Hurricane related charges, net
    
    
    
    
    
    
    (315
    )Net impairment losses on dispositions
    
    
    
    
    
    
    (63
    )Other operating income, net
    
    
    179
    
    
    
    259Interest expense
    
    
    (6,456
    )
    
    
    (7,395
    )Gain on early extinguishment of debt
    
    
    17
    
    
    
    Investment and other income, net
    
    
    24
    
    
    
    41Earnings before income taxes
    
    $
    12,379
    
    
    $
    8,104
 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)
 (10) Supplementary Information
  Three Months Ended January 31,2010
    
    
    2009Service revenueFuneral
    
    $
    45,327
    
    
    $
    45,306Cemetery
    
    
    15,571
    
    
    
    15,10160,898
    
    
    
    60,407Merchandise revenueFuneral
    
    
    25,142
    
    
    
    24,917Cemetery
    
    
    33,141
    
    
    
    29,02758,283
    
    
    
    53,944Other revenueFuneral
    
    
    1,639
    
    
    
    1,527Cemetery
    
    
    3,580
    
    
    
    3,4525,219
    
    
    
    4,979Total revenue
    
    $
    124,400
    
    
    $
    119,330Service costsFuneral
    
    $
    14,705
    
    
    $
    14,668Cemetery
    
    
    9,802
    
    
    
    9,75524,507
    
    
    
    24,423Merchandise costsFuneral
    
    
    14,585
    
    
    
    15,006Cemetery
    
    
    22,204
    
    
    
    19,25036,789
    
    
    
    34,256Facility expensesFuneral
    
    
    23,621
    
    
    
    23,821Cemetery
    
    
    14,314
    
    
    
    13,74737,935
    
    
    
    37,568Total costs
    
    $
    99,231
    
    
    $
    96,247
  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)
 (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 January 31, 2010Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    67,232
    
    
    $
    485
    
    
    $
    4,391
    
    
    $
    
    
    
    $
    72,108Cemetery
    
    
    
    
    
    
    46,676
    
    
    
    572
    
    
    
    5,044
    
    
    
    
    
    
    
    52,292
    
    
    
    113,908
    
    
    
    1,057
    
    
    
    9,435
    
    
    
    
    
    
    
    124,400Costs and expenses:Funeral
    
    
    
    
    
    
    49,441
    
    
    
    263
    
    
    
    3,207
    
    
    
    
    
    
    
    52,911Cemetery
    
    
    
    
    
    
    41,573
    
    
    
    620
    
    
    
    4,127
    
    
    
    
    
    
    
    46,320
    
    
    
    91,014
    
    
    
    883
    
    
    
    7,334
    
    
    
    
    
    
    
    99,231Gross profit
    
    
    
    
    
    
    22,894
    
    
    
    174
    
    
    
    2,101
    
    
    
    
    
    
    
    25,169Corporate general and administrative
expenses
    
    
    (6,554
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,554
    )Hurricane related recoveries (charges), net
    
    
    (54
    )
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    Other operating income, net
    
    
    16
    
    
    
    143
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    179Operating earnings (loss)
    
    
    (6,592
    )
    
    
    23,037
    
    
    
    228
    
    
    
    2,121
    
    
    
    
    
    
    
    18,794Interest expense
    
    
    (487
    )
    
    
    (5,478
    )
    
    
    (8
    )
    
    
    (483
    )
    
    
    
    
    
    
    (6,456
    )Gain on early extinguishment of debt
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Investment and other income, net
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24Equity in subsidiaries
    
    
    11,821
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    (11,901
    )
    
    
    Earnings before income taxes
    
    
    4,783
    
    
    
    17,639
    
    
    
    220
    
    
    
    1,638
    
    
    
    (11,901
    )
    
    
    12,379Income tax expense (benefit)
    
    
    (2,704
    )
    
    
    7,043
    
    
    
    54
    
    
    
    499
    
    
    
    
    
    
    
    4,892Net earnings
    
    
    7,487
    
    
    
    10,596
    
    
    
    166
    
    
    
    1,139
    
    
    
    (11,901
    )
    
    
    7,487Other comprehensive loss, net
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    1
    
    
    
    (1
    )Comprehensive income
    
    $
    7,486
    
    
    $
    10,596
    
    
    $
    166
    
    
    $
    1,138
    
    
    $
    (11,900
    )
    
    $
    7,486
 33




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended January 31, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    66,871
    
    
    $
    399
    
    
    $
    4,480
    
    
    $
    
    
    
    $
    71,750Cemetery
    
    
    
    
    
    
    43,025
    
    
    
    661
    
    
    
    3,894
    
    
    
    
    
    
    
    47,580
    
    
    
    109,896
    
    
    
    1,060
    
    
    
    8,374
    
    
    
    
    
    
    
    119,330Costs and expenses:Funeral
    
    
    
    
    
    
    50,000
    
    
    
    291
    
    
    
    3,204
    
    
    
    
    
    
    
    53,495Cemetery
    
    
    
    
    
    
    38,811
    
    
    
    636
    
    
    
    3,305
    
    
    
    
    
    
    
    42,752
    
    
    
    88,811
    
    
    
    927
    
    
    
    6,509
    
    
    
    
    
    
    
    96,247Gross profit
    
    
    
    
    
    
    21,085
    
    
    
    133
    
    
    
    1,865
    
    
    
    
    
    
    
    23,083Corporate general and administrative
expenses
    
    
    (7,506
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,506
    )Hurricane related charges, net
    
    
    (276
    )
    
    
    (39
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (315
    )Net impairment losses on dispositions
    
    
    (8
    )
    
    
    (55
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63
    )Other operating income (expense), net
    
    
    (2
    )
    
    
    244
    
    
    
    1
    
    
    
    16
    
    
    
    
    
    
    
    259Operating earnings (loss)
    
    
    (7,792
    )
    
    
    21,235
    
    
    
    134
    
    
    
    1,881
    
    
    
    
    
    
    
    15,458Interest expense
    
    
    (666
    )
    
    
    (6,165
    )
    
    
    (36
    )
    
    
    (528
    )
    
    
    
    
    
    
    (7,395
    )Investment and other income, net
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Equity in subsidiaries
    
    
    11,171
    
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    (11,306
    )
    
    
    Earnings before income taxes
    
    
    2,754
    
    
    
    15,205
    
    
    
    98
    
    
    
    1,353
    
    
    
    (11,306
    )
    
    
    8,104Income tax expense (benefit)
    
    
    (2,012
    )
    
    
    4,836
    
    
    
    19
    
    
    
    495
    
    
    
    
    
    
    
    3,338Net earnings
    
    
    4,766
    
    
    
    10,369
    
    
    
    79
    
    
    
    858
    
    
    
    (11,306
    )
    
    
    4,766Other comprehensive income, net
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (3
    )
    
    
    3Comprehensive income
    
    $
    4,769
    
    
    $
    10,369
    
    
    $
    79
    
    
    $
    861
    
    
    $
    (11,309
    )
    
    $
    4,769
 34




---



##### 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
 January 31, 2010Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    44,418
    
    
    $
    6,023
    
    
    $
    36
    
    
    $
    2,303
    
    
    $
    
    
    
    $
    52,780Certificates of deposit
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Receivables, net of allowances
    
    
    6,968
    
    
    
    47,689
    
    
    
    447
    
    
    
    4,227
    
    
    
    
    
    
    
    59,331Inventories
    
    
    263
    
    
    
    33,440
    
    
    
    336
    
    
    
    1,908
    
    
    
    
    
    
    
    35,947Prepaid expenses
    
    
    1,516
    
    
    
    8,068
    
    
    
    61
    
    
    
    1,929
    
    
    
    
    
    
    
    11,574Deferred income taxes, net
    
    
    9,932
    
    
    
    10,296
    
    
    
    43
    
    
    
    1,374
    
    
    
    
    
    
    
    21,645Total current assets
    
    
    68,097
    
    
    
    105,516
    
    
    
    923
    
    
    
    11,741
    
    
    
    
    
    
    
    186,277Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    48,113
    
    
    
    397
    
    
    
    13,552
    
    
    
    
    
    
    
    62,062Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    387,954
    
    
    
    
    
    
    
    9,500
    
    
    
    
    
    
    
    397,454Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    189,112
    
    
    
    1,085
    
    
    
    6,600
    
    
    
    
    
    
    
    196,797Goodwill
    
    
    
    
    
    
    227,401
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,236Cemetery property, at cost
    
    
    
    
    
    
    348,668
    
    
    
    11,286
    
    
    
    26,235
    
    
    
    
    
    
    
    386,189Property and equipment, at cost
    
    
    54,268
    
    
    
    469,159
    
    
    
    2,208
    
    
    
    38,195
    
    
    
    
    
    
    
    563,830Less accumulated depreciation
    
    
    37,134
    
    
    
    213,539
    
    
    
    1,039
    
    
    
    15,522
    
    
    
    
    
    
    
    267,234Net property and equipment
    
    
    17,134
    
    
    
    255,620
    
    
    
    1,169
    
    
    
    22,673
    
    
    
    
    
    
    
    296,596Deferred income taxes, net
    
    
    
    
    
    
    105,844
    
    
    
    
    
    
    
    10,994
    
    
    
    (6,972
    )
    
    
    109,866Cemetery perpetual care trust investments
    
    
    
    
    
    
    202,202
    
    
    
    8,462
    
    
    
    3,796
    
    
    
    
    
    
    
    214,460Other assets
    
    
    7,975
    
    
    
    5,113
    
    
    
    6
    
    
    
    1,045
    
    
    
    
    
    
    
    14,139Intercompany receivables
    
    
    774,766
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (774,766
    )
    
    
    Equity in subsidiaries
    
    
    16,289
    
    
    
    8,201
    
    
    
    
    
    
    
    
    
    
    
    (24,490
    )
    
    
    Total assets
    
    $
    884,261
    
    
    $
    1,883,744
    
    
    $
    23,376
    
    
    $
    125,923
    
    
    $
    (806,228
    )
    
    $
    2,111,076LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    3
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3Accounts payable, accrued expenses and
other current liabilities
    
    
    14,528
    
    
    
    68,931
    
    
    
    220
    
    
    
    4,606
    
    
    
    
    
    
    
    88,285Total current liabilities
    
    
    14,531
    
    
    
    68,931
    
    
    
    220
    
    
    
    4,606
    
    
    
    
    
    
    
    88,288Long-term debt, less current maturities
    
    
    339,934
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,934Deferred income taxes
    
    
    3,996
    
    
    
    
    
    
    
    2,976
    
    
    
    
    
    
    
    (6,972
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    751,049
    
    
    
    3,082
    
    
    
    20,635
    
    
    
    (774,766
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    198,957
    
    
    
    
    
    
    
    46,627
    
    
    
    
    
    
    
    245,584Deferred preneed cemetery revenue
    
    
    
    
    
    
    236,145
    
    
    
    278
    
    
    
    26,965
    
    
    
    
    
    
    
    263,388Deferred preneed funeral and cemetery
receipts held in trust
    
    
    
    
    
    
    519,327
    
    
    
    1,049
    
    
    
    6,048
    
    
    
    
    
    
    
    526,424Perpetual care trusts corpus
    
    
    
    
    
    
    199,846
    
    
    
    8,455
    
    
    
    3,775
    
    
    
    
    
    
    
    212,076Other long-term liabilities
    
    
    17,163
    
    
    
    3,776
    
    
    
    
    
    
    
    93
    
    
    
    
    
    
    
    21,032Negative equity in subsidiaries
    
    
    94,287
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (94,287
    )
    
    
    Total liabilities
    
    
    469,911
    
    
    
    1,978,031
    
    
    
    16,060
    
    
    
    108,749
    
    
    
    (876,025
    )
    
    
    1,696,726Common stock
    
    
    93,122
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    93,122Other
    
    
    321,194
    
    
    
    (94,389
    )
    
    
    6,992
    
    
    
    17,088
    
    
    
    70,309
    
    
    
    321,194Accumulated other comprehensive income
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    (34
    )
    
    
    34Total shareholders equity
    
    
    414,350
    
    
    
    (94,287
    )
    
    
    7,316
    
    
    
    17,174
    
    
    
    69,797
    
    
    
    414,350Total liabilities and shareholders equity
    
    $
    884,261
    
    
    $
    1,883,744
    
    
    $
    23,376
    
    
    $
    125,923
    
    
    $
    (806,228
    )
    
    $
    2,111,076
 35




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 October 31, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    56,734
    
    
    $
    5,096
    
    
    $
    52
    
    
    $
    926
    
    
    $
    
    
    
    $
    62,808Receivables, net of allowances
    
    
    7,062
    
    
    
    47,388
    
    
    
    504
    
    
    
    4,485
    
    
    
    
    
    
    
    59,439Inventories
    
    
    269
    
    
    
    33,440
    
    
    
    312
    
    
    
    2,135
    
    
    
    
    
    
    
    36,156Prepaid expenses
    
    
    1,218
    
    
    
    3,804
    
    
    
    38
    
    
    
    1,688
    
    
    
    
    
    
    
    6,748Deferred income taxes, net
    
    
    9,006
    
    
    
    11,168
    
    
    
    47
    
    
    
    1,494
    
    
    
    
    
    
    
    21,715Total current assets
    
    
    74,289
    
    
    
    100,896
    
    
    
    953
    
    
    
    10,728
    
    
    
    
    
    
    
    186,866Receivables due beyond one year, net of allowances
    
    
    
    
    
    
    48,783
    
    
    
    420
    
    
    
    13,808
    
    
    
    
    
    
    
    63,011Preneed funeral receivables and trust investments
    
    
    
    
    
    
    379,899
    
    
    
    
    
    
    
    9,613
    
    
    
    
    
    
    
    389,512Preneed cemetery receivables and trust investments
    
    
    
    
    
    
    185,447
    
    
    
    1,124
    
    
    
    6,846
    
    
    
    
    
    
    
    193,417Goodwill
    
    
    
    
    
    
    227,401
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,236Cemetery property, at cost
    
    
    
    
    
    
    348,627
    
    
    
    11,315
    
    
    
    26,035
    
    
    
    
    
    
    
    385,977Property and equipment, at cost
    
    
    53,956
    
    
    
    466,187
    
    
    
    2,183
    
    
    
    38,136
    
    
    
    
    
    
    
    560,462Less accumulated depreciation
    
    
    36,015
    
    
    
    208,806
    
    
    
    994
    
    
    
    15,190
    
    
    
    
    
    
    
    261,005Net property and equipment
    
    
    17,941
    
    
    
    257,381
    
    
    
    1,189
    
    
    
    22,946
    
    
    
    
    
    
    
    299,457Deferred income taxes, net
    
    
    
    
    
    
    107,636
    
    
    
    
    
    
    
    10,415
    
    
    
    (4,653
    )
    
    
    113,398Cemetery perpetual care trust investments
    
    
    
    
    
    
    193,616
    
    
    
    8,207
    
    
    
    3,653
    
    
    
    
    
    
    
    205,476Other assets
    
    
    8,402
    
    
    
    5,196
    
    
    
    6
    
    
    
    1,050
    
    
    
    
    
    
    
    14,654Intercompany receivables
    
    
    771,490
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (771,490
    )
    
    
    Equity in subsidiaries
    
    
    15,065
    
    
    
    8,121
    
    
    
    
    
    
    
    
    
    
    
    (23,186
    )
    
    
    Total assets
    
    $
    887,187
    
    
    $
    1,863,003
    
    
    $
    23,262
    
    
    $
    124,881
    
    
    $
    (799,329
    )
    
    $
    2,099,004LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5Accounts payable, accrued expenses and other current liabilities
    
    
    15,209
    
    
    
    75,920
    
    
    
    199
    
    
    
    4,678
    
    
    
    
    
    
    
    96,006Total current liabilities
    
    
    15,214
    
    
    
    75,920
    
    
    
    199
    
    
    
    4,678
    
    
    
    
    
    
    
    96,011Long-term debt, less current maturities
    
    
    339,721
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,721Deferred income taxes
    
    
    1,672
    
    
    
    
    
    
    
    2,981
    
    
    
    
    
    
    
    (4,653
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    747,847
    
    
    
    3,402
    
    
    
    20,241
    
    
    
    (771,490
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    200,990
    
    
    
    
    
    
    
    46,835
    
    
    
    
    
    
    
    247,825Deferred preneed cemetery revenue
    
    
    
    
    
    
    239,177
    
    
    
    277
    
    
    
    27,510
    
    
    
    
    
    
    
    266,964Deferred preneed funeral and cemetery receipts held in trust
    
    
    
    
    
    
    507,912
    
    
    
    1,045
    
    
    
    5,830
    
    
    
    
    
    
    
    514,787Perpetual care trusts corpus
    
    
    
    
    
    
    192,324
    
    
    
    8,208
    
    
    
    3,636
    
    
    
    
    
    
    
    204,168Other long-term liabilities
    
    
    17,040
    
    
    
    3,716
    
    
    
    
    
    
    
    115
    
    
    
    
    
    
    
    20,871Negative equity in subsidiaries
    
    
    104,883
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (104,883
    )
    
    
    Total liabilities
    
    
    478,530
    
    
    
    1,967,886
    
    
    
    16,112
    
    
    
    108,845
    
    
    
    (881,026
    )
    
    
    1,690,347Common stock
    
    
    92,684
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    92,684Other
    
    
    315,938
    
    
    
    (104,985
    )
    
    
    6,826
    
    
    
    15,949
    
    
    
    82,210
    
    
    
    315,938Accumulated other comprehensive income
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    (35
    )
    
    
    35Total shareholders equity
    
    
    408,657
    
    
    
    (104,883
    )
    
    
    7,150
    
    
    
    16,036
    
    
    
    81,697
    
    
    
    408,657Total liabilities and shareholders equity
    
    $
    887,187
    
    
    $
    1,863,003
    
    
    $
    23,262
    
    
    $
    124,881
    
    
    $
    (799,329
    )
    
    $
    2,099,004
 36




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Three Months Ended January 31, 2010Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating activities
    
    $
    (131
    )
    
    $
    1,411
    
    
    $
    380
    
    
    $
    1,113
    
    
    $
    
    
    
    $
    2,773Cash flows from investing activities:Purchases of certificates of deposit
    
    
    (5,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,000
    )Additions to property and equipment
    
    
    (366
    )
    
    
    (3,725
    )
    
    
    (76
    )
    
    
    (130
    )
    
    
    
    
    
    
    (4,297
    )Other
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39Net cash used in investing activities
    
    
    (5,366
    )
    
    
    (3,686
    )
    
    
    (76
    )
    
    
    (130
    )
    
    
    
    
    
    
    (9,258
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (846
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (846
    )Intercompany receivables (payables)
    
    
    (3,276
    )
    
    
    3,202
    
    
    
    (320
    )
    
    
    394
    
    
    
    
    
    
    
    Retirement of common stock warrants
    
    
    (107
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107
    )Issuance of common stock
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115Retirement of call options
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107Debt refinancing costs
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38
    )Dividends
    
    
    (2,794
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,794
    )Excess tax benefits from share-based payment arrangements
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20Net cash provided by (used in) financing activities
    
    
    (6,819
    )
    
    
    3,202
    
    
    
    (320
    )
    
    
    394
    
    
    
    
    
    
    
    (3,543
    )Net increase (decrease) in cash
    
    
    (12,316
    )
    
    
    927
    
    
    
    (16
    )
    
    
    1,377
    
    
    
    
    
    
    
    (10,028
    )Cash and cash equivalents, beginning of period
    
    
    56,734
    
    
    
    5,096
    
    
    
    52
    
    
    
    926
    
    
    
    
    
    
    
    62,808Cash and cash equivalents, end of period
    
    $
    44,418
    
    
    $
    6,023
    
    
    $
    36
    
    
    $
    2,303
    
    
    $
    
    
    
    $
    52,780
 37




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Three Months Ended January 31, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating activities
    
    $
    (2,134
    )
    
    $
    7,005
    
    
    $
    103
    
    
    $
    2,310
    
    
    $
    
    
    
    $
    7,284Cash flows from investing activities:Proceeds from sale of assets
    
    
    292
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    292Purchase of subsidiaries and other investments, net of cash acquired
    
    
    
    
    
    
    (1,623
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,623
    )Additions to property and equipment
    
    
    (1,908
    )
    
    
    (2,587
    )
    
    
    (5
    )
    
    
    (289
    )
    
    
    
    
    
    
    (4,789
    )Other
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net cash used in investing activities
    
    
    (1,616
    )
    
    
    (4,209
    )
    
    
    (5
    )
    
    
    (289
    )
    
    
    
    
    
    
    (6,119
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )Intercompany receivables (payables)
    
    
    3,690
    
    
    
    (744
    )
    
    
    (86
    )
    
    
    (2,860
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    83
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83Dividends
    
    
    (2,318
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,318
    )Net cash provided by (used in) financing activities
    
    
    1,446
    
    
    
    (744
    )
    
    
    (86
    )
    
    
    (2,860
    )
    
    
    
    
    
    
    (2,244
    )Net increase (decrease) in cash
    
    
    (2,304
    )
    
    
    2,052
    
    
    
    12
    
    
    
    (839
    )
    
    
    
    
    
    
    (1,079
    )Cash and cash equivalents, beginning of period
    
    
    65,593
    
    
    
    4,332
    
    
    
    22
    
    
    
    2,627
    
    
    
    
    
    
    
    72,574Cash and cash equivalents, end of period
    
    $
    63,289
    
    
    $
    6,384
    
    
    $
    34
    
    
    $
    1,788
    
    
    $
    
    
    
    $
    71,495
 38




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Consolidated Comprehensive Income
  Three Months Ended January 31,2010
    
    
    2009Net earnings
    
    $
    7,487
    
    
    $
    4,766Other comprehensive income (loss):Unrealized appreciation (depreciation) of investments, net of deferred tax (expense) benefit of $1 and
($2), respectively
    
    
    (1
    )
    
    
    3(Increase) reduction in net unrealized losses associated with available-for-sale securities of the trusts
    
    
    20,230
    
    
    
    (35,915
    )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
    
    
    (20,230
    )
    
    
    35,915Total other comprehensive income (loss)
    
    
    (1
    )
    
    
    3Total comprehensive income
    
    $
    7,486
    
    
    $
    4,769
 (13)
    
    Long-term Debt
 January 31, 2010
    
    
    October 31, 2009Long-term debt:3.125% senior convertible notes due
2014, net of unamortized discount of
$12,156 and $12,912 as of January 31,
2010 and October 31, 2009, respectively
    
    $
    74,260
    
    
    $
    74,5043.375% senior convertible notes due
2016, net of unamortized discount of
$14,400 and $14,858 as of January 31,
2010 and October 31, 2009, respectively
    
    
    65,584
    
    
    
    65,127Senior secured revolving credit facility
    
    
    
    
    
    
    6.25% senior notes due 2013
    
    
    200,000
    
    
    
    200,000Other, principally seller financing of
acquired operations or assumption upon
acquisition, weighted average interest
rate of 8.0% as of January 31, 2010 and
October 31, 2009, partially secured by
assets of subsidiaries, with maturities
through 2022
    
    
    93
    
    
    
    95Total long-term debt
    
    
    339,937
    
    
    
    339,726Less current maturities
    
    
    3
    
    
    
    5$
    339,934
    
    
    $
    339,721
 Fair Value
  Senior Convertible Notes
  39




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (13)
    
    Long-term Debt(Continued)
  Adoption of Convertible Debt Guidance
      40




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (13)
    
    Long-term Debt(Continued)
       (14)
    
    Income Taxes
  (15)
    
    Subsequent Events
  41




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (15)
    
    Subsequent Events(Continued)
  42




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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
   43




---



##### Table of Contents



Funeral and CemeteryMerchandise and
    
    
    Cemetery PerpetualServices Trusts
    
    
    Care TrustsFor the quarter ended January 31, 2010
    
    
    4.1
    %
    
    
    5.0
    %For the last twelve months ended January 31, 2010
    
    
    28.8
    %
    
    
    32.8
    %For the last five years ended January 31, 2010
    
    
    (1.3
    )%
    
    
    2.1
    %For the last ten years ended January 31, 2010
    
    
    1.9
    %
    
    
    2.7
    %
  44




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##### Table of Contents



Critical Accounting Policies
  Results of Operations
  Three Months Ended January 31, 2010 Compared to Three Months Ended January 31, 2009
 Funeral Operations
 Three Months Ended January 31,Increase2010
    
    
    2009
    
    
    (Decrease)(In millions)Funeral Revenue:Funeral Home Locations
    
    $
    68.0
    
    
    $
    68.1
    
    
    $
    (.1
    )Corporate Trust Management (1)
    
    
    4.1
    
    
    
    3.6
    
    
    
    .5Total Funeral Revenue
    
    $
    72.1
    
    
    $
    71.7
    
    
    $
    .4Funeral Costs:Funeral Home Locations
    
    $
    52.6
    
    
    $
    53.2
    
    
    $
    (.6
    )Corporate Trust Management (1)
    
    
    .3
    
    
    
    .2
    
    
    
    .1Total Funeral Costs
    
    $
    52.9
    
    
    $
    53.4
    
    
    $
    (.5
    )Funeral Gross Profit:Funeral Home Locations
    
    $
    15.4
    
    
    $
    14.9
    
    
    $
    .5Corporate Trust Management (1)
    
    
    3.8
    
    
    
    3.4
    
    
    
    .4Total Funeral Gross Profit
    
    $
    19.2
    
    
    $
    18.3
    
    
    $
    .9
 Same-Store Analysis for the Three Months Ended January 31, 2010 and 2009
 Change in Average Revenue
    
    Change in Same-StorePer Funeral Service
    
    Funeral Services
    
    Same-Store Cremation Rate2010
    
    2009(.6)% (1)
    
    
    (1.3
    )%
    
    
    41.4
    %
    
    
    40.3
    %
 
 (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 45




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##### Table of Contents



established by the Company at rates consistent with industry norms based on the fair market
value of assets managed and are paid by the trusts to our subsidiary, Investors Trust, Inc. The
trust earnings represent the amount of distributable earnings as stipulated by our respective
trust agreements that are generated by the trusts over the life of the preneed contracts and
allocated to those products and services delivered during the relevant periods. See Notes 3 and
6 to the condensed consolidated financial statements included herein for information regarding
the cost basis and market value of the trust assets and current performance of the trusts (i.e.,
current realized gains and losses, interest income and dividends). Trust management fees
included in funeral revenue for the three months ended January 31, 2010 and 2009 were $1.1
million and $0.9 million, respectively. Funeral trust earnings recognized in funeral revenue
for the three months ended January 31, 2010 and 2009 were $3.0 million and $2.7 million,
respectively.   Cemetery Operations
 Three Months Ended January 31,Increase2010
    
    
    2009
    
    
    (Decrease)(In millions)Cemetery Revenue:Cemetery Locations
    
    $
    50.5
    
    
    $
    45.7
    
    
    $
    4.8Corporate Trust Management (1)
    
    
    1.8
    
    
    
    1.9
    
    
    
    (.1
    )Total Cemetery Revenue
    
    $
    52.3
    
    
    $
    47.6
    
    
    $
    4.7Cemetery Costs:Cemetery Locations
    
    $
    46.1
    
    
    $
    42.5
    
    
    $
    3.6Corporate Trust Management (1)
    
    
    .2
    
    
    
    .3
    
    
    
    (.1
    )Total Cemetery Costs
    
    $
    46.3
    
    
    $
    42.8
    
    
    $
    3.5Cemetery Gross Profit:Cemetery Locations
    
    $
    4.4
    
    
    $
    3.2
    
    
    $
    1.2Corporate Trust Management (1)
    
    
    1.6
    
    
    
    1.6
    
    
    
    Total Cemetery Gross Profit
    
    $
    6.0
    
    
    $
    4.8
    
    
    $
    1.2
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
distributable earnings as stipulated by our respective trust agreements that are generated by
the trusts over the life of the preneed contracts and allocated to those products and services
delivered during the relevant periods. See Notes 4 and 6 to the condensed consolidated
financial statements included herein for information 46




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##### Table of Contents



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 January 31, 2010 and
2009 were $1.2 million and $1.0 million, respectively, and cemetery trust earnings recognized
included in cemetery revenue for the three months ended January 31, 2010 and 2009 were $0.6
million and $0.9 million, respectively. Perpetual care trust earnings of $2.4 million and $1.7
million, respectively, are included in the revenues and gross profit of the cemetery segment.
See Notes 5 and 6 to the condensed consolidated financial statements included herein for
information regarding the cemetery perpetual care trusts.   Other
       47




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##### Table of Contents



Preneed Sales into the Backlog
   Liquidity and Capital Resources
 General
     48




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##### Table of Contents



Cash Flow
    49




---



##### Table of Contents



Contractual Obligations and Commercial Commitments
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 year
    
    
    1  3 years
    
    
    3  5 years
    
    
    5 yearsLong-term debt obligations (1)
    
    $
    366.5
    
    
    $
    
    
    
    $
    
    
    
    $
    286.4
    
    
    $
    80.1Interest on long-term debt (2)
    
    
    73.5
    
    
    
    17.9
    
    
    
    35.8
    
    
    
    15.7
    
    
    
    4.1Operating and capital lease obligations (3)
    
    
    29.9
    
    
    
    3.4
    
    
    
    6.0
    
    
    
    3.8
    
    
    
    16.7Purchase obligations (4)
    
    
    2.7
    
    
    
    2.7
    
    
    
    
    
    
    
    
    
    
    
    Non-competition and other agreements (5)
    
    
    1.4
    
    
    
    .3
    
    
    
    .5
    
    
    
    .2
    
    
    
    .4$
    474.0
    
    
    $
    24.3
    
    
    $
    42.3
    
    
    $
    306.1
    
    
    $
    101.3
 
 (1)
    
    See below for a breakdown of our future scheduled principal payments and
maturities of our long-term debt by type as of January 31, 2010.(2)
    
    Includes contractual interest payments for our senior convertible notes, senior
notes and third-party debt.(3)
    
    Our noncancellable operating leases are primarily for land and buildings and expire
over the next one to 14 years, except for eight leases that expire between 2032 and 2039. Our
future minimum lease payments for all operating leases as of January 31, 2010 are $3.4
million, $3.3 million, $2.7 million, $2.1 million, $1.7 million and $16.7 million for the
years ending October 31, 2010, 2011, 2012, 2013, 2014 and later years, respectively.(4)
    
    Represents a construction contract for a funeral home.(5)
    
    This category includes payments pursuant to non-competition agreements with prior
owners and key employees of acquired businesses and separation pay related to former executive
officers.  Expiration by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Contingent Obligations
    
    Total
    
    
    year
    
    
    1  3 years
    
    
    3  5 years
    
    
    yearsCemetery perpetual
care trust funding
obligations
(1)
    
    $
    13.6
    
    
    $
    13.6
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term obligations
related to uncertain
tax positions
(2)
    
    
    3.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.6$
    17.2
    
    
    $
    13.6
    
    
    $
    
    
    
    $
    
    
    
    $
    3.6
 
 (1)
    
    In those states where we have withdrawn realized net capital gains in the past
from our cemetery perpetual care trusts, regulators may seek replenishment of the realized net
capital losses either by requiring a cash deposit to the trust or by prohibiting or
restricting withdrawals of future earnings until they cover the loss. The estimated probable
funding obligation in the cemetery perpetual care trusts in these states was $13.6 million as
of January 31, 2010. As of January 31, 2010, we had unrealized losses of $44.8 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 $3.1 million.(2)
    
    In accordance with the required accounting guidance on uncertain tax positions, as
of January 31, 2010, we have recorded $3.6 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 50




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##### Table of Contents



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
    
    
    Total2010

    $
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2011

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2012

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2013

    
    
    
    
    
    
    
    
    200.0
    
    
    
    
    
    
    
    200.02014

    
    
    
    
    86.4
    
    
    
    
    
    
    
    
    
    
    
    86.4Thereafter

    
    
    
    
    80.0
    
    
    
    
    
    
    
    .1
    
    
    
    80.1Total long-term debt

    $
    
    
    $
    166.4
    
    
    $
    200.0
    
    
    $
    .1
    
    
    $
    366.5
 Off-Balance Sheet Arrangements
  (1)
    
    the $24.8 million bond we are required to maintain to guarantee our obligations
relating to funds we withdrew in fiscal year 2001 from our preneed funeral trusts in
Florida, which is discussed above and in Note 20 to the consolidated financial
statements in our 2009 Form 10-K; and(2)
    
    the insurance-funded preneed funeral contracts, which will be funded by life
insurance or annuity contracts issued by third-party insurers, are not reflected in our
condensed consolidated balance sheets, and are discussed in Note 2(i) to the
consolidated financial statements in our 2009 Form 10-K.
 Recent Accounting Standards
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  51




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 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(1)November 1,
2009 through
November 30, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    26,495,706December 1, 2009
through December
31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    26,495,706January 1, 2010
through January 31,
2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    26,495,706Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    26,495,706
 52




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##### Table of Contents



(1)
    
    We announced a $25.0 million stock repurchase program in September 2007, which
was increased by $25.0 million in December 2007 and June 2008, resulting in a $75.0 million
program. 
 Item 6. Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
April 3, 2008 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended April 30, 2008)3.2
    
    By-laws of the Company, as amended and restated as of September 8, 2008 (incorporated by
reference to Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended
July 31, 2008)4.1
    
    See Exhibits 3.1 and 3.2 for provisions of the Companys Amended and Restated Articles of
Incorporation, as amended, and By-laws, as amended, defining the rights of holders of Class A
and Class B common stock4.2
    
    Specimen of Class A common stock certificate (incorporated by reference to Exhibit 3 to the
Companys Registration Statement on Form 8-A/A filed with the Commission on June 21, 2007)4.3
    
    Second Amended and Restated Credit Agreement dated June 2, 2009 by and among the Company,
Empresas Stewart-Cementerios and Empresas Stewart-Funerarias, as Borrowers, Bank of America,
N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer and The
Other Lenders party hereto (incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K filed June 3, 2009)4.4
    
    Indenture dated as of February 11, 2005 by and among Stewart Enterprises, Inc., the
Guarantors thereunder and U.S. Bank National Association, as Trustee, with respect to the 6.25
percent Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K filed February 14, 2005)4.5
    
    Form of 6.25 percent Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed February 14, 2005)4.6
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.125 percent Senior
Convertible Notes due 2014 (including Form of 3.125 percent Senior Convertible Notes due 2014)
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed
June 27, 2007)4.7
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.375 percent Senior
Convertible Notes due 2016 (including Form of 3.375 percent Senior Convertible Notes due 2016)
(incorporated by reference to Exhibit 4.2 to the Companys Current Report on Form 8-K filed
June 27, 2007)31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
 53




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.March 10, 2010
    /s/ THOMAS M. KITCHENThomas M. KitchenSenior Executive Vice President and
Chief Financial OfficerMarch 10, 2010
    /s/ ANGELA M. LACOURAngela M. LacourVice President
Corporate Controller
Chief Accounting Officer 54




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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
 55