##### 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, 2006
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For
the transition period from

to
 
 Commission File Number: 1-15449
 
 STEWART ENTERPRISES, INC.
  LOUISIANA
    
    72-0693290(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)1333 South Clearview ParkwayJefferson, Louisiana
    
    70121(Address of principal executive offices)
    
    (Zip Code)
 
 Registrants telephone number, including area code: (504) 729-1400
 
 o þ
 o þ o
 Yes o No þ




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 INDEX
 PagePart I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed
Consolidated Statements of Earnings 
Three Months Ended January 31, 2006 and 2005
    
    
    3Condensed
Consolidated Balance Sheets 
January 31, 2006 and October 31, 2005
    
    
    4Condensed
Consolidated Statement of Shareholders Equity 
Three Months January 31, 2006
    
    
    6Condensed
Consolidated Statements of Cash Flows 
Three Months Ended January 31, 2006 and 2005
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    38Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    48Item 4. Controls and Procedures
    
    
    48Part II. Other InformationItem 1. Legal Proceedings
    
    
    50Item 1A. Risk Factors
    
    
    50Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    50Item 5. Other Information
    
    
    50Item 6. Exhibits
    
    
    51Signatures
    
    
    53Certification of President & CEO Pursuant to Section 302Certification of EVP & CFO Pursuant to Section 302Certifications Pursuant to Section 906
  2




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended January 31,2006
    
    
    2005(Restated)(Note 1)Revenues:Funeral
    
    $
    71,789
    
    
    $
    69,716Cemetery
    
    
    54,816
    
    
    
    52,852126,605
    
    
    
    122,568Costs and expenses:Funeral
    
    
    53,973
    
    
    
    51,918Cemetery
    
    
    43,553
    
    
    
    43,40897,526
    
    
    
    95,326Gross profit
    
    
    29,079
    
    
    
    27,242Corporate general and administrative expenses
    
    
    (7,219
    )
    
    
    (4,216
    )Hurricane related charges, net
    
    
    (2,638
    )
    
    
    Separation charges
    
    
    (154
    )
    
    
    Gains on dispositions and impairment (losses), net
    
    
    298
    
    
    
    878Other operating income, net
    
    
    978
    
    
    
    239Operating earnings
    
    
    20,344
    
    
    
    24,143Interest expense
    
    
    (7,528
    )
    
    
    (10,376
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (2,651
    )Investment and other income, net
    
    
    468
    
    
    
    108Earnings from continuing operations before income taxes
    
    
    13,284
    
    
    
    11,224Income taxes
    
    
    4,895
    
    
    
    3,835Earnings from continuing operations
    
    
    8,389
    
    
    
    7,389Discontinued operations:Earnings from discontinued operations before income taxes
    
    
    
    
    
    
    530Income taxes
    
    
    
    
    
    
    16Earnings from discontinued operations
    
    
    
    
    
    
    514Earnings before cumulative effect of change in accounting principle
    
    
    8,389
    
    
    
    7,903Cumulative effect of change in accounting principle (net of
$101,061 income tax benefit)
    
    
    
    
    
    
    (153,180
    )Net earnings (loss)
    
    $
    8,389
    
    
    $
    (145,277
    )Basic earnings (loss) per common share:Earnings from continuing operations before cumulative effect
of change in accounting principle
    
    $
    .08
    
    
    $
    .07Earnings from discontinued operations
    
    
    
    
    
    
    Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (1.40
    )Net earnings (loss)
    
    $
    .08
    
    
    $
    (1.33
    )Diluted earnings (loss) per common share:Earnings from continuing operations before cumulative effect
of change in accounting principle
    
    $
    .08
    
    
    $
    .07Earnings from discontinued operations
    
    
    
    
    
    
    Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (1.40
    )Net earnings (loss)
    
    $
    .08
    
    
    $
    (1.33
    )Weighted average common shares outstanding (in thousands):Basic
    
    
    108,504
    
    
    
    109,087Diluted
    
    
    108,522
    
    
    
    109,450Dividends declared per common share
    
    $
    .025
    
    
    $
    
  3




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 January 31,
    
    
    October 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    64,572
    
    
    $
    40,605Marketable securities
    
    
    1,307
    
    
    
    1,302Receivables, net of allowances
    
    
    67,208
    
    
    
    79,897Inventories
    
    
    32,282
    
    
    
    33,480Prepaid expenses
    
    
    4,911
    
    
    
    2,766Deferred income taxes, net
    
    
    8,101
    
    
    
    11,116Total current assets
    
    
    178,381
    
    
    
    169,166Receivables due beyond one year, net of allowances
    
    
    70,783
    
    
    
    68,935Preneed funeral receivables and trust investments
    
    
    513,338
    
    
    
    503,468Preneed cemetery receivables and trust investments
    
    
    252,719
    
    
    
    257,437Goodwill
    
    
    272,729
    
    
    
    272,729Cemetery property, at cost
    
    
    366,384
    
    
    
    366,776Property and equipment, at cost:Land
    
    
    41,495
    
    
    
    41,191Buildings
    
    
    289,416
    
    
    
    288,005Equipment and other
    
    
    161,075
    
    
    
    158,285491,986
    
    
    
    487,481Less accumulated depreciation
    
    
    200,831
    
    
    
    195,845Net property and equipment
    
    
    291,155
    
    
    
    291,636Deferred income taxes, net
    
    
    186,910
    
    
    
    187,573Cemetery perpetual care trust investments
    
    
    218,963
    
    
    
    213,088Other assets
    
    
    19,573
    
    
    
    20,318Total assets
    
    $
    2,370,935
    
    
    $
    2,351,126
  4




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 January 31,
    
    
    October 31,2006
    
    
    2005LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    3,142
    
    
    $
    3,168Accounts payable
    
    
    10,472
    
    
    
    10,758Accrued payroll
    
    
    11,285
    
    
    
    12,306Accrued insurance
    
    
    21,269
    
    
    
    20,757Accrued interest
    
    
    8,949
    
    
    
    5,236Other current liabilities
    
    
    16,475
    
    
    
    24,681Income taxes payable
    
    
    1,296
    
    
    
    886Total current liabilities
    
    
    72,888
    
    
    
    77,792Long-term debt, less current maturities
    
    
    405,994
    
    
    
    406,859Deferred preneed funeral revenue
    
    
    280,867
    
    
    
    284,464Deferred preneed cemetery revenue
    
    
    299,602
    
    
    
    292,511Non-controlling interest in funeral and cemetery trusts
    
    
    636,895
    
    
    
    626,841Other long-term liabilities
    
    
    11,784
    
    
    
    11,442Total liabilities
    
    
    1,708,030
    
    
    
    1,699,909Commitments and contingencies
    
    
    
    
    
    
    Non-controlling interest in perpetual care trusts
    
    
    217,263
    
    
    
    211,764Shareholders equity:Preferred stock, $1.00 par value, 5,000,000 shares
authorized; no shares issued
    
    
    
    
    
    
    Common stock, $1.00 stated value:Class A authorized 150,000,000 shares issued
and outstanding 105,115,187 shares at January
31, 2006 and October 31, 2005
    
    
    105,115
    
    
    
    105,115Class B authorized 5,000,000 shares issued
and outstanding 3,555,020 shares at January
31, 2006 and October 31, 2005, 10 votes per
share, convertible into an equal number of
Class A shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    665,370
    
    
    
    667,663Accumulated deficit
    
    
    (327,919
    )
    
    
    (336,308
    )Unearned restricted stock compensation
    
    
    (474
    )
    
    
    (569
    )Accumulated other comprehensive loss:Unrealized depreciation of investments
    
    
    (5
    )
    
    
    (3
    )Total accumulated other comprehensive losses
    
    
    (5
    )
    
    
    (3
    )Total shareholders equity
    
    
    445,642
    
    
    
    439,453Total liabilities and shareholders equity
    
    $
    2,370,935
    
    
    $
    2,351,126
  5




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
(Dollars in thousands, except per share amounts)
 Unearned
    
    
    UnrealizedAdditional
    
    
    
    
    
    Restricted
    
    
    Depreciation
    
    

    TotalCommon
    
    
    Paid-In
    
    
    Accumulated

    
    
    Stock
    
    
    of
    
    

    ShareholdersStock(1)
    
    
    Capital
    
    
    Deficit

    
    
    Compensation
    
    
    Investments
    
    

    EquityBalance October 31, 2005
    
    $
    108,670
    
    
    $
    667,663
    
    
    $
    (336,308
    )
    
    $
    (569
    )
    
    $
    (3
    )
    
    $
    439,453Comprehensive income (loss):Net earnings
    
    
    
    
    
    
    
    
    
    
    8,389
    
    
    
    
    
    
    
    
    
    
    
    8,389Other comprehensive loss:Unrealized depreciation of
investments, net of deferred
tax benefit of $1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Total other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    8,389
    
    
    
    
    
    
    
    (2
    )
    
    
    8,387Restricted stock activity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    95Share-based compensation
    
    
    
    
    
    
    424
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424Dividends ($.025 per share)
    
    
    
    
    
    
    (2,717
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,717
    )Balance January 31, 2006
    
    $
    108,670
    
    
    $
    665,370
    
    
    $
    (327,919
    )
    
    $
    (474
    )
    
    $
    (5
    )
    
    $
    445,642
 
 (1)
    
    Amount includes 105,115 shares (in thousands) of Class A common stock with a stated
value of $1 per share as of January 31, 2006 and October 31, 2005, and includes 3,555 shares
(in thousands) of Class B common stock.  6




---



##### 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 31,2006
    
    
    2005(Restated)(Note 1)Cash flows from operating activities:Net earnings (loss)
    
    $
    8,389
    
    
    $
    (145,277
    )Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:(Gains) on dispositions and impairment losses, net
    
    
    (298
    )
    
    
    (1,421
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    153,180Loss on early extinguishment of debt
    
    
    
    
    
    
    2,651Depreciation and amortization
    
    
    5,149
    
    
    
    5,330Amortization of deferred financing costs
    
    
    264
    
    
    
    508Provision for doubtful accounts
    
    
    2,095
    
    
    
    1,920Share-based compensation
    
    
    424
    
    
    
    Tax benefit on stock options exercised
    
    
    
    
    
    
    1,757Provision for deferred income taxes
    
    
    3,679
    
    
    
    1,772Other
    
    
    95
    
    
    
    60Changes in assets and liabilities:(Increase) decrease in other receivables
    
    
    4,029
    
    
    
    (3,003
    )Decrease in inventories and cemetery property
    
    
    1,589
    
    
    
    375Decrease in accounts payable and accrued expenses
    
    
    (5,078
    )
    
    
    (14,245
    )Net effect of preneed funeral production and maturities
    
    
    (3,629
    )
    
    
    (4,222
    )Net effect of preneed cemetery production and deliveries
    
    
    12,024
    
    
    
    (587
    )Decrease in other
    
    
    (1,508
    )
    
    
    (671
    )Net cash provided by (used in) operating activities
    
    
    27,224
    
    
    
    (1,873
    )Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    
    
    
    
    16Proceeds from sale of assets, net
    
    
    9
    
    
    
    5,449Insurance proceeds related to hurricane damaged properties
    
    
    4,540
    
    
    
    Additions to property and equipment
    
    
    (4,274
    )
    
    
    (6,512
    )Other
    
    
    15
    
    
    
    28Net cash provided by (used in) investing activities
    
    
    290
    
    
    
    (1,019
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    
    
    
    
    110,000Repayments of long-term debt
    
    
    (891
    )
    
    
    (124,274
    )Debt issue costs
    
    
    
    
    
    
    (1,681
    )Issuance of common stock
    
    
    
    
    
    
    10,419Dividends
    
    
    (2,717
    )
    
    
    Other
    
    
    61
    
    
    
    (944
    )Net cash used in financing activities
    
    
    (3,547
    )
    
    
    (6,480
    )Net increase (decrease) in cash
    
    
    23,967
    
    
    
    (9,372
    )Cash and cash equivalents, beginning of period
    
    
    40,605
    
    
    
    21,514Cash and cash equivalents, end of period
    
    $
    64,572
    
    
    $
    12,142Supplemental cash flow information:Cash paid during the period for:Income taxes
    
    $
    200
    
    
    $
    700Interest
    
    $
    3,200
    
    
    $
    17,300
  7




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Restatement
  (A)
    
    The incorrect determination of operating and reportable segments and reporting units
related to the application of FASB Statement No. 142, Goodwill and Other Intangible
Assets, (SFAS No. 142), which also had the effect of changing the charges recorded for
the assets sold as part of the Companys plan initiated in December 2003 (see Note 13) to
sell a number of businesses, and the net book value of assets held for sale on its balance
sheet.(B)
    
    Errors identified in revenue recognition of preneed cemetery merchandise and services
contracts and recognition of realized trust earnings on preneed cemetery and funeral
merchandise and services contracts.(C)
    
    Other miscellaneous adjustments, including adjustments for lease-related accounting
practices.
  Segments and Reporting Units
     8




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Restatement(Continued)
 Deferred Revenue Project
    Other Adjustments
   9




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Restatement(Continued)
 As Previously
    
    
    Effect of
    
    
    
    
    
    Effect of restatingReported- Three
    
    
    2005 preneed
    
    
    Effect of restating

    
    
    to correct for the
    
    
    
    
    
    
    As Reclassified andMonths Ended
    
    
    selling costs
    
    
    to correct for

    
    
    impact of the
    
    
    As Restated- Three
    
    
    Restated-January 31,
    
    
    accounting
    
    
    goodwill reporting

    
    
    deferred revenue
    
    
    Months Ended
    
    
    Three Months Ended2005(1)
    
    
    change(2)
    
    


unit errors (3)
    
    
    project
    
    
    January 31, 2005
    
    

January 31, 2005 (4)Consolidated Statements of Earnings:Revenues:Funeral
    
    $
    71,623
    
    
    $
    (67
    )
    
    $
    
    
    
    $
    (1,609
    )
    
    $
    69,947
    
    
    $
    69,716Cemetery
    
    
    54,856
    
    
    
    (210
    )
    
    
    
    
    
    
    (1,591
    )
    
    
    53,055
    
    
    
    52,852126,479
    
    
    
    (277
    )
    
    
    
    
    
    
    (3,200
    )
    
    
    123,002
    
    
    
    122,568Costs and expenses:Funeral
    
    
    51,413
    
    
    
    697
    
    
    
    
    
    
    
    
    
    
    
    52,110
    
    
    
    51,918Cemetery
    
    
    43,172
    
    
    
    335
    
    
    
    
    
    
    
    
    
    
    
    43,507
    
    
    
    43,40894,585
    
    
    
    1,032
    
    
    
    
    
    
    
    
    
    
    
    95,617
    
    
    
    95,326Gross profit
    
    
    31,894
    
    
    
    (1,309
    )
    
    
    
    
    
    
    (3,200
    )
    
    
    27,385
    
    
    
    27,242Corporate general and administrative expenses
    
    
    (4,216
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,216
    )
    
    
    (4,216
    )Gains on dispositions and impairment
(losses), net
    
    
    331
    
    
    
    390
    
    
    
    173
    
    
    
    
    
    
    
    894
    
    
    
    878Other operating income, net
    
    
    244
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    244
    
    
    
    239Operating earnings
    
    
    28,253
    
    
    
    (919
    )
    
    
    173
    
    
    
    (3,200
    )
    
    
    24,307
    
    
    
    24,143Interest expense
    
    
    (10,376
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,376
    )
    
    
    (10,376
    )Loss on early extinguishment of debt
    
    
    (2,651
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,651
    )
    
    
    (2,651
    )Investment and other income, net
    
    
    108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108
    
    
    
    108Earnings from continuing operations before
income taxes
    
    
    15,334
    
    
    
    (919
    )
    
    
    173
    
    
    
    (3,200
    )
    
    
    11,388
    
    
    
    11,224Income taxes
    
    
    5,989
    
    
    
    (434
    )
    
    
    (77
    )
    
    
    (1,502
    )
    
    
    3,976
    
    
    
    3,835Earnings from continuing operations
    
    
    9,345
    
    
    
    (485
    )
    
    
    250
    
    
    
    (1,698
    )
    
    
    7,412
    
    
    
    7,389Earnings from discontinued operations before
income taxes
    
    
    3
    
    
    
    313
    
    
    
    50
    
    
    
    
    
    
    
    366
    
    
    
    530Income taxes
    
    
    138
    
    
    
    80
    
    
    
    (343
    )
    
    
    
    
    
    
    (125
    )
    
    
    16Earnings (loss) from discontinued operations
    
    
    (135
    )
    
    
    233
    
    
    
    393
    
    
    
    
    
    
    
    491
    
    
    
    514Earnings before cumulative effect of change
in accounting principles
    
    
    9,210
    
    
    
    (252
    )
    
    
    643
    
    
    
    (1,698
    )
    
    
    7,903
    
    
    
    7,903Cumulative effect of change in accounting
principles
    
    
    
    
    
    
    (141,318
    )
    
    
    
    
    
    
    (11,862
    )
    
    
    (153,180
    )
    
    
    (153,180
    )Net earnings (loss)
    
    $
    9,210
    
    
    $
    (141,570
    )
    
    $
    643
    
    
    $
    (13,560
    )
    
    $
    (145,277
    )
    
    $
    (145,277
    )Basic earnings (loss) per common share:Earnings from continuing operations
    
    $
    .08
    
    
    $
    (.01
    )
    
    $
    .01
    
    
    $
    (.01
    )
    
    $
    .07
    
    
    $
    .07Earnings from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    (1.29
    )
    
    
    
    
    
    
    (.11
    )
    
    
    (1.40
    )
    
    
    (1.40
    )Net earnings (loss)
    
    $
    .08
    
    
    $
    (1.30
    )
    
    $
    .01
    
    
    $
    (.12
    )
    
    $
    (1.33
    )
    
    $
    (1.33
    )Diluted earnings (loss) per common share:Earnings from continuing operations
    
    $
    .08
    
    
    $
    (.01
    )
    
    $
    .01
    
    
    $
    (.01
    )
    
    $
    .07
    
    
    $
    .07Earnings from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    (1.29
    )
    
    
    
    
    
    
    (.11
    )
    
    
    (1.40
    )
    
    
    (1.40
    )Net earnings (loss)
    
    $
    .08
    
    
    $
    (1.30
    )
    
    $
    .01
    
    
    $
    (.12
    )
    
    $
    (1.33
    )
    
    $
    (1.33
    )
 10




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1)
Restatement  (Continued)
 
 (1)
    
    The previously reported amounts represent amounts reported in the Form
10-Q for the quarter ended January 31, 2005 filed on March 10, 2005.(2)
    
    Represents changes due to the 2005 change in accounting principle related to
preneed selling costs that was first reported in the Form 10-Q for the second quarter of
fiscal year 2005 but was effective as of November 1, 2004. The amounts in this column reflect
the impact of recording the cumulative effect of the change in accounting principle, reversal
of amounts previously amortized and the recording of selling costs incurred in the period.
See Note 3(a) for further discussion of this change in accounting principle.(3)
    
    Represents adjustments for the restatement of goodwill on the Companys
consolidated balance sheet which had the effect of changing the net book value of the assets
included as part of its plan to sell a number of its businesses initiated in December 2003.(4)
    
    Represents the January 2006 classification of continuing and discontinued
operations. See Note 13 for further discussion related to discontinued operations. (2) Basis of Presentation
 The Company
  Principles of Consolidation
  Interim Disclosures
    Use of Estimates
  11




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2)
Basis of Presentation  (Continued)
 Share-Based Compensation
     Three Months Ended January 31, 2006Number of Shares
    
    
    Weighted Average
    
    
    AggregateUnderlying Options
    
    
    Exercise Prices
    
    
    Intrinsic ValueOutstanding as of November 1, 2005
    
    
    1,468,734
    
    
    $
    6.62Granted
    
    
    269,250
    
    
    $
    5.06Exercised/Repurchased
    
    
    
    
    
    $
    Forfeited
    
    
    
    
    
    $
    Outstanding as of January 31, 2006
    
    
    1,737,984
    
    
    $
    6.38
    
    
    $
    163Exercisable as of January 31, 2006
    
    
    517,188
    
    
    $
    6.28
    
    
    $
    23Weighted-average fair value of options granted
    
    
    
    
    
    $
    2.22
 12




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2) Basis of Presentation  (Continued)
  Options Outstanding
    
    Options ExercisableNumber
    
    Weighted Average
    
    
    
    
    
    Number
    
    WeightedRange of
    
    Outstanding
    
    Remaining
    
    Weighted Average
    
    Exercisable
    
    AverageExercise Prices
    
    at 1/31/2006
    
    Contractual Life
    
    Exercise Prices
    
    at 1/31/2006
    
    Exercise Prices$5.06
    
    
    269,250
    
    
    6.83 years
    
    $
    5.06
    
    
    
    
    
    
    $
    $5.44
    
    
    333,334
    
    
    7.89 years
    
    $
    5.44
    
    
    
    233,338
    
    
    $
    5.44$6.90
    
    
    560,400
    
    
    5.89 years
    
    $
    6.90
    
    
    
    140,100
    
    
    $
    6.90$7.03
    
    
    575,000
    
    
    5.80 years
    
    $
    7.03
    
    
    
    143,750
    
    
    $
    7.03$5.06 to $7.03
    
    
    1,737,984
    
    
    6.39 years
    
    $
    6.38
    
    
    
    517,188
    
    
    $
    6.28
 Weighted AverageThree Months Ended
    
    
    Grant-DateJanuary 31, 2006
    
    
    Fair ValueNonvested options as of November 1, 2005
    
    
    1,235,396
    
    
    $
    3.92Granted
    
    
    269,250
    
    
    $
    2.22Vested
    
    
    (283,850
    )
    
    $
    4.06Forfeited
    
    
    
    
    
    $
    Nonvested options as of January 31, 2006
    
    
    1,220,796
    
    
    $
    3.52
   Three MonthsEndedJanuary 31, 2005Net loss
    
    $
    (145,277
    )Stock-based employee compensation expense included in
reported net earnings, net of tax
    
    
    90Total stock-based employee compensation expense
determined under fair value-based method, net of tax
    
    
    (528
    )Pro forma net loss
    
    $
    (145,715
    )Net loss per common share:Basic  as reported
    
    $
    (1.33
    )Basic  pro forma
    
    $
    (1.33
    )Diluted  as reported
    
    $
    (1.33
    )Diluted  pro forma
    
    $
    (1.33
    )
 13




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2)
Basis of Presentation  (Continued)
 Reclassifications
  (3) Change in Accounting Principles and New Accounting Principles
 Preneed Selling Costs
   Other Accounting Pronouncements
  (4) Preneed Funeral Activities
 Preneed Funeral Receivables and Trust Investments
  14




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Funeral Activities(Continued)
 January 31, 2006
    
    
    October 31, 2005Trust assets
    
    $
    456,312
    
    
    $
    446,344Receivables from customers
    
    
    57,026
    
    
    
    57,124Preneed funeral receivables and trust
investments
    
    $
    513,338
    
    
    $
    503,468
  January 31, 2006Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    48,056
    
    
    $
    
    
    
    $
    
    
    
    $
    48,056U.S. Government, agencies and
municipalities
    
    
    6,396
    
    
    
    45
    
    
    
    (124
    )
    
    
    6,317Corporate bonds
    
    
    19,103
    
    
    
    650
    
    
    
    (709
    )
    
    
    19,044Preferred stocks
    
    
    72,234
    
    
    
    590
    
    
    
    (1,307
    )
    
    
    71,517Common stocks
    
    
    238,821
    
    
    
    21,736
    
    
    
    (7,273
    )
    
    
    253,284Mutual funds
    
    
    30,441
    
    
    
    2,639
    
    
    
    (241
    )
    
    
    32,839Insurance contracts and other long-
term investments
    
    
    22,825
    
    
    
    357
    
    
    
    
    
    
    
    23,182Trust investments
    
    $
    437,876
    
    
    $
    26,017
    
    
    $
    (9,654
    )
    
    
    454,239Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103.7
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,073Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    456,312
  January 31, 2006Due in one year or less
    
    $
    1,352Due in one to five years
    
    
    13,315Due in five to ten years
    
    
    10,346Thereafter
    
    
    348$
    25,361
   15




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Funeral Activities(Continued)
 October 31, 2005Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    52,275
    
    
    $
    
    
    
    $
    
    
    
    $
    52,275U.S. Government, agencies and
municipalities
    
    
    7,421
    
    
    
    52
    
    
    
    (384
    )
    
    
    7,089Corporate bonds
    
    
    19,702
    
    
    
    679
    
    
    
    (566
    )
    
    
    19,815Preferred stocks
    
    
    68,419
    
    
    
    503
    
    
    
    (1,577
    )
    
    
    67,345Common stocks
    
    
    239,970
    
    
    
    13,803
    
    
    
    (9,812
    )
    
    
    243,961Mutual funds
    
    
    30,254
    
    
    
    215
    
    
    
    (247
    )
    
    
    30,222Insurance contracts and other long-
term investments
    
    
    23,190
    
    
    
    351
    
    
    
    
    
    
    
    23,541Trust investments
    
    $
    441,231
    
    
    $
    15,603
    
    
    $
    (12,586
    )
    
    
    444,248Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100.7
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,096Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    446,344
 (5) Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  January 31, 2006
    
    
    October 31, 2005Trust assets
    
    $
    189,004
    
    
    $
    191,506Receivables from customers
    
    
    63,715
    
    
    
    65,931Preneed cemetery receivables and trust investments
    
    $
    252,719
    
    
    $
    257,437
  16




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Preneed Cemetery Merchandise and Service Activities(Continued)
 January 31, 2006Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    9,415
    
    
    $
    
    
    
    $
    
    
    
    $
    9,415U.S. Government, agencies and
municipalities
    
    
    11,705
    
    
    
    34
    
    
    
    (74
    )
    
    
    11,665Corporate bonds
    
    
    8,782
    
    
    
    279
    
    
    
    (211
    )
    
    
    8,850Preferred stocks
    
    
    32,743
    
    
    
    270
    
    
    
    (624
    )
    
    
    32,389Common stocks
    
    
    99,264
    
    
    
    8,686
    
    
    
    (4,289
    )
    
    
    103,661Mutual funds
    
    
    19,018
    
    
    
    2,254
    
    
    
    (1
    )
    
    
    21,271Insurance contracts and other
long-term investments
    
    
    568
    
    
    
    2
    
    
    
    
    
    
    
    570Trust investments
    
    $
    181,495
    
    
    $
    11,525
    
    
    $
    (5,199
    )
    
    
    187,821Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103.5
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,183Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    189,004
  January 31, 2006Due in one year or less
    
    $
    568Due in one to five years
    
    
    14,550Due in five to ten years
    
    
    4,820Thereafter
    
    
    577$
    20,515
   17




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Preneed Cemetery Merchandise and Service Activities(Continued)
 October 31, 2005Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    12,377
    
    
    $
    
    
    
    $
    
    
    
    $
    12,377U.S. Government, agencies and
municipalities
    
    
    10,686
    
    
    
    27
    
    
    
    (76
    )
    
    
    10,637Corporate bonds
    
    
    8,893
    
    
    
    309
    
    
    
    (145
    )
    
    
    9,057Preferred stocks
    
    
    34,319
    
    
    
    296
    
    
    
    (861
    )
    
    
    33,754Common stocks
    
    
    104,999
    
    
    
    5,465
    
    
    
    (5,486
    )
    
    
    104,978Mutual funds
    
    
    19,018
    
    
    
    86
    
    
    
    (47
    )
    
    
    19,057Insurance contracts and other
long-term investments
    
    
    568
    
    
    
    2
    
    
    
    
    
    
    
    570Trust investments
    
    $
    190,860
    
    
    $
    6,185
    
    
    $
    (6,615
    )
    
    
    190,430Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99.8
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,076Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    191,506
 (6) Cemetery Interment Rights and Perpetual Care Trusts
   January 31, 2006Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    18,375
    
    
    $
    1
    
    
    $
    (5
    )
    
    $
    18,371U.S. Government, agencies and
municipalities
    
    
    6,949
    
    
    
    39
    
    
    
    (110
    )
    
    
    6,878Corporate bonds
    
    
    18,621
    
    
    
    1,487
    
    
    
    (212
    )
    
    
    19,896Preferred stocks
    
    
    75,851
    
    
    
    787
    
    
    
    (3,811
    )
    
    
    72,827Common stocks
    
    
    86,930
    
    
    
    12,669
    
    
    
    (4,520
    )
    
    
    95,079Mutual funds
    
    
    3,511
    
    
    
    126
    
    
    
    (64
    )
    
    
    3,573Insurance contracts and other
long-term investments
    
    
    1,032
    
    
    
    48
    
    
    
    (26
    )
    
    
    1,054Trust investments
    
    $
    211,269
    
    
    $
    15,157
    
    
    $
    (8,748
    )
    
    
    217,678Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103.0
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,285Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    218,963
 18




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (6) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  January 31, 2006Due in one year or less
    
    $
    1,178Due in one to five years
    
    
    20,303Due in five to ten years
    
    
    3,851Thereafter
    
    
    1,442$
    26,774
   October 31, 2005Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    20,172
    
    
    $
    
    
    
    $
    
    
    
    $
    20,172U.S. Government, agencies and
municipalities
    
    
    7,077
    
    
    
    36
    
    
    
    (127
    )
    
    
    6,986Corporate bonds
    
    
    18,817
    
    
    
    1,669
    
    
    
    (156
    )
    
    
    20,330Preferred stocks
    
    
    71,168
    
    
    
    642
    
    
    
    (4,187
    )
    
    
    67,623Common stocks
    
    
    87,406
    
    
    
    10,659
    
    
    
    (5,795
    )
    
    
    92,270Mutual funds
    
    
    3,557
    
    
    
    129
    
    
    
    (72
    )
    
    
    3,614Insurance contracts and other
long-term investments
    
    
    1,132
    
    
    
    45
    
    
    
    (26
    )
    
    
    1,151Trust investments
    
    $
    209,329
    
    
    $
    13,180
    
    
    $
    (10,363
    )
    
    
    212,146Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101.3
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    942Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    213,088
 (7) Non-Controlling Interest in Funeral and Cemetery Trusts and in Perpetual Care Trusts
  Non-controllingNon-controlling Interest
    
    
    Interest inPreneed
    
    
    Preneed
    
    
    
    
    
    
    PerpetualFuneral
    
    
    Cemetery
    
    
    Total
    
    
    Care TrustsTrust assets at market value
    
    $
    456,312
    
    
    $
    189,004
    
    
    $
    645,316
    
    
    $
    218,963Less:Pending withdrawals
    
    
    (8,384
    )
    
    
    (3,599
    )
    
    
    (11,983
    )
    
    
    (2,308
    )Pending deposits
    
    
    2,036
    
    
    
    1,526
    
    
    
    3,562
    
    
    
    608Non-controlling interest
    
    $
    449,964
    
    
    $
    186,931
    
    
    $
    636,895
    
    
    $
    217,263
  19




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7)
    
    Non-Controlling Interest in Funeral and Cemetery Trusts and in Perpetual Care
Trusts(Continued)
 Non-controllingNon-controlling Interest
    
    
    Interest inPreneed
    
    
    Preneed
    
    
    
    
    
    
    PerpetualFuneral
    
    
    Cemetery
    
    
    Total
    
    
    Care TrustsTrust assets at market value
    
    $
    446,344
    
    
    $
    191,506
    
    
    $
    637,850
    
    
    $
    213,088Less:Pending withdrawals
    
    
    (7,868
    )
    
    
    (6,104
    )
    
    
    (13,972
    )
    
    
    (1,866
    )Pending deposits
    
    
    1,648
    
    
    
    1,315
    
    
    
    2,963
    
    
    
    542Non-controlling interest
    
    $
    440,124
    
    
    $
    186,717
    
    
    $
    626,841
    
    
    $
    211,764
 Investment and other income, net
  Three Months
    
    
    Three MonthsEnded
    
    
    EndedJanuary 31, 2006
    
    
    January 31, 2005(Restated)Non-controlling interest:Realized gains
    
    $
    1,170
    
    
    $
    3,584Realized losses
    
    
    (1,318
    )
    
    
    (4,069
    )Interest income, dividend and other ordinary income
    
    
    7,575
    
    
    
    6,851Trust expenses and income taxes
    
    
    (2,831
    )
    
    
    (2,864
    )Net trust investment income
    
    
    4,596
    
    
    
    3,502Interest expense related to non-controlling
interest in funeral and cemetery trust investments
    
    
    (1,994
    )
    
    
    (2,013
    )Interest expense related to non-controlling
interest in perpetual care trust investments
    
    
    (2,602
    )
    
    
    (1,489
    )Total non-controlling interest
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    468
    
    
    
    108Total investment and other income, net
    
    $
    468
    
    
    $
    108
 
 (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. (8) Commitments and Contingencies
 Henrietta Torres and Teresa Fiore, on behalf of themselves and all others similarly situated
and the General Public v. Stewart Enterprises, Inc., et al.
  20




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8)
    
    Commitments and Contingencies(Continued)
     In re: Funeral Consumer Antitrust Litigation Funeral Consumers Alliance, Inc, et al. v. Service Corporation International,
Alderwoods Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville
Casket Co.
  FCA Case
 Pioneer Valley Casket Co., Inc., et al. v. Service Corporation International, Alderwoods
Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville Casket Co. Pioneer Valley
   21




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8)
    
    Commitments and Contingencies(Continued)
  Ralph Lee Fancher, on behalf of himself and all others similarly
situated v. Service Corporation International, Alderwoods Group, Inc,. Stewart Enterprises, Inc.,
Hillenbrand Industries, Inc., Aurora Casket Co., York Group, Inc., and Batesville Casket Co., ,
 State Attorney General Civil Investigative Demands
     22




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8)
    
    Commitments and Contingencies(Continued)
  (9)
    
    Reconciliation of Basic and Diluted Per Share Data
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended January 31, 2006Earnings from continuing operations
    
    $
    8,389Basic earnings per common share:Earnings from continuing operations
available to common shareholders
    
    $
    8,389
    
    
    
    108,504
    
    
    $
    .08Effect of dilutive securities:Time-vest stock options assumed exercised
and restricted stock
    
    
    
    
    
    
    18Diluted earnings per common share:Earnings from continuing operations
available to common shareholders plus
time-vest stock options assumed exercised
and restricted stock
    
    $
    8,389
    
    
    
    108,522
    
    
    $
    .08
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree
Months Ended January 31, 2005  RestatedEarnings from continuing operations
before cumulative effect of change in
accounting principle
    
    $
    7,389Basic earnings per common share:Earnings from continuing operations
before cumulative effect of change in
accounting principle available to common
shareholders
    
    $
    7,389
    
    
    
    109,087
    
    
    $
    .07Effect of dilutive securities:Time-vest stock options assumed exercised
and restricted stock
    
    
    
    
    
    
    363Diluted earnings per common share:Earnings from continuing operations
before cumulative effect of change in
accounting principle available to common
shareholders plus time-vest stock options
assumed exercised and restricted stock
    
    $
    7,389
    
    
    
    109,450
    
    
    $
    .07
  23




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9) Reconciliation of Basic and Diluted Per Share Data(Continued)
  (10)
    
    Segment Data
        24




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (10)
    
    Segment Data (Continued)
     Funeral Revenue
    
    
    Cemetery Revenue(1)
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJanuary 31, 2006
    
    
    January 31, 2005
    
    
    January 31, 2006
    
    
    January 31, 2005
    
    
    January 31, 2006
    
    
    January 31, 2005(Restated)
    
    
    
    
    
    
    (Restated)
    
    
    
    
    
    
    (Restated)Western Division
    
    $
    36,974
    
    
    $
    35,690
    
    
    $
    19,480
    
    
    $
    20,303
    
    
    $
    56,454
    
    
    $
    55,993Eastern Division
    
    
    30,163
    
    
    
    29,548
    
    
    
    32,729
    
    
    
    29,845
    
    
    
    62,892
    
    
    
    59,393Corporate Trust
Management
(2)
    
    
    4,652
    
    
    
    4,478
    
    
    
    2,607
    
    
    
    2,704
    
    
    
    7,259
    
    
    
    7,182Total
    
    $
    71,789
    
    
    $
    69,716
    
    
    $
    54,816
    
    
    $
    52,852
    
    
    $
    126,605
    
    
    $
    122,568
 Funeral Gross Profit
    
    
    Cemetery Gross Profit(1)
    
    
    Total Gross ProfitThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJanuary 31, 2006
    
    
    January 31, 2005
    
    
    January 31, 2006
    
    
    January 31, 2005
    
    
    January 31, 2006
    
    
    January 31, 2005(Restated)
    
    
    
    
    
    
    (Restated)
    
    
    
    
    
    
    (Restated)Western Division
    
    $
    7,697
    
    
    $
    7,615
    
    
    $
    3,727
    
    
    $
    4,016
    
    
    $
    11,424
    
    
    $
    11,631Eastern Division
    
    
    5,599
    
    
    
    5,847
    
    
    
    5,049
    
    
    
    2,851
    
    
    
    10,648
    
    
    
    8,698Corporate Trust
Management
(2)
    
    
    4,520
    
    
    
    4,336
    
    
    
    2,487
    
    
    
    2,577
    
    
    
    7,007
    
    
    
    6,913Total
    
    $
    17,816
    
    
    $
    17,798
    
    
    $
    11,263
    
    
    $
    9,444
    
    
    $
    29,079
    
    
    $
    27,242
 Net Preneed Funeral Merchandise
    
    
    Net Preneed Cemetery Merchandise
    
    
    Net Total Preneed Merchandiseand Service Sales(3)
    
    
    and Service Sales(3)
    
    
    and Service Sales(3)Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJanuary 31, 2006
    
    
    January 31, 2005
    
    
    January 31, 2006
    
    
    January 31, 2005
    
    
    January 31, 2006
    
    
    January 31, 2005(Restated)
    
    
    
    
    
    
    (Restated)
    
    
    
    
    
    
    (Restated)Western Division
    
    $
    12,367
    
    
    $
    11,062
    
    
    $
    3,810
    
    
    $
    3,777
    
    
    $
    16,177
    
    
    $
    14,839Eastern Division
    
    
    9,598
    
    
    
    9,136
    
    
    
    10,133
    
    
    
    9,895
    
    
    
    19,731
    
    
    
    19,031Total
    
    $
    21,965
    
    
    $
    20,198
    
    
    $
    13,943
    
    
    $
    13,672
    
    
    $
    35,908
    
    
    $
    33,870
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of
the related geographic segment and amounted to $2,618 and $1,122 for the three months ended
January 31, 2006 and 2005, respectively.(2)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and service trust earnings recognized with respect to preneed contracts
delivered during the period. Trust management fees 25




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (10)
    
    Segment Data(Continued)are established by the Company at rates consistent with industry norms and are paid by the
trusts to the Companys subsidiary, Investors Trust, Inc. The trust earnings represent
earnings realized over the life of the preneed contracts delivered during the relevant periods.
Trust management fees included in funeral revenue for the three months ended January 31, 2006
and 2005 were $1,367 and $1,153, respectively, and funeral trust earnings for the three months
ended January 31, 2006 and 2005 were $3,285 and $3,325, respectively. Trust management fees
included in cemetery revenue for the three months ended January 31, 2006 and 2005 were $1,206
and $1,231, respectively, and cemetery trust earnings for the three months ended January 31,
2006 and 2005 were $1,401 and $1,473, respectively.(3)
    
    Preneed sales amounts represent total preneed funeral and cemetery service and
merchandise sales generated in the applicable period, net of cancellations.
  Three Months EndedJanuary 312006
    
    
    2005(Restated)Gross profit for reportable segments
    
    $
    29,079
    
    
    $
    27,242Corporate general and administrative expenses
    
    
    (7,219
    )
    
    
    (4,216
    )Hurricane related charges, net
    
    
    (2,638
    )
    
    
    Separation charges
    
    
    (154
    )
    
    
    Gains on dispositions and impairment (losses), net
    
    
    298
    
    
    
    878Other operating income, net
    
    
    978
    
    
    
    239Interest expense
    
    
    (7,528
    )
    
    
    (10,376
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (2,651
    )Investment and other income, net
    
    
    468
    
    
    
    108Earnings from continuing operations before
income taxes and cumulative effect of change
in accounting principle
    
    $
    13,284
    
    
    $
    11,224
 26




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Supplementary Information
  Three Months EndedJanuary 31,2006
    
    
    2005(Restated)Service revenueFuneral
    
    $
    41,161
    
    
    $
    39,617Cemetery
    
    
    15,722
    
    
    
    13,46256,883
    
    
    
    53,079Merchandise revenueFuneral
    
    
    28,592
    
    
    
    28,293Cemetery
    
    
    35,100
    
    
    
    35,71463,692
    
    
    
    64,007Other revenueFuneral
    
    
    2,036
    
    
    
    1,806Cemetery
    
    
    3,994
    
    
    
    3,6766,030
    
    
    
    5,482Total revenue
    
    $
    126,605
    
    
    $
    122,568Service costsFuneral
    
    
    13,342
    
    
    
    12,335Cemetery
    
    
    9,694
    
    
    
    9,52623,036
    
    
    
    21,861Merchandise costsFuneral
    
    
    17,005
    
    
    
    16,111Cemetery
    
    
    20,582
    
    
    
    20,52637,587
    
    
    
    36,637General and administrative expensesFuneral
    
    
    23,626
    
    
    
    23,472Cemetery
    
    
    13,277
    
    
    
    13,35636,903
    
    
    
    36,828Total costs
    
    $
    97,526
    
    
    $
    95,326
  27




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes
and Senior Notes
  Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended January 31, 2006Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    66,875
    
    
    $
    4,914
    
    
    $
    
    
    
    $
    71,789Cemetery
    
    
    
    
    
    
    50,458
    
    
    
    4,358
    
    
    
    
    
    
    
    54,816
    
    
    
    117,333
    
    
    
    9,272
    
    
    
    
    
    
    
    126,605Costs and expenses:Funeral
    
    
    
    
    
    
    50,802
    
    
    
    3,171
    
    
    
    
    
    
    
    53,973Cemetery
    
    
    
    
    
    
    40,089
    
    
    
    3,464
    
    
    
    
    
    
    
    43,553
    
    
    
    90,891
    
    
    
    6,635
    
    
    
    
    
    
    
    97,526Gross profit
    
    
    
    
    
    
    26,442
    
    
    
    2,637
    
    
    
    
    
    
    
    29,079Corporate general and
administrative expenses
    
    
    (7,219
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,219
    )Hurricane related charges, net
    
    
    
    
    
    
    (2,638
    )
    
    
    
    
    
    
    
    
    
    
    (2,638
    )Separation charges
    
    
    (55
    )
    
    
    (99
    )
    
    
    
    
    
    
    
    
    
    
    (154
    )Gains on dispositions and
impairment (losses), net
    
    
    
    
    
    
    
    
    
    
    298
    
    
    
    
    
    
    
    298Other operating income, net
    
    
    16
    
    
    
    919
    
    
    
    43
    
    
    
    
    
    
    
    978Operating earnings (loss)
    
    
    (7,258
    )
    
    
    24,624
    
    
    
    2,978
    
    
    
    
    
    
    
    20,344Interest income (expense)
    
    
    9,735
    
    
    
    (15,586
    )
    
    
    (1,677
    )
    
    
    
    
    
    
    (7,528
    )Investment and other income, net
    
    
    468
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    468Equity in subsidiaries
    
    
    6,576
    
    
    
    
    
    
    
    
    
    
    
    (6,576
    )
    
    
    Earnings from continuing
operations before income
taxes
    
    
    9,521
    
    
    
    9,038
    
    
    
    1,301
    
    
    
    (6,576
    )
    
    
    13,284Income taxes
    
    
    1,132
    
    
    
    3,382
    
    
    
    381
    
    
    
    
    
    
    
    4,895Net earnings
    
    
    8,389
    
    
    
    5,656
    
    
    
    920
    
    
    
    (6,576
    )
    
    
    8,389Other comprehensive loss, net
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )
    
    
    2
    
    
    
    (2
    )Comprehensive income
    
    $
    8,387
    
    
    $
    5,656
    
    
    $
    918
    
    
    $
    (6,574
    )
    
    $
    8,387
 28




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and
Senior Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended January 31, 2005Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)Revenues:Funeral
    
    $
    
    
    
    $
    64,275
    
    
    $
    5,441
    
    
    $
    
    
    
    $
    69,716Cemetery
    
    
    
    
    
    
    47,416
    
    
    
    5,436
    
    
    
    
    
    
    
    52,852
    
    
    
    111,691
    
    
    
    10,877
    
    
    
    
    
    
    
    122,568Costs and expenses:Funeral
    
    
    
    
    
    
    48,627
    
    
    
    3,291
    
    
    
    
    
    
    
    51,918Cemetery
    
    
    
    
    
    
    39,243
    
    
    
    4,165
    
    
    
    
    
    
    
    43,408
    
    
    
    87,870
    
    
    
    7,456
    
    
    
    
    
    
    
    95,326Gross profit
    
    
    
    
    
    
    23,821
    
    
    
    3,421
    
    
    
    
    
    
    
    27,242Corporate general and administrative
expenses
    
    
    (4,216
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,216
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    614
    
    
    
    264
    
    
    
    
    
    
    
    878Other operating income, net
    
    
    117
    
    
    
    43
    
    
    
    79
    
    
    
    
    
    
    
    239Operating earnings (loss)
    
    
    (4,099
    )
    
    
    24,478
    
    
    
    3,764
    
    
    
    
    
    
    
    24,143Interest income (expense)
    
    
    11,284
    
    
    
    (19,677
    )
    
    
    (1,983
    )
    
    
    
    
    
    
    (10,376
    )Loss on early extinguishment of debt
    
    
    (2,651
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,651
    )Investment and other income, net
    
    
    108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108Equity loss in subsidiaries
    
    
    (148,220
    )
    
    
    
    
    
    
    
    
    
    
    148,220
    
    
    
    Earnings (loss) from continuing
operations before income taxes
    
    
    (143,578
    )
    
    
    4,801
    
    
    
    1,781
    
    
    
    148,220
    
    
    
    11,224Income taxes
    
    
    1,699
    
    
    
    1,590
    
    
    
    546
    
    
    
    
    
    
    
    3,835Earnings (loss) from continuing
operations
    
    
    (145,277
    )
    
    
    3,211
    
    
    
    1,235
    
    
    
    148,220
    
    
    
    7,389Discontinued operations:Earnings from discontinued
operations before income taxes
    
    
    
    
    
    
    246
    
    
    
    284
    
    
    
    
    
    
    
    530Income taxes
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16Earnings from discontinued operations
    
    
    
    
    
    
    230
    
    
    
    284
    
    
    
    
    
    
    
    514Earnings (loss) before cumulative
effect of change in accounting
principle
    
    
    (145,277
    )
    
    
    3,441
    
    
    
    1,519
    
    
    
    148,220
    
    
    
    7,903Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    (145,276
    )
    
    
    (7,904
    )
    
    
    
    
    
    
    (153,180
    )Net loss
    
    
    (145,277
    )
    
    
    (141,835
    )
    
    
    (6,385
    )
    
    
    148,220
    
    
    
    (145,277
    )Other comprehensive income, net
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    193Comprehensive loss
    
    $
    (145,084
    )
    
    $
    (141,835
    )
    
    $
    (6,385
    )
    
    $
    148,220
    
    
    $
    (145,084
    )
 29




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and
Senior Notes(Continued)
 Condensed Consolidating Balance Sheets
 January 31, 2006Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    60,035
    
    
    $
    3,264
    
    
    $
    1,273
    
    
    $
    
    
    
    $
    64,572Marketable securities
    
    
    
    
    
    
    
    
    
    
    1,307
    
    
    
    
    
    
    
    1,307Receivables, net of allowances
    
    
    14,240
    
    
    
    46,406
    
    
    
    6,562
    
    
    
    
    
    
    
    67,208Inventories
    
    
    358
    
    
    
    24,902
    
    
    
    7,022
    
    
    
    
    
    
    
    32,282Prepaid expenses
    
    
    785
    
    
    
    4,103
    
    
    
    23
    
    
    
    
    
    
    
    4,911Deferred income taxes, net
    
    
    2,918
    
    
    
    5,181
    
    
    
    2
    
    
    
    
    
    
    
    8,101Total current assets
    
    
    78,336
    
    
    
    83,856
    
    
    
    16,189
    
    
    
    
    
    
    
    178,381Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    50,549
    
    
    
    20,234
    
    
    
    
    
    
    
    70,783Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    502,647
    
    
    
    10,691
    
    
    
    
    
    
    
    513,338Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    236,192
    
    
    
    16,527
    
    
    
    
    
    
    
    252,719Goodwill
    
    
    
    
    
    
    252,942
    
    
    
    19,787
    
    
    
    
    
    
    
    272,729Cemetery property, at cost
    
    
    
    
    
    
    347,193
    
    
    
    19,191
    
    
    
    
    
    
    
    366,384Property and equipment, at cost
    
    
    35,589
    
    
    
    419,501
    
    
    
    36,896
    
    
    
    
    
    
    
    491,986Less accumulated depreciation
    
    
    20,528
    
    
    
    168,823
    
    
    
    11,480
    
    
    
    
    
    
    
    200,831Net property and equipment
    
    
    15,061
    
    
    
    250,678
    
    
    
    25,416
    
    
    
    
    
    
    
    291,155Deferred income taxes, net
    
    
    13,176
    
    
    
    160,119
    
    
    
    13,615
    
    
    
    
    
    
    
    186,910Cemetery perpetual care trust investments
    
    
    
    
    
    
    218,963
    
    
    
    
    
    
    
    
    
    
    
    218,963Other assets
    
    
    6,183
    
    
    
    12,467
    
    
    
    923
    
    
    
    
    
    
    
    19,573Equity in subsidiaries
    
    
    7,860
    
    
    
    5,353
    
    
    
    
    
    
    
    (13,213
    )
    
    
    Total assets
    
    $
    120,616
    
    
    $
    2,120,959
    
    
    $
    142,573
    
    
    $
    (13,213
    )
    
    $
    2,370,935LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    3,142
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,142Accounts payable
    
    
    200
    
    
    
    9,935
    
    
    
    337
    
    
    
    
    
    
    
    10,472Accrued expenses and other current
liabilities
    
    
    15,888
    
    
    
    38,575
    
    
    
    4,811
    
    
    
    
    
    
    
    59,274Total current liabilities
    
    
    19,230
    
    
    
    48,510
    
    
    
    5,148
    
    
    
    
    
    
    
    72,888Long-term debt, less current maturities
    
    
    375,994
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    405,994Intercompany payables, net
    
    
    (973,858
    )
    
    
    954,607
    
    
    
    19,251
    
    
    
    
    
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    231,286
    
    
    
    49,581
    
    
    
    
    
    
    
    280,867Deferred preneed cemetery revenue
    
    
    
    
    
    
    274,222
    
    
    
    25,380
    
    
    
    
    
    
    
    299,602Non-controlling interest in funeral and
cemetery trusts
    
    
    
    
    
    
    636,895
    
    
    
    
    
    
    
    
    
    
    
    636,895Other long-term liabilities
    
    
    9,274
    
    
    
    2,510
    
    
    
    
    
    
    
    
    
    
    
    11,784Negative equity in subsidiaries
    
    
    244,334
    
    
    
    
    
    
    
    
    
    
    
    (244,334
    )
    
    
    Total liabilities
    
    
    (325,026
    )
    
    
    2,148,030
    
    
    
    129,360
    
    
    
    (244,334
    )
    
    
    1,708,030Non-controlling interest in perpetual
care trusts
    
    
    
    
    
    
    217,263
    
    
    
    
    
    
    
    
    
    
    
    217,263Common stock
    
    
    108,670
    
    
    
    426
    
    
    
    52
    
    
    
    (478
    )
    
    
    108,670Other
    
    
    336,977
    
    
    
    (244,760
    )
    
    
    13,166
    
    
    
    231,594
    
    
    
    336,977Accumulated other comprehensive loss
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )
    
    
    5
    
    
    
    (5
    )Total shareholders equity
    
    
    445,642
    
    
    
    (244,334
    )
    
    
    13,213
    
    
    
    231,121
    
    
    
    445,642Total liabilities and shareholders equity
    
    $
    120,616
    
    
    $
    2,120,959
    
    
    $
    142,573
    
    
    $
    (13,213
    )
    
    $
    2,370,935
 30




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and
Senior Notes(Continued)
 Condensed Consolidating Balance Sheets
 October 31, 2005Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    38,675
    
    
    $
    874
    
    
    $
    1,056
    
    
    $
    
    
    
    $
    40,605Marketable securities
    
    
    
    
    
    
    
    
    
    
    1,302
    
    
    
    
    
    
    
    1,302Receivables, net of allowances
    
    
    17,337
    
    
    
    56,381
    
    
    
    6,179
    
    
    
    
    
    
    
    79,897Inventories
    
    
    401
    
    
    
    26,194
    
    
    
    6,885
    
    
    
    
    
    
    
    33,480Prepaid expenses
    
    
    451
    
    
    
    2,278
    
    
    
    37
    
    
    
    
    
    
    
    2,766Deferred income taxes, net
    
    
    2,918
    
    
    
    8,196
    
    
    
    2
    
    
    
    
    
    
    
    11,116Total current assets
    
    
    59,782
    
    
    
    93,923
    
    
    
    15,461
    
    
    
    
    
    
    
    169,166Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    49,384
    
    
    
    19,551
    
    
    
    
    
    
    
    68,935Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    492,247
    
    
    
    11,221
    
    
    
    
    
    
    
    503,468Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    239,027
    
    
    
    18,410
    
    
    
    
    
    
    
    257,437Goodwill
    
    
    
    
    
    
    252,942
    
    
    
    19,787
    
    
    
    
    
    
    
    272,729Cemetery property, at cost
    
    
    
    
    
    
    346,611
    
    
    
    20,165
    
    
    
    
    
    
    
    366,776Property and equipment, at cost
    
    
    35,078
    
    
    
    415,970
    
    
    
    36,433
    
    
    
    
    
    
    
    487,481Less accumulated depreciation
    
    
    19,744
    
    
    
    164,959
    
    
    
    11,142
    
    
    
    
    
    
    
    195,845Net property and equipment
    
    
    15,334
    
    
    
    251,011
    
    
    
    25,291
    
    
    
    
    
    
    
    291,636Deferred income taxes, net
    
    
    13,176
    
    
    
    160,782
    
    
    
    13,615
    
    
    
    
    
    
    
    187,573Cemetery perpetual care trust investments
    
    
    
    
    
    
    213,088
    
    
    
    
    
    
    
    
    
    
    
    213,088Other assets
    
    
    6,447
    
    
    
    13,061
    
    
    
    810
    
    
    
    
    
    
    
    20,318Equity in subsidiaries
    
    
    6,942
    
    
    
    5,353
    
    
    
    
    
    
    
    (12,295
    )
    
    
    Total assets
    
    $
    101,681
    
    
    $
    2,117,429
    
    
    $
    144,311
    
    
    $
    (12,295
    )
    
    $
    2,351,126LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    3,168
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,168Accounts payable
    
    
    513
    
    
    
    9,578
    
    
    
    667
    
    
    
    
    
    
    
    10,758Accrued expenses and other current
liabilities
    
    
    15,322
    
    
    
    45,356
    
    
    
    3,188
    
    
    
    
    
    
    
    63,866Total current liabilities
    
    
    19,003
    
    
    
    54,934
    
    
    
    3,855
    
    
    
    
    
    
    
    77,792Long-term debt, less current maturities
    
    
    376,859
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    406,859Intercompany payables, net
    
    
    (992,609
    )
    
    
    968,998
    
    
    
    23,611
    
    
    
    
    
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    237,200
    
    
    
    47,264
    
    
    
    
    
    
    
    284,464Deferred preneed cemetery revenue
    
    
    
    
    
    
    265,225
    
    
    
    27,286
    
    
    
    
    
    
    
    292,511Non-controlling interest in funeral and
cemetery trusts
    
    
    
    
    
    
    626,841
    
    
    
    
    
    
    
    
    
    
    
    626,841Other long-term liabilities
    
    
    8,985
    
    
    
    2,457
    
    
    
    
    
    
    
    
    
    
    
    11,442Negative equity in subsidiaries
    
    
    249,990
    
    
    
    
    
    
    
    
    
    
    
    (249,990
    )
    
    
    Total liabilities
    
    
    (337,772
    )
    
    
    2,155,655
    
    
    
    132,016
    
    
    
    (249,990
    )
    
    
    1,699,909Non-controlling interest in perpetual
care trusts
    
    
    
    
    
    
    211,764
    
    
    
    
    
    
    
    
    
    
    
    211,764Common stock
    
    
    108,670
    
    
    
    426
    
    
    
    52
    
    
    
    (478
    )
    
    
    108,670Other
    
    
    330,786
    
    
    
    (250,416
    )
    
    
    12,246
    
    
    
    238,170
    
    
    
    330,786Accumulated other comprehensive loss
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    3
    
    
    
    (3
    )Total shareholders equity
    
    
    439,453
    
    
    
    (249,990
    )
    
    
    12,295
    
    
    
    237,695
    
    
    
    439,453Total liabilities and shareholders equity
    
    $
    101,681
    
    
    $
    2,117,429
    
    
    $
    144,311
    
    
    $
    (12,295
    )
    
    $
    2,351,126
 31




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and
Senior Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Three Months Ended January 31, 2006Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    6,713
    
    
    $
    15,780
    
    
    $
    4,731
    
    
    $
    
    
    
    $
    27,224Cash flows from investing activities:Proceeds from sale of assets, net
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9Insurance proceeds related to hurricane
damaged properties
    
    
    
    
    
    
    4,540
    
    
    
    
    
    
    
    
    
    
    
    4,540Additions to property and equipment
    
    
    (551
    )
    
    
    (3,571
    )
    
    
    (152
    )
    
    
    
    
    
    
    (4,274
    )Other
    
    
    
    
    
    
    23
    
    
    
    (8
    )
    
    
    
    
    
    
    15Net cash provided by (used in) investing
activities
    
    
    (551
    )
    
    
    1,001
    
    
    
    (160
    )
    
    
    
    
    
    
    290Cash flows from financing activities:Repayments of long-term debt
    
    
    (891
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (891
    )Intercompany receivables (payables)
    
    
    18,745
    
    
    
    (14,391
    )
    
    
    (4,354
    )
    
    
    
    
    
    
    Dividends
    
    
    (2,717
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,717
    )Other
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61Net cash provided by (used in) financing
activities
    
    
    15,198
    
    
    
    (14,391
    )
    
    
    (4,354
    )
    
    
    
    
    
    
    (3,547
    )Net increase in cash
    
    
    21,360
    
    
    
    2,390
    
    
    
    217
    
    
    
    
    
    
    
    23,967Cash and cash equivalents, beginning of period
    
    
    38,675
    
    
    
    874
    
    
    
    1,056
    
    
    
    
    
    
    
    40,605Cash and cash equivalents, end of period
    
    $
    60,035
    
    
    $
    3,264
    
    
    $
    1,273
    
    
    $
    
    
    
    $
    64,572
 32




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12) Condensed
Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and Senior Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Three Months Ended January 31, 2005Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)Net cash provided by (used in)
operating activities
    
    $
    (2,486
    )
    
    $
    (2,111
    )
    
    $
    2,724
    
    
    $
    
    
    
    $
    (1,873
    )Cash flows from investing activities:Proceeds from sales of marketable
securities
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16Proceeds from sale of assets, net
    
    
    (147
    )
    
    
    4,921
    
    
    
    675
    
    
    
    
    
    
    
    5,449Additions to property and equipment
    
    
    (1,059
    )
    
    
    (2,257
    )
    
    
    (3,196
    )
    
    
    
    
    
    
    (6,512
    )Other
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    28Net cash provided by (used in)
investing activities
    
    
    (1,206
    )
    
    
    2,708
    
    
    
    (2,521
    )
    
    
    
    
    
    
    (1,019
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    110,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,000Repayments of long-term debt
    
    
    (124,274
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (124,274
    )Intercompany receivables (payables)
    
    
    1,887
    
    
    
    (1,559
    )
    
    
    (328
    )
    
    
    
    
    
    
    Debt issue costs
    
    
    (1,681
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,681
    )Issuance of common stock
    
    
    10,419
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,419Other
    
    
    (944
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (944
    )Net cash used in financing activities
    
    
    (4,593
    )
    
    
    (1,559
    )
    
    
    (328
    )
    
    
    
    
    
    
    (6,480
    )Net decrease in cash
    
    
    (8,285
    )
    
    
    (962
    )
    
    
    (125
    )
    
    
    
    
    
    
    (9,372
    )Cash and cash equivalents, beginning of
period
    
    
    13,553
    
    
    
    7,625
    
    
    
    336
    
    
    
    
    
    
    
    21,514Cash and cash equivalents, end of
period
    
    $
    5,268
    
    
    $
    6,663
    
    
    $
    211
    
    
    $
    
    
    
    $
    12,142
 33




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (13) Discontinued Operations, Assets Held for Sale and Impairment Charges
    Three Months EndedJanuary 31,2005(Restated)Revenue:Funeral
    
    $
    331Cemetery
    
    
    203$
    534Gross profit:Funeral
    
    $
    (105
    )Cemetery
    
    
    87(18
    )Gains on dispositions and impairment (losses), net
    
    
    543Other operating income, net
    
    
    5Earnings from discontinued operations
before income taxes
    
    $
    530
 (14) Separation Charges
  34




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (15) Consolidated Comprehensive Income
  Three Months Ended January 31,2006
    
    
    2005(Restated)Net earnings (loss)
    
    $
    8,389
    
    
    $
    (145,277
    )Other comprehensive income:Unrealized depreciation of
investments, net of deferred
tax benefit of $1
    
    
    (2
    )
    
    
    Unrealized appreciation on
derivative instrument
designated and qualifying as a
cash flow hedging instrument,
net of deferred tax expense of
($118)
    
    
    
    
    
    
    193Reduction in net unrealized
losses associated with
available-for-sale securities
of the trusts
    
    
    29,098
    
    
    
    20,686Reclassification of the net
unrealized losses activity
attributable to the
non-controlling interest
holders
    
    
    (29,098
    )
    
    
    (20,686
    )Total other comprehensive income
    
    
    (2
    )
    
    
    193Total comprehensive income (loss)
    
    $
    8,387
    
    
    $
    (145,084
    )
 (16) Guarantees
     35




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (17) Related Party Transactions
      (18) Hurricane Related Charges
   36




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (18) Hurricane Related Charges(Continued)
   (19) Long-term Debt
  (20) Subsequent Events
  37




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Restatement of Historical Financial Statements
  (A)
    
    The incorrect determination of operating and reportable segments and reporting units
related to the application of FASB Statement No. 142, Goodwill and Other Intangible
Assets, (SFAS No. 142), which also had the effect of changing the charges recorded for
the assets sold as part of our plan initiated in December 2003 to sell a number of
businesses, and the net book value of assets held for sale on our balance sheet.(B)
    
    Errors identified in revenue recognition of preneed cemetery merchandise and services
contracts and recognition of realized trust earnings on preneed cemetery and funeral
merchandise and services contracts.(C)
    
    Other miscellaneous adjustments, including adjustments for lease-related accounting
practices.
  Segments and Reporting Units
     38




---



##### Table of Contents



Deferred Revenue Project
    Other Adjustments
   Overview
    39




---



##### Table of Contents



Critical Accounting Policies
  Results of Operations
  40




---



##### Table of Contents



Three Months Ended January 31, 2006 Compared to Three Months Ended January 31, 2005Continuing
Operations
 Funeral Operations
 Three Months EndedJanuary 31,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)(In millions)(Restated)Funeral Revenue:Eastern Division
    
    $
    30.2
    
    
    $
    29.5
    
    
    $
    .7Western Division
    
    
    37.0
    
    
    
    35.7
    
    
    
    1.3Corporate Trust Management (1)
    
    
    4.6
    
    
    
    4.5
    
    
    
    .1Total Funeral Revenue
    
    $
    71.8
    
    
    $
    69.7
    
    
    $
    2.1Funeral Costs:Eastern Division
    
    $
    24.6
    
    
    $
    23.7
    
    
    $
    .9Western Division
    
    
    29.3
    
    
    
    28.1
    
    
    
    1.2Corporate Trust Management (1)
    
    
    .1
    
    
    
    .1
    
    
    
    Total Funeral Costs
    
    $
    54.0
    
    
    $
    51.9
    
    
    $
    2.1Funeral Gross Profit:Eastern Division
    
    $
    5.6
    
    
    $
    5.8
    
    
    $
    (.2
    )Western Division
    
    
    7.7
    
    
    
    7.6
    
    
    
    .1Corporate Trust Management (1)
    
    
    4.5
    
    
    
    4.4
    
    
    
    .1Total Funeral Gross Profit
    
    $
    17.8
    
    
    $
    17.8
    
    
    $
    
 (2)
 Change in Average
    
    Change in Same-Store
    
    Cremation RateRevenue Per Call
    
    Funeral Services
    
    2006
    
    2005Eastern Division
    
    
    1.6
    %
    
    
    1.3
    %
    
    
    32.6
    %
    
    
    29.3
    %Western Division
    
    
    1.7
    %
    
    
    3.2
    %
    
    
    43.2
    %
    
    
    42.8
    %Total
    
    
    1.3
    %
    
    
    2.4
    %
    
    
    38.7
    %
    
    
    37.0
    %
 
 (1)
    
    Corporate trust management consists of trust management fees and funeral
merchandise and service trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by us at rates consistent with
industry norms and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust
earnings represent earnings realized over the life of the preneed contracts delivered during
the relevant periods. See Notes 4 and 7 to the 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, 2006 and 2005 were $1.3 million and $1.2 million, respectively, and funeral trust
earnings for the three months ended January 31, 2006 and 2005 were $3.3 million.(2)
    
    On August 29, 2005, Hurricane Katrina struck the New Orleans metropolitan area and
severely damaged three of our funeral homes located in that area, which is part of our Western
division. This same-store analysis includes these three funeral homes which had revenue of
$1.5 million and $2.2 million for the three months ended January 31, 2006 and 2005,
respectively, and performed 359 and 476 funeral services in the first quarter of 2006 and
2005, respectively. Excluding these three funeral homes, the increase in average revenue per
call for the Western division and the Company was 2.6 percent and 1.7 percent, respectively,
and the change in same-store funeral services for the Western division and the Company was 4.8
percent and 3.3 percent, respectively. Consolidated Operations  Funeral
  41




---



##### Table of Contents



Segment Discussion  Funeral
   Cemetery Operations
 Three Months EndedJanuary 31,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)(In millions)(Restated)Cemetery Revenue:Eastern Division
    
    $
    32.7
    
    
    $
    29.8
    
    
    $
    2.9Western Division
    
    
    19.5
    
    
    
    20.3
    
    
    
    (.8
    )Corporate Trust Management (1)
    
    
    2.6
    
    
    
    2.7
    
    
    
    (.1
    )Total Cemetery Revenue
    
    $
    54.8
    
    
    $
    52.8
    
    
    $
    2.0Cemetery Costs:Eastern Division
    
    $
    27.6
    
    
    $
    27.0
    
    
    $
    .6Western Division
    
    
    15.8
    
    
    
    16.3
    
    
    
    (.5
    )Corporate Trust Management (1)
    
    
    .1
    
    
    
    .1
    
    
    
    Total Cemetery Costs
    
    $
    43.5
    
    
    $
    43.4
    
    
    $
    .1Cemetery Gross Profit:Eastern Division
    
    $
    5.1
    
    
    $
    2.8
    
    
    $
    2.3Western Division
    
    
    3.7
    
    
    
    4.0
    
    
    
    (.3
    )Corporate Trust Management (1)
    
    
    2.5
    
    
    
    2.6
    
    
    
    (.1
    )Total Cemetery Gross Profit
    
    $
    11.3
    
    
    $
    9.4
    
    
    $
    1.9
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery merchandise and
service trust 42




---



##### Table of Contents



Consolidated Operations  Cemetery
    Segment Discussion  Cemetery
   Discontinued Operations
  Other
  43




---



##### Table of Contents



Preneed Sales into and Deliveries out of the Backlog
  44




---



##### Table of Contents



Liquidity and Capital Resources
 Cash Flow
    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)
    
    $
    409.1
    
    
    $
    3.1
    
    
    $
    4.9
    
    
    $
    4.4
    
    
    $
    396.7Interest on long-term debt (2)
    
    
    171.7
    
    
    
    27.5
    
    
    
    51.9
    
    
    
    51.2
    
    
    
    41.1Operating lease obligations (3)
    
    
    33.9
    
    
    
    3.6
    
    
    
    6.9
    
    
    
    4.9
    
    
    
    18.5Non-competition and other agreements (4)
    
    
    5.8
    
    
    
    1.9
    
    
    
    3.0
    
    
    
    .6
    
    
    
    .3$
    620.5
    
    
    $
    36.1
    
    
    $
    66.7
    
    
    $
    61.1
    
    
    $
    456.6
 45




---



##### Table of Contents



(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, 2006.(2)
    
    Includes contractual interest payments for our revolving credit facility, Term Loan
B, senior notes and third-party debt. The interest on the revolving credit facility and Term
Loan B was calculated based on interest rates in effect as of January 31, 2006.(3)
    
    Our noncancellable operating leases are primarily for land and buildings and expire
over the next one to 13 years, except for six leases that expire between 2032 and 2039. Our
future minimum lease payments as of January 31, 2006 are $3.6 million, $3.8 million, $3.1
million, $2.7 million, $2.2 million, and $18.5 million for the years ending October 31, 2006,
2007, 2008, 2009, 2010 and later years, respectively.(4)
    
    We have entered into non-competition agreements with prior owners and key employees
of acquired subsidiaries that expire through 2012. This category also includes separation pay
related to former executive officers.   Other, PrincipallyRevolving
    
    
    
    
    
    
    
    
    
    
    Seller FinancingFiscal Year Ending
    
    Credit
    
    
    Term
    
    
    Senior
    
    
    of AcquiredOctober 31,
    
    Facility
    
    
    Loan B
    
    
    Notes
    
    
    Operations
    
    
    Total2006
    
    $
    
    
    
    $
    1.6
    
    
    $
    
    
    
    $
    .7
    
    
    $
    2.32007
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    .6
    
    
    
    2.82008
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    .2
    
    
    
    2.42009
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    2.22010
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    2.2Thereafter
    
    
    
    
    
    
    197.1
    
    
    
    200.0
    
    
    
    .1
    
    
    
    397.2Total long-term debt
    
    $
    
    
    
    $
    207.5
    
    
    $
    200.0
    
    
    $
    1.6
    
    
    $
    409.1
    46




---



##### Table of Contents



Off-Balance Sheet Arrangements
  (1)
    
    the $41.1 million bond we are required to maintain to guarantee our obligations
relating to funds we withdrew in fiscal year 2001 from our preneed funeral trusts in
Florida, which is discussed above and in Note 21 to the consolidated financial
statements in our 2005 Form 10-K; and(2)
    
    the insurance-funded preneed funeral contracts, which will be funded by life
insurance or annuity contracts issued by third-party insurers, are not reflected in our
consolidated balance sheets, and are discussed in Note 3(i) to the consolidated
financial statements in our 2005 Form 10-K.
 Ratio of Earnings to Fixed Charges
  Three MonthsEnded
    
    Years Ended October 31,January 31, 2006
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001(Restated)
    
    (Restated)
    
    (Restated)
    
    (Restated)2.67 (1)
    
    
    1.36

(2)(6)
    
    
    1.98

(3)
    
    
    1.08

(4)
    
    
    1.27

(5)(6)
    
    
    

(6)(7)
 
 (1)
    
    Pretax earnings for the three months ended January 31, 2006 include $2.6 million in
net hurricane related charges, $0.3 million of gains on dispositions and impairment (losses),
net and $0.2 million in separation charges.(2)
    
    Pretax earnings for fiscal year 2005 include a charge of $9.4 million for expenses
related to Hurricane Katrina, a charge of $1.5 million for separation charges related to the
July 2005 restructuring of our divisions, $1.3 million of gains on dispositions and impairment
(losses), net and $32.8 million for the loss on early extinguishment of debt related to the
2005 debt refinancings.(3)
    
    Pretax earnings for fiscal year 2004 includes separation charges of $3.4
million for costs related to workforce reductions and separation pay to a former executive
officer and ($0.2) million in gains on dispositions and impairment (losses), net.(4)
    
    Pretax earnings for fiscal year 2003 include a charge of $11.3 million for the loss
on early extinguishment of debt in connection with redemption of the ROARS, a noncash charge
of $10.2 million for long-lived asset impairment and a charge of $2.5 million for separation
payments to former executive officers.(5)
    
    Pretax earnings for fiscal year 2002 include a noncash charge of $18.5 million in
connection with the write-down of assets held for sale.(6)
    
    Excludes the cumulative effect of change in accounting principles.(7)
    
    Pretax earnings for fiscal year 2001 include a noncash charge of $269.2 million in
connection with the write-down of assets held for sale and other charges and a $9.1 million
charge for the loss on early extinguishment of debt. As a result of these charges, our
earnings for fiscal year 2001 were insufficient to cover our fixed charges, and an additional
$229.9 million in pretax earnings would have been required to eliminate the coverage
deficiency.  Recent Accounting Standards
  47




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
   Interest
    
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   48




---



##### Table of Contents



1.
    
    The Company did not maintain effective controls over revenue recognition related to
preneed cemetery merchandise and services contracts. Specifically, the Company did not maintain effective
controls over the reconciliation of recorded revenues to revenues based on physical delivery
of preneed cemetery merchandise to ensure completeness and accuracy of recorded preneed
cemetery merchandise revenue and deferred preneed cemetery revenue. This control deficiency
resulted in the restatement of the Companys consolidated financial statements for all annual
and interim periods beginning with fiscal year 2001, the period in which the Company adopted
Staff Accounting Bulletin No. 101 (SAB 101) Revenue Recognition in Financial Statements,
through fiscal year 2004 and the first three quarters of fiscal year 2005. Prior to the
adoption of SAB 101, the Company recognized preneed cemetery merchandise revenues at the time
a contract was entered into with a customer. This control deficiency could result in the
misstatement of cemetery merchandise revenues and of deferred preneed cemetery revenues that
would result in a material misstatement to annual or interim financial statements that would
not be prevented or detected. Accordingly, management determined that this control deficiency
represents a material weakness.2.
    
    The Company did not maintain effective controls over recognition of realized trust
earnings on preneed cemetery and funeral contracts. Specifically, the Company did not
maintain effective controls to recognize realized net trust earnings upon the delivery of
the related preneed cemetery and funeral merchandise and performance of preneed funeral
services to ensure accuracy of recorded realized trust earnings and deferred trust earnings.
This control deficiency resulted in the restatement of the Companys consolidated financial
statements for all annual and interim periods from fiscal year 2001 through fiscal year 2004
and the first three quarters of fiscal year 2005. This control deficiency could result in
the misstatement of cemetery and funeral revenues and of the deferred revenue associated
with preneed cemetery and preneed funeral contracts sold on a preneed basis that would
result in a material misstatement to annual or interim financial statements that would not
be prevented or detected. Accordingly management determined that this control deficiency
represents a material weakness.
  Plan for Remediation
  Changes in Internal Control over Financial Reporting
  49




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 Issuer Purchases of Equity Securities
 Total number of
    
    
    Maximum approximateshares purchased
    
    
    dollar value of sharesTotal number
    
    
    
    
    
    
    as part of
    
    
    that may yet beof shares
    
    
    Average price
    
    
    publicly-announced
    
    
    purchased under thePeriod
    
    purchased
    
    
    paid per share
    
    
    plans or programs(1)
    
    
    plans or programsNovember 1,
2005 through
November 30, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    22,032,533December 1, 2005
through December
31, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    22,032,533January 1, 2006
through January 31,
2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    22,032,533Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    22,032,533
 
 (1)
    
    On March 28, 2005, we announced a new stock repurchase program, authorizing the
investment of up to $30.0 million in the repurchase of our common stock. Repurchases under the
new program will be limited to our Class A common stock, and will be made in the open market
or in privately negotiated transactions at such times and in such amounts as management deems
appropriate, depending upon market conditions and other factors 
 Item 5. Other Information
 50




---



##### Table of Contents



Item 6. Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
May 7, 2003 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended April 30, 2003)3.2
    
    By-laws of the Company, as amended and restated as of November 19, 2004 (incorporated by
reference to Exhibit 3.1 to the Companys Current Report on Form 8-K dated November 22, 2004)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 4.2 to
Amendment No. 3 to the Companys Registration Statement on Form S-1 (Registration No.
33-42336) filed with the Commission on October 7, 1991)4.3
    
    Rights Agreement, dated as of October 28, 1999, between Stewart Enterprises, Inc. and
ChaseMellon Shareholder Services, L.L.C. as Rights Agent (incorporated by reference to Exhibit
1 to the Companys Form 8-A dated November 3, 1999)4.4
    
    Credit Agreement dated June 29, 2001 by and among the Company, Empresas Stewart-Cementerios
and Empresas Stewart-Funerarias, as Borrowers, Bank of America, N.A., as Administrative Agent,
Collateral Agent and as a Lender, Deutsche Banc Alex. Brown, Inc., as Syndication Agent,
Bankers Trust Company, as a Lender and the other Lenders party thereto from time to time
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K dated
June 29, 2001) and Amendment No. 1 to the Credit Agreement dated April 25, 2003 (incorporated
by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K dated May 1, 2003) and
Amendment No. 2 to the Credit Agreement dated February 18, 2004 (incorporated by reference to
Exhibit 4.4 to the Companys Quarterly Report on Form 10-Q for the quarter ended January 31,
2004)4.5
    
    Amended and Restated Credit Agreement dated November 19, 2004 by and among the Company,
Empresas Stewart-Cementerios and Empresas Stewart-Funerarias, as Borrowers, Bank of America,
N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer and The
Other Lenders party hereto (incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K dated November 22, 2004)4.6
    
    Indenture dated June 29, 2001 by and among Stewart, the Guarantors named therein and Firstar
Bank, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Companys Form S-4
dated August 14, 2001) and First Supplemental Indenture, dated as of February 2, 2005 by and
among Stewart Enterprises, Inc., the Guarantors thereunder and U.S. Bank National Association,
as Trustee, supplementing the Indenture (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K dated February 2, 2005) and Second Supplemental
Indenture, dated as of February 28, 2005 by and among The Lincoln Memorial Park Cemetery
Association, a subsidiary of Stewart Enterprises, Inc., Stewart Enterprises, Inc., the
 51




---



##### Table of Contents



other Guarantors and U.S. Bank National Association, as trustee (incorporated by reference to
Exhibit 4.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended April 30,
2005)4.7
    
    Form of 10.75 percent Senior Subordinated Note due 2008 (incorporated by reference to Exhibit
4.2 to the Companys Form S-4 dated August 14, 2001)4.8
    
    Indenture dated as of February 11, 2005 by and among Stewart Enterprises, Inc., the
Guarantors thereunder and U.S. Bank National Association, as Trustee, with respect to the 6.25
percent Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K dated February 11, 2005)4.9
    
    Form of 6.25 percent Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K dated February 11, 2005)31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Kenneth C. Budde,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen,
Executive Vice President and Chief Financial Officer32
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of Kenneth C. Budde,
President and Chief Executive Officer, and Thomas M. Kitchen, Executive Vice President and
Chief Financial Officer
 52




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.March 13, 2006
    
    /s/ THOMAS M. KITCHEN

Thomas M. KitchenExecutive Vice President andChief Financial OfficerMarch 13, 2006
    
    /s/ MICHAEL G. HYMEL

Michael G. HymelVice PresidentCorporate ControllerChief Accounting Officer
 53




---



##### Table of Contents



Exhibit Index
 Exhibit No.
    
    Description3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
May 7, 2003 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended April 30, 2003)3.2
    
    By-laws of the Company, as amended and restated as of November 19, 2004 (incorporated by
reference to Exhibit 3.1 to the Companys Current Report on Form 8-K dated November 22, 2004)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 4.2 to
Amendment No. 3 to the Companys Registration Statement on Form S-1 (Registration No.
33-42336) filed with the Commission on October 7, 1991)4.3
    
    Rights Agreement, dated as of October 28, 1999, between Stewart Enterprises, Inc. and
ChaseMellon Shareholder Services, L.L.C. as Rights Agent (incorporated by reference to Exhibit
1 to the Companys Form 8-A dated November 3, 1999)4.4
    
    Credit Agreement dated June 29, 2001 by and among the Company, Empresas Stewart-Cementerios
and Empresas Stewart-Funerarias, as Borrowers, Bank of America, N.A., as Administrative Agent,
Collateral Agent and as a Lender, Deutsche Banc Alex. Brown, Inc., as Syndication Agent,
Bankers Trust Company, as a Lender and the other Lenders party thereto from time to time
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K dated
June 29, 2001) and Amendment No. 1 to the Credit Agreement dated April 25, 2003 (incorporated
by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K dated May 1, 2003) and
Amendment No. 2 to the Credit Agreement dated February 18, 2004 (incorporated by reference to
Exhibit 4.4 to the Companys Quarterly Report on Form 10-Q for the quarter ended January 31,
2004)4.5
    
    Amended and Restated Credit Agreement dated November 19, 2004 by and among the Company,
Empresas Stewart-Cementerios and Empresas Stewart-Funerarias, as Borrowers, Bank of America,
N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer and The
Other Lenders party hereto (incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K dated November 22, 2004)4.6
    
    Indenture dated June 29, 2001 by and among Stewart, the Guarantors named therein and Firstar
Bank, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Companys Form S-4
dated August 14, 2001) and First Supplemental Indenture, dated as of February 2, 2005 by and
among Stewart Enterprises, Inc., the Guarantors thereunder and U.S. Bank National Association,
as Trustee, supplementing the Indenture (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K dated February 2, 2005) and Second Supplemental
Indenture, dated as of February 28, 2005 by and among The Lincoln Memorial Park Cemetery
Association, a subsidiary of Stewart Enterprises, Inc., Stewart Enterprises, Inc., the
 54




---



##### Table of Contents



other
Guarantors and U.S. National Bank Association, as trustee (incorporated by reference to
Exhibit 4.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended April 30,
2005)4.7
    
    Form of 10.75 percent Senior Subordinated Note due 2008 (incorporated by reference to Exhibit
4.2 to the Companys Form S-4 dated August 14, 2001)4.8
    
    Indenture dated as of February 11, 2005 by and among Stewart Enterprises, Inc., the
Guarantors thereunder and U.S. Bank National Association, as Trustee, with respect to the 6.25
percent Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K dated February 11, 2005)4.9
    
    Form of 6.25 percent Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K dated February 11, 2005)31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Kenneth C. Budde,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen,
Executive Vice President and Chief Financial Officer32
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of Kenneth C. Budde,
President and Chief Executive Officer, and Thomas M. Kitchen, Executive Vice President and
Chief Financial Officer
 55