##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended April 30, 2011
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 
 Commission File Number: 1-15449
 
 STEWART ENTERPRISES, INC.
  LOUISIANA
(State or other jurisdiction of incorporation or organization)
    
    72-0693290
(I.R.S. Employer Identification No.)1333 South Clearview Parkway 
Jefferson, Louisiana
(Address of principal executive offices)
    
    70121
(Zip Code)
 (504) 729-1400
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 INDEX
 PagePart I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings  Three Months Ended April 30, 2011 and 2010
    
    
    3Condensed Consolidated Statements of Earnings  Six Months Ended April 30, 2011 and 2010
    
    
    4Condensed Consolidated Balance Sheets  April 30, 2011 and October 31, 2010
    
    
    5Condensed Consolidated Statement of Shareholders Equity  Six Months Ended April 30, 2011
    
    
    7Condensed Consolidated Statements of Cash Flows  Six Months Ended April 30, 2011 and 2010
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    47Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    60Item 4. Controls and Procedures
    
    
    60Part II. Other InformationItem 1. Legal Proceedings
    
    
    61Item 1A. Risk Factors
    
    
    61Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    62Item 6. Exhibits
    
    
    62Signatures
    
    
    64EX-31.1EX-31.2EX-32.1
  2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended April 30,2011
    
    
    2010Revenues:Funeral
    
    $
    72,974
    
    
    $
    71,060Cemetery
    
    
    56,691
    
    
    
    56,973129,665
    
    
    
    128,033Costs and expenses:Funeral
    
    
    54,926
    
    
    
    54,151Cemetery
    
    
    49,098
    
    
    
    48,802104,024
    
    
    
    102,953Gross profit
    
    
    25,641
    
    
    
    25,080Corporate general and administrative expenses
    
    
    (6,650
    )
    
    
    (6,116
    )Hurricane related charges, net
    
    
    (54
    )
    
    
    (32
    )Net loss on dispositions
    
    
    (400
    )
    
    
    Other operating income, net
    
    
    448
    
    
    
    265Operating earnings
    
    
    18,985
    
    
    
    19,197Interest expense
    
    
    (5,732
    )
    
    
    (5,891
    )Loss on early extinguishment of debt
    
    
    (1,811
    )
    
    
    Investment and other income, net
    
    
    340
    
    
    
    36Earnings from continuing operations before income taxes
    
    
    11,782
    
    
    
    13,342Income taxes
    
    
    1,784
    
    
    
    4,954Earnings from continuing operations
    
    
    9,998
    
    
    
    8,388Discontinued operations:Earnings from discontinued operations before income taxes
    
    
    
    
    
    
    4Income taxes
    
    
    
    
    
    
    1Earnings from discontinued operations
    
    
    
    
    
    
    3Net earnings
    
    $
    9,998
    
    
    $
    8,391Basic earnings per common share:Earnings from continuing operations
    
    $
    .11
    
    
    $
    .09Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .11
    
    
    $
    .09Diluted earnings per common share:Earnings from continuing operations
    
    $
    .11
    
    
    $
    .09Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .11
    
    
    $
    .09Weighted average common shares outstanding (in thousands):Basic
    
    
    90,442
    
    
    
    92,113Diluted
    
    
    91,066
    
    
    
    92,387Dividends declared per common share
    
    $
    .03
    
    
    $
    .03
  3




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Six Months Ended April 30,2011
    
    
    2010Revenues:Funeral
    
    $
    146,840
    
    
    $
    142,780Cemetery
    
    
    112,089
    
    
    
    109,265258,929
    
    
    
    252,045Costs and expenses:Funeral
    
    
    108,404
    
    
    
    106,600Cemetery
    
    
    96,529
    
    
    
    95,122204,933
    
    
    
    201,722Gross profit
    
    
    53,996
    
    
    
    50,323Corporate general and administrative expenses
    
    
    (13,289
    )
    
    
    (12,786
    )Hurricane related charges, net
    
    
    (104
    )
    
    
    (32
    )Net loss on dispositions
    
    
    (400
    )
    
    
    Other operating income, net
    
    
    681
    
    
    
    444Operating earnings
    
    
    40,884
    
    
    
    37,949Interest expense
    
    
    (11,468
    )
    
    
    (12,347
    )Gain (loss) on early extinguishment of debt
    
    
    (1,811
    )
    
    
    17Investment and other income, net
    
    
    364
    
    
    
    60Earnings from continuing operations before income taxes
    
    
    27,969
    
    
    
    25,679Income taxes
    
    
    9,927
    
    
    
    9,830Earnings from continuing operations
    
    
    18,042
    
    
    
    15,849Discontinued operations:Earnings from discontinued operations before income taxes
    
    
    
    
    
    
    46Income taxes
    
    
    
    
    
    
    17Earnings from discontinued operations
    
    
    
    
    
    
    29Net earnings
    
    $
    18,042
    
    
    $
    15,878Basic earnings per common share:Earnings from continuing operations
    
    $
    .20
    
    
    $
    .17Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .20
    
    
    $
    .17Diluted earnings per common share:Earnings from continuing operations
    
    $
    .20
    
    
    $
    .17Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .20
    
    
    $
    .17Weighted average common shares outstanding (in thousands):Basic
    
    
    90,658
    
    
    
    92,082Diluted
    
    
    91,125
    
    
    
    92,332Dividends declared per common share
    
    $
    .06
    
    
    $
    .06
  4




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 April 30, 2011
    
    
    October 31, 2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    78,310
    
    
    $
    56,060Certificates of deposit and marketable securities
    
    
    598
    
    
    
    10,000Receivables, net of allowances
    
    
    48,836
    
    
    
    51,151Inventories
    
    
    35,793
    
    
    
    35,708Prepaid expenses
    
    
    7,671
    
    
    
    5,479Deferred income taxes, net
    
    
    28,405
    
    
    
    28,312Assets held for sale
    
    
    
    
    
    
    27Total current assets
    
    
    199,613
    
    
    
    186,737Receivables due beyond one year, net of allowances
    
    
    64,267
    
    
    
    67,458Preneed funeral receivables and trust investments
    
    
    432,696
    
    
    
    414,918Preneed cemetery receivables and trust investments
    
    
    226,650
    
    
    
    209,287Goodwill
    
    
    247,038
    
    
    
    247,038Cemetery property, at cost
    
    
    387,641
    
    
    
    386,004Property and equipment, at cost:Land
    
    
    43,726
    
    
    
    43,518Buildings
    
    
    342,474
    
    
    
    338,237Equipment and other
    
    
    194,219
    
    
    
    191,428580,419
    
    
    
    573,183Less accumulated depreciation
    
    
    295,205
    
    
    
    283,633Net property and equipment
    
    
    285,214
    
    
    
    289,550Deferred income taxes, net
    
    
    92,112
    
    
    
    98,025Cemetery perpetual care trust investments
    
    
    242,542
    
    
    
    230,730Non-current assets held for sale
    
    
    
    
    
    
    1,214Other assets
    
    
    15,878
    
    
    
    11,905Total assets
    
    $
    2,193,651
    
    
    $
    2,142,866
  5




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 April 30, 2011
    
    
    October 31, 2010LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5,817
    
    
    $
    5Accounts payable and accrued expenses
    
    
    24,175
    
    
    
    24,797Accrued payroll and other benefits
    
    
    13,406
    
    
    
    14,311Accrued insurance
    
    
    20,850
    
    
    
    20,912Accrued interest
    
    
    2,018
    
    
    
    4,197Estimated obligation to fund cemetery perpetual care trust
    
    
    12,633
    
    
    
    13,253Other current liabilities
    
    
    9,495
    
    
    
    12,132Income taxes payable
    
    
    698
    
    
    
    2,533Liabilities associated with assets held for sale
    
    
    
    
    
    
    8Total current liabilities
    
    
    89,092
    
    
    
    92,148Long-term debt, less current maturities
    
    
    315,891
    
    
    
    314,027Deferred income taxes, net
    
    
    4,906
    
    
    
    4,950Deferred preneed funeral revenue
    
    
    242,032
    
    
    
    243,520Deferred preneed cemetery revenue
    
    
    256,364
    
    
    
    258,044Deferred preneed funeral and cemetery receipts held in trust
    
    
    591,761
    
    
    
    554,716Perpetual care trusts corpus
    
    
    241,576
    
    
    
    229,240Long-term liabilities associated with assets held for sale
    
    
    
    
    
    
    714Other long-term liabilities
    
    
    20,456
    
    
    
    20,023Total liabilities
    
    
    1,762,078
    
    
    
    1,717,382Commitments and contingenciesShareholders equity:Preferred stock, $1.00 par value, 5,000,000 shares authorized;
no shares issued
    
    
    
    
    
    
    Common stock, $1.00 stated value:Class A authorized 200,000,000 shares; issued and
outstanding 87,646,189 and 88,739,140 shares at April
30, 2011 and October 31, 2010, respectively
    
    
    87,646
    
    
    
    88,739Class B authorized 5,000,000 shares; issued and
outstanding 3,555,020 shares at April 30, 2011 and
October 31, 2010; 10 votes per share convertible into
an equal number of Class A shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    536,450
    
    
    
    547,319Accumulated deficit
    
    
    (196,105
    )
    
    
    (214,147
    )Accumulated other comprehensive income:Unrealized appreciation of investments
    
    
    27
    
    
    
    18Total accumulated other comprehensive income
    
    
    27
    
    
    
    18Total shareholders equity
    
    
    431,573
    
    
    
    425,484Total liabilities and shareholders equity
    
    $
    2,193,651
    
    
    $
    2,142,866
  6




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
(Dollars in thousands, except per share amounts)
 Additional
    
    
    
    
    
    
    Unrealized
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Accumulated
    
    
    Appreciation
    
    
    ShareholdersStock(1)
    
    
    Capital
    
    
    Deficit
    
    
    of Investments
    
    
    EquityBalance October 31, 2010
    
    $
    92,294
    
    
    $
    547,319
    
    
    $
    (214,147
    )
    
    $
    18
    
    
    $
    425,484Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    18,042
    
    
    
    
    
    
    
    18,042Other comprehensive income:Unrealized
appreciation of
investments, net of
deferred tax expense
of
($5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    9Total other comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    9Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    18,042
    
    
    
    9
    
    
    
    18,051Restricted stock activity
    
    
    84
    
    
    
    506
    
    
    
    
    
    
    
    
    
    
    
    590Issuance of common stock
    
    
    107
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    607Stock options exercised
    
    
    238
    
    
    
    810
    
    
    
    
    
    
    
    
    
    
    
    1,048Stock option expense
    
    
    
    
    
    
    561
    
    
    
    
    
    
    
    
    
    
    
    561Tax benefit associated
with stock activity
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    104Purchase and retirement of
common stock
    
    
    (1,522
    )
    
    
    (7,865
    )
    
    
    
    
    
    
    
    
    
    
    (9,387
    )Dividends ($.06 per share)
    
    
    
    
    
    
    (5,485
    )
    
    
    
    
    
    
    
    
    
    
    (5,485
    )Balance April 30, 2011
    
    $
    91,201
    
    
    $
    536,450
    
    
    $
    (196,105
    )
    
    $
    27
    
    
    $
    431,573
 
 (1)
    
    Amount includes 87,646 and 88,739 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of April 30, 2011 and October 31, 2010, respectively,
and includes 3,555 shares (in thousands) of Class B common stock.  7




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Six Months Ended April 30,2011
    
    
    2010Cash flows from operating activities:Net earnings
    
    $
    18,042
    
    
    $
    15,878Adjustments to reconcile net earnings to net cash provided by operating activities:Net loss on dispositions
    
    
    400
    
    
    
    (Gain) loss on early extinguishment of debt
    
    
    1,811
    
    
    
    (17
    )Premiums paid on early extinguishment of debt
    
    
    (777
    )
    
    
    Depreciation and amortization
    
    
    13,575
    
    
    
    13,194Non-cash interest and amortization of discount on senior convertible notes
    
    
    2,636
    
    
    
    3,046Provision for doubtful accounts
    
    
    2,528
    
    
    
    2,406Share-based compensation
    
    
    1,661
    
    
    
    1,500Excess tax benefits from share-based payment arrangements
    
    
    (144
    )
    
    
    (26
    )Provision for deferred income taxes
    
    
    8,278
    
    
    
    8,395Estimated obligation to fund cemetery perpetual care trust
    
    
    73
    
    
    
    Other
    
    
    (328
    )
    
    
    12Changes in assets and liabilities:Decrease in receivables
    
    
    486
    
    
    
    754Increase in prepaid expenses
    
    
    (2,193
    )
    
    
    (2,271
    )(Increase) decrease in inventories and cemetery property
    
    
    (684
    )
    
    
    1,106Federal income tax refunds
    
    
    
    
    
    
    1,600Decrease in accounts payable and accrued expenses
    
    
    (8,524
    )
    
    
    (11,501
    )Net effect of preneed funeral production and maturities:Decrease in preneed funeral receivables and trust investments
    
    
    4,083
    
    
    
    5,925Decrease in deferred preneed funeral revenue
    
    
    (1,674
    )
    
    
    (2,104
    )Decrease in deferred preneed funeral receipts held in trust
    
    
    (1,947
    )
    
    
    (6,926
    )Net effect of preneed cemetery production and deliveries:(Increase) decrease in preneed cemetery receivables and trust investments
    
    
    (3,901
    )
    
    
    793Decrease in deferred preneed cemetery revenue
    
    
    (1,682
    )
    
    
    (5,679
    )Increase in deferred preneed cemetery receipts held in trust
    
    
    3,935
    
    
    
    325Increase in other
    
    
    42
    
    
    
    45Net cash provided by operating activities
    
    
    35,696
    
    
    
    26,455Cash flows from investing activities:Proceeds from sales of certificates of deposit and marketable securities
    
    
    10,000
    
    
    
    250Purchases of certificates of deposit and marketable securities
    
    
    (585
    )
    
    
    (10,661
    )Proceeds from sale of assets
    
    
    285
    
    
    
    Purchase of subsidiaries and other investments, net of cash acquired
    
    
    (1,809
    )
    
    
    Additions to property and equipment
    
    
    (8,762
    )
    
    
    (8,366
    )Other
    
    
    54
    
    
    
    50Net cash used in investing activities
    
    
    (817
    )
    
    
    (18,727
    )Cash flows from financing activities:Proceeds of long-term debt
    
    
    200,000
    
    
    
    Repayments of long-term debt
    
    
    (194,190
    )
    
    
    (847
    )Retirement of common stock warrants
    
    
    
    
    
    
    (107
    )Issuance of common stock
    
    
    1,199
    
    
    
    471Retirement of call options
    
    
    
    
    
    
    107Purchase and retirement of common stock
    
    
    (9,387
    )
    
    
    Debt refinancing costs
    
    
    (4,910
    )
    
    
    (38
    )Dividends
    
    
    (5,485
    )
    
    
    (5,589
    )Excess tax benefits from share-based payment arrangements
    
    
    144
    
    
    
    26Net cash used in financing activities
    
    
    (12,629
    )
    
    
    (5,977
    )Net increase in cash
    
    
    22,250
    
    
    
    1,751Cash and cash equivalents, beginning of period
    
    
    56,060
    
    
    
    62,808Cash and cash equivalents, end of period
    
    $
    78,310
    
    
    $
    64,559Supplemental cash flow information:Cash paid (received) during the period for:Income taxes, net
    
    $
    3,281
    
    
    $
    (430
    )Interest
    
    $
    11,105
    
    
    $
    9,728Non-cash investing and financing activities:Issuance of common stock to executive officers and directors
    
    $
    456
    
    
    $
    414Issuance of restricted stock, net of forfeitures
    
    $
    590
    
    
    $
    437
  8




---



##### Table of Contents



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




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis of Presentation(Continued)
    WeightedNumber of Shares
    
    AverageGrant Type
    
    Granted
    
    Price per Share
    
    Vesting Period
    
    Vesting ConditionStock options
    
    
    1,330,000
    
    
    $
    6.24
    
    
    Equal one-fourth 
portions over 4 years
    
    Service conditionRestricted stock
    
    
    518,000
    
    
    $
    6.24
    
    
    Equal one-third portions over 3 years
    
    Market condition
  Receivables and Allowance for Doubtful Accounts
  10




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis of Presentation(Continued)
  Receivables as of April 30, 2011
    
    
    Receivables as of October 31, 2010Ending Balance Collectively
    
    
    Ending Balance CollectivelyEvaluated for Impairment
    
    
    Evaluated for ImpairmentCurrent receivables  at-need funeral
    
    $
    9,182
    
    
    $
    9,153Current receivables  other
    
    
    45,147
    
    
    
    47,736Receivables, due beyond one year  other
    
    
    72,199
    
    
    
    75,782Preneed funeral receivables
    
    
    42,797
    
    
    
    42,879Preneed cemetery receivables
    
    
    30,980
    
    
    
    31,643Total
    
    $
    200,305
    
    
    $
    207,193Total current receivables
    
    
    54,329
    
    
    
    56,889Total noncurrent receivables
    
    
    145,976
    
    
    
    150,304Total
    
    $
    200,305
    
    
    $
    207,193
  Allowance for Doubtful Accounts
    
    
    Allowance for Doubtful Accountsand Cancellations as of
    
    
    and Cancellations as ofApril 30, 2011
    
    
    October 31, 2010Ending Balance Collectively
    
    
    Ending Balance CollectivelyEvaluated for Impairment
    
    
    Evaluated for ImpairmentCurrent receivables  at-need
funeral and other
    
    $
    (5,493
    )
    
    $
    (5,738
    )Receivables, due beyond one year  other
    
    
    (7,932
    )
    
    
    (8,324
    )Preneed funeral receivables
    
    
    (11,673
    )
    
    
    (11,753
    )Preneed cemetery receivables
    
    
    (4,093
    )
    
    
    (4,692
    )Total
    
    $
    (29,191
    )
    
    $
    (30,507
    )Total current receivables
    
    
    (5,493
    )
    
    
    (5,738
    )Total noncurrent receivables
    
    
    (23,698
    )
    
    
    (24,769
    )Total
    
    $
    (29,191
    )
    
    $
    (30,507
    )
 Allowance for Doubtful Accounts and Cancellations RollforwardBalance 
    
    
    Charged toOctober 31,
    
    
    costs and
    
    
    
    
    
    
    Balance 2010
    
    
    expenses
    
    
    Write-offs
    
    
    April 30, 2011Current receivables 
at-need funeral and other
    
    $
    5,738
    
    
    
    1,034
    
    
    
    (1,279
    )
    
    $
    5,493Receivables, due beyond one year 
other
    
    $
    8,324
    
    
    
    1,494
    
    
    
    (1,886
    )
    
    $
    7,932$
    14,062
    
    
    $
    2,528
    
    
    $
    (3,165
    )
    
    $
    13,425
  11




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis of Presentation(Continued)
  Receivables Aging Analysisas of April 30, 2011Greater than1 to 30 Days
    
    
    31 to 60 Days
    
    
    61 to 90 Days
    
    
    90 Days
    
    
    TotalReceivables  at-need funeral
    
    $
    5,578
    
    
    $
    656
    
    
    $
    366
    
    
    $
    2,582
    
    
    $
    9,182Receivables  other
    
    
    94,978
    
    
    
    3,245
    
    
    
    2,268
    
    
    
    16,855
    
    
    
    117,346Preneed funeral receivables
    
    
    29,127
    
    
    
    949
    
    
    
    433
    
    
    
    12,288
    
    
    
    42,797Preneed cemetery receivables
    
    
    24,888
    
    
    
    976
    
    
    
    587
    
    
    
    4,529
    
    
    
    30,980$
    154,571
    
    
    $
    5,826
    
    
    $
    3,654
    
    
    $
    36,254
    
    
    $
    200,305
 Reclassifications
  (2) New Accounting Principles
     12




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2) New Accounting Principles(Continued)
   (3) Preneed Funeral Activities
  Preneed Funeral Receivables and Trust Investments
  April 30,
    
    
    October 31,2011
    
    
    2010Trust assets
    
    $
    401,572
    
    
    $
    383,792Receivables from customers
    
    
    42,797
    
    
    
    42,879444,369
    
    
    
    426,671Allowance for cancellations
    
    
    (11,673
    )
    
    
    (11,753
    )Preneed funeral receivables and trust investments
    
    $
    432,696
    
    
    $
    414,918
 13




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
  April 30, 2011Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short- term investments
    
    $
    17,044
    
    
    $
    
    
    
    $
    
    
    
    $
    17,044U.S. Government, agencies and
municipalities
    
    
    1,990
    
    
    
    35
    
    
    
    (1
    )
    
    
    2,024Corporate bonds
    
    
    27,352
    
    
    
    1,582
    
    
    
    
    
    
    
    28,934Preferred stocks
    
    
    53,748
    
    
    
    493
    
    
    
    (1,782
    )
    
    
    52,459Common stocks
    
    
    231,361
    
    
    
    3,513
    
    
    
    (77,148
    )
    
    
    157,726Mutual funds:Equity
    
    
    26,045
    
    
    
    2,877
    
    
    
    (860
    )
    
    
    28,062Fixed income
    
    
    55,949
    
    
    
    979
    
    
    
    (761
    )
    
    
    56,167Commodity
    
    
    23,660
    
    
    
    2,388
    
    
    
    
    
    
    
    26,048Real estate investment trusts
    
    
    7,987
    
    
    
    771
    
    
    
    
    
    
    
    8,758World bond
    
    
    9,030
    
    
    
    310
    
    
    
    
    
    
    
    9,340Insurance contracts and other
long-term investments
    
    
    13,840
    
    
    
    45
    
    
    
    (98
    )
    
    
    13,787Trust investments
    
    $
    468,006
    
    
    $
    12,993
    
    
    $
    (80,650
    )
    
    $
    400,349Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85.5
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,223Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    401,572
  October 31, 2010Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short- term investments
    
    $
    26,118
    
    
    $
    
    
    
    $
    
    
    
    $
    26,118U.S. Government, agencies and
municipalities
    
    
    2,224
    
    
    
    84
    
    
    
    (1
    )
    
    
    2,307Corporate bonds
    
    
    44,077
    
    
    
    2,887
    
    
    
    (1
    )
    
    
    46,963Preferred stocks
    
    
    56,297
    
    
    
    356
    
    
    
    (2,220
    )
    
    
    54,433Common stocks
    
    
    234,946
    
    
    
    925
    
    
    
    (91,593
    )
    
    
    144,278Mutual funds:Equity
    
    
    27,154
    
    
    
    185
    
    
    
    (2,936
    )
    
    
    24,403Fixed income
    
    
    53,444
    
    
    
    1,718
    
    
    
    (767
    )
    
    
    54,395Commodity
    
    
    13,572
    
    
    
    1,968
    
    
    
    
    
    
    
    15,540Insurance contracts and other
long-term investments
    
    
    14,171
    
    
    
    146
    
    
    
    (98
    )
    
    
    14,219Trust investments
    
    $
    472,003
    
    
    $
    8,269
    
    
    $
    (97,616
    )
    
    $
    382,656Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81.1
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,136Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    383,792
 14




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
  April 30, 2011Due in one year or less
    
    $
    4,058Due in one to five years
    
    
    19,185Due in five to ten years
    
    
    7,697Thereafter
    
    
    18$
    30,958
      SignificantQuoted Market
    
    Other
    
    SignificantPrices in Active
    
    Observable
    
    UnobservableMarkets
    
    Inputs
    
    Inputs
    
    Fair Market(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    ValueTrust investmentsApril 30, 2011
    
    $
    310,802
    
    
    $
    83,418
    
    
    $
    6,129
    
    
    $
    400,349Trust investmentsOctober 31, 2010
    
    $
    272,173
    
    
    $
    103,703
    
    
    $
    6,780
    
    
    $
    382,656
 15




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
   Three Months Ended April 30,
    
    
    Six Months Ended April 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Fair market value, beginning balance
    
    $
    6,383
    
    
    $
    8,735
    
    
    $
    6,780
    
    
    $
    8,662Total unrealized losses included in
other comprehensive income
(1)
    
    
    
    
    
    
    (930
    )
    
    
    
    
    
    
    (930
    )Distributions and other, net
    
    
    (254
    )
    
    
    73
    
    
    
    (651
    )
    
    
    146Fair market value, ending balance
    
    $
    6,129
    
    
    $
    7,878
    
    
    $
    6,129
    
    
    $
    7,878
 
 (1)
    
    All gains (losses) recognized in other comprehensive income for funeral trust
investments are attributable to the Companys preneed customers and are offset by a
corresponding increase (decrease) in deferred preneed funeral receipts held in trust.  Three Months Ended April 30,
    
    Six Months Ended April 30,2011
    
    2010
    
    2011
    
    2010Purchases
    
    $
    27,759
    
    
    $
    14,709
    
    
    $
    72,048
    
    
    $
    15,558Sales
    
    
    32,872
    
    
    
    18,079
    
    
    
    70,629
    
    
    
    22,428Realized gains from sales of investments
    
    
    1,591
    
    
    
    809
    
    
    
    4,409
    
    
    
    1,437Realized losses from sales of
investments and other
    
    
    (581
    )
    
    
    (538
    )
    
    
    (680
    )
    
    
    (1,054
    )Interest income, dividends and other
ordinary income
    
    
    3,477
    
    
    
    2,542
    
    
    
    6,813
    
    
    
    4,887Deposits (1)
    
    
    4,674
    
    
    
    5,590
    
    
    
    10,030
    
    
    
    13,605Withdrawals (1)
    
    
    11,930
    
    
    
    10,070
    
    
    
    22,315
    
    
    
    22,047
 
 (1)
    
    The Company historically sold a significant portion of its preneed funeral sales
through trust. Over time, the mix has shifted to a more significant portion being sold
through insurance versus trust, particularly in states where the trusting requirements are
high.  16




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
 April 30, 2011Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S.
Government,
agencies and
municipalities
    
    $
    
    
    
    $
    
    
    
    $
    20
    
    
    $
    (1
    )
    
    $
    20
    
    
    $
    (1
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    31,268
    
    
    
    (1,782
    )
    
    
    31,268
    
    
    
    (1,782
    )Common stocks
    
    
    2,607
    
    
    
    (529
    )
    
    
    128,805
    
    
    
    (76,619
    )
    
    
    131,412
    
    
    
    (77,148
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    3,163
    
    
    
    (860
    )
    
    
    3,163
    
    
    
    (860
    )Fixed income
    
    
    341
    
    
    
    (3
    )
    
    
    4,234
    
    
    
    (758
    )
    
    
    4,575
    
    
    
    (761
    )Insurance contracts
and other long-term
investments
    
    
    30
    
    
    
    (98
    )
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    (98
    )Total
    
    $
    2,978
    
    
    $
    (630
    )
    
    $
    167,490
    
    
    $
    (80,020
    )
    
    $
    170,468
    
    
    $
    (80,650
    )
 October 31, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S.
Government,
agencies and
municipalities
    
    $
    
    
    
    $
    
    
    
    $
    21
    
    
    $
    (1
    )
    
    $
    21
    
    
    $
    (1
    )Corporate bonds
    
    
    896
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    896
    
    
    
    (1
    )Preferred stocks
    
    
    49
    
    
    
    (1
    )
    
    
    35,205
    
    
    
    (2,219
    )
    
    
    35,254
    
    
    
    (2,220
    )Common stocks
    
    
    (17
    )
    
    
    (136
    )
    
    
    136,483
    
    
    
    (91,457
    )
    
    
    136,466
    
    
    
    (91,593
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    20,298
    
    
    
    (2,936
    )
    
    
    20,298
    
    
    
    (2,936
    )Fixed income
    
    
    3,575
    
    
    
    (3
    )
    
    
    4,550
    
    
    
    (764
    )
    
    
    8,125
    
    
    
    (767
    )Insurance contracts
and other long-term
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98
    )
    
    
    
    
    
    
    (98
    )Total
    
    $
    4,503
    
    
    $
    (141
    )
    
    $
    196,557
    
    
    $
    (97,475
    )
    
    $
    201,060
    
    
    $
    (97,616
    )
   17




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
  (4) Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  April 30,
    
    
    October 31,2011
    
    
    2010Trust assets
    
    $
    199,763
    
    
    $
    182,336Receivables from customers
    
    
    30,980
    
    
    
    31,643230,743
    
    
    
    213,979Allowance for cancellations
    
    
    (4,093
    )
    
    
    (4,692
    )Preneed cemetery receivables and trust investments
    
    $
    226,650
    
    
    $
    209,287
  April 30, 2011Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short- term investments
    
    $
    9,065
    
    
    $
    
    
    
    $
    
    
    
    $
    9,065U.S. Government, agencies and
municipalities
    
    
    1,106
    
    
    
    28
    
    
    
    (6
    )
    
    
    1,128Corporate bonds
    
    
    2,750
    
    
    
    333
    
    
    
    
    
    
    
    3,083Preferred stocks
    
    
    19,967
    
    
    
    182
    
    
    
    (907
    )
    
    
    19,242Common stocks
    
    
    119,246
    
    
    
    3,621
    
    
    
    (38,579
    )
    
    
    84,288Mutual funds:Equity
    
    
    29,284
    
    
    
    950
    
    
    
    (4,213
    )
    
    
    26,021Fixed income
    
    
    26,633
    
    
    
    491
    
    
    
    
    
    
    
    27,124Commodity
    
    
    14,679
    
    
    
    1,427
    
    
    
    
    
    
    
    16,106Real estate investment trusts
    
    
    6,626
    
    
    
    644
    
    
    
    
    
    
    
    7,270World bond
    
    
    5,230
    
    
    
    169
    
    
    
    
    
    
    
    5,399Other long-term investments
    
    
    437
    
    
    
    
    
    
    
    
    
    
    
    437Trust investments
    
    $
    235,023
    
    
    $
    7,845
    
    
    $
    (43,705
    )
    
    $
    199,163Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84.7
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    600Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    199,763
 18




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
  October 31, 2010Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short- term investments
    
    $
    12,719
    
    
    $
    
    
    
    $
    
    
    
    $
    12,719U.S. Government, agencies and
municipalities
    
    
    5,655
    
    
    
    667
    
    
    
    (2
    )
    
    
    6,320Corporate bonds
    
    
    11,790
    
    
    
    950
    
    
    
    (13
    )
    
    
    12,727Preferred stocks
    
    
    20,132
    
    
    
    139
    
    
    
    (1,182
    )
    
    
    19,089Common stocks
    
    
    122,529
    
    
    
    1,223
    
    
    
    (45,792
    )
    
    
    77,960Mutual funds:Equity
    
    
    30,291
    
    
    
    50
    
    
    
    (6,978
    )
    
    
    23,363Fixed income
    
    
    21,405
    
    
    
    660
    
    
    
    (6
    )
    
    
    22,059Commodity
    
    
    6,521
    
    
    
    966
    
    
    
    
    
    
    
    7,487Other long-term investments
    
    
    592
    
    
    
    3
    
    
    
    
    
    
    
    595Trust investments
    
    $
    231,634
    
    
    $
    4,658
    
    
    $
    (53,973
    )
    
    $
    182,319Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78.7
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    470Less trust investments of assets
held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (453
    )Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    182,336
  April 30, 2011Due in one year or less
    
    $
    339Due in one to five years
    
    
    2,234Due in five to ten years
    
    
    1,545Thereafter
    
    
    93$
    4,211
  19




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
     SignificantQuoted Market
    
    Other
    
    SignificantPrices in Active
    
    Observable
    
    UnobservableMarkets
    
    Inputs
    
    Inputs
    
    Fair Market(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    ValueTrust investmentsApril 30, 2011
    
    $
    175,741
    
    
    $
    23,422
    
    
    $
    
    
    
    $
    199,163Trust investmentsOctober 31, 2010
    
    $
    144,048
    
    
    $
    38,271
    
    
    $
    
    
    
    $
    182,319
   Three Months Ended April 30,
    
    Six Months Ended April 30,2011
    
    2010
    
    2011
    
    2010Purchases
    
    $
    20,022
    
    
    $
    9,089
    
    
    $
    51,894
    
    
    $
    11,135Sales
    
    
    19,389
    
    
    
    10,449
    
    
    
    47,773
    
    
    
    12,769Realized gains from sales of investments
    
    
    1,072
    
    
    
    836
    
    
    
    3,323
    
    
    
    1,259Realized losses from sales of
investments and other
    
    
    (209
    )
    
    
    (637
    )
    
    
    (549
    )
    
    
    (1,518
    )Interest income, dividends and other
ordinary income
    
    
    1,612
    
    
    
    1,237
    
    
    
    3,410
    
    
    
    2,390Deposits
    
    
    4,307
    
    
    
    3,783
    
    
    
    8,008
    
    
    
    9,476Withdrawals
    
    
    4,865
    
    
    
    4,325
    
    
    
    9,472
    
    
    
    8,729
 20




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
  April 30, 2011Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    272
    
    
    $
    (6
    )
    
    $
    
    
    
    $
    
    
    
    $
    272
    
    
    $
    (6
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    12,270
    
    
    
    (907
    )
    
    
    12,270
    
    
    
    (907
    )Common stocks
    
    
    2,391
    
    
    
    (57
    )
    
    
    57,687
    
    
    
    (38,522
    )
    
    
    60,078
    
    
    
    (38,579
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    13,823
    
    
    
    (4,213
    )
    
    
    13,823
    
    
    
    (4,213
    )Total
    
    $
    2,663
    
    
    $
    (63
    )
    
    $
    83,780
    
    
    $
    (43,642
    )
    
    $
    86,443
    
    
    $
    (43,705
    )
 October 31, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S.
Government,
agencies and
municipalities
    
    $
    517
    
    
    $
    (2
    )
    
    $
    
    
    
    $
    
    
    
    $
    517
    
    
    $
    (2
    )Corporate bonds
    
    
    627
    
    
    
    (6
    )
    
    
    493
    
    
    
    (7
    )
    
    
    1,120
    
    
    
    (13
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    15,206
    
    
    
    (1,182
    )
    
    
    15,206
    
    
    
    (1,182
    )Common stocks
    
    
    1,957
    
    
    
    (139
    )
    
    
    66,544
    
    
    
    (45,653
    )
    
    
    68,501
    
    
    
    (45,792
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    22,582
    
    
    
    (6,978
    )
    
    
    22,582
    
    
    
    (6,978
    )Fixed income
    
    
    2,677
    
    
    
    (3
    )
    
    
    16
    
    
    
    (3
    )
    
    
    2,693
    
    
    
    (6
    )Total
    
    $
    5,778
    
    
    $
    (150
    )
    
    $
    104,841
    
    
    $
    (53,823
    )
    
    $
    110,619
    
    
    $
    (53,973
    )
   21




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
  (5) Cemetery Interment Rights and Perpetual Care Trusts
   April 30, 2011Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    7,659
    
    
    $
    
    
    
    $
    
    
    
    $
    7,659U.S. Government, agencies and
municipalities
    
    
    7,114
    
    
    
    187
    
    
    
    (95
    )
    
    
    7,206Corporate bonds
    
    
    31,897
    
    
    
    1,142
    
    
    
    (837
    )
    
    
    32,202Preferred stocks
    
    
    36,337
    
    
    
    145
    
    
    
    (4,663
    )
    
    
    31,819Common stocks
    
    
    92,143
    
    
    
    1,748
    
    
    
    (31,683
    )
    
    
    62,208Mutual funds:Equity
    
    
    8,464
    
    
    
    595
    
    
    
    (285
    )
    
    
    8,774Fixed income
    
    
    58,438
    
    
    
    755
    
    
    
    (1,420
    )
    
    
    57,773Commodity
    
    
    10,467
    
    
    
    490
    
    
    
    
    
    
    
    10,957Real estate investment trusts
    
    
    5,922
    
    
    
    357
    
    
    
    
    
    
    
    6,279Master limited partnerships
    
    
    8,587
    
    
    
    162
    
    
    
    
    
    
    
    8,749World bond
    
    
    7,663
    
    
    
    305
    
    
    
    
    
    
    
    7,968Other long-term investments
    
    
    245
    
    
    
    
    
    
    
    (105
    )
    
    
    140Trust investments
    
    $
    274,936
    
    
    $
    5,886
    
    
    $
    (39,088
    )
    
    $
    241,734Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87.9
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    808Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    242,542
 22




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  October 31, 2010Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    32,403
    
    
    $
    
    
    
    $
    
    
    
    $
    32,403U.S. Government, agencies and
municipalities
    
    
    8,006
    
    
    
    196
    
    
    
    (54
    )
    
    
    8,148Corporate bonds
    
    
    31,086
    
    
    
    1,334
    
    
    
    (825
    )
    
    
    31,595Preferred stocks
    
    
    56,807
    
    
    
    257
    
    
    
    (6,376
    )
    
    
    50,688Common stocks
    
    
    90,284
    
    
    
    1,042
    
    
    
    (36,496
    )
    
    
    54,830Mutual funds:Equity
    
    
    5,783
    
    
    
    49
    
    
    
    (662
    )
    
    
    5,170Fixed income
    
    
    46,646
    
    
    
    878
    
    
    
    (304
    )
    
    
    47,220Other long-term investments
    
    
    401
    
    
    
    2
    
    
    
    (79
    )
    
    
    324Trust investments
    
    $
    271,416
    
    
    $
    3,758
    
    
    $
    (44,796
    )
    
    $
    230,378Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84.9
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    630Less trust investments of assets
held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (278
    )Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    230,730
  April 30, 2011Due in one year or less
    
    $
    5,694Due in one to five years
    
    
    17,481Due in five to ten years
    
    
    11,451Thereafter
    
    
    4,782$
    39,408
  23




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
     SignificantQuoted Market
    
    Other
    
    SignificantPrices in Active
    
    Observable
    
    UnobservableMarkets
    
    Inputs
    
    Inputs
    
    Fair Market(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    ValueTrust investmentsApril 30, 2011
    
    $
    170,366
    
    
    $
    71,228
    
    
    $
    140
    
    
    $
    241,734Trust investmentsOctober 31, 2010
    
    $
    139,774
    
    
    $
    90,431
    
    
    $
    173
    
    
    $
    230,378
   Three Months Ended April 30,
    
    
    Six Months Ended April 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Fair market value, beginning balance
    
    $
    106
    
    
    $
    168
    
    
    $
    173
    
    
    $
    226Other
    
    
    34
    
    
    
    82
    
    
    
    (33
    )
    
    
    24Fair market value, ending balance
    
    $
    140
    
    
    $
    250
    
    
    $
    140
    
    
    $
    250
  24




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  Three Months Ended April 30,
    
    Six Months Ended April 30,2011
    
    2010
    
    2011
    
    2010Purchases
    
    $
    40,289
    
    
    $
    22,930
    
    
    $
    81,244
    
    
    $
    39,102Sales
    
    
    34,669
    
    
    
    13,200
    
    
    
    52,534
    
    
    
    42,085Realized gains from sales of investments
    
    
    416
    
    
    
    2,258
    
    
    
    932
    
    
    
    4,283Realized losses from sales of
investments and other
    
    
    (274
    )
    
    
    (268
    )
    
    
    (438
    )
    
    
    (818
    )Interest income, dividends and other
ordinary income
    
    
    2,492
    
    
    
    2,177
    
    
    
    5,324
    
    
    
    4,338Deposits
    
    
    1,869
    
    
    
    1,895
    
    
    
    3,399
    
    
    
    3,733Withdrawals
    
    
    1,423
    
    
    
    2,121
    
    
    
    3,644
    
    
    
    3,009
   April 30, 2011Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    1,998
    
    
    $
    (39
    )
    
    $
    79
    
    
    $
    (56
    )
    
    $
    2,077
    
    
    $
    (95
    )Corporate bonds
    
    
    6,435
    
    
    
    (131
    )
    
    
    538
    
    
    
    (706
    )
    
    
    6,973
    
    
    
    (837
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    25,210
    
    
    
    (4,663
    )
    
    
    25,210
    
    
    
    (4,663
    )Common stocks
    
    
    599
    
    
    
    (186
    )
    
    
    51,056
    
    
    
    (31,497
    )
    
    
    51,655
    
    
    
    (31,683
    )Mutual funds:Equity
    
    
    31
    
    
    
    (1
    )
    
    
    2,315
    
    
    
    (284
    )
    
    
    2,346
    
    
    
    (285
    )Fixed income
    
    
    21,546
    
    
    
    (1,175
    )
    
    
    890
    
    
    
    (245
    )
    
    
    22,436
    
    
    
    (1,420
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    (105
    )
    
    
    88
    
    
    
    (105
    )Total
    
    $
    30,609
    
    
    $
    (1,532
    )
    
    $
    80,176
    
    
    $
    (37,556
    )
    
    $
    110,785
    
    
    $
    (39,088
    )
 October 31, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    269
    
    
    $
    (1
    )
    
    $
    105
    
    
    $
    (53
    )
    
    $
    374
    
    
    $
    (54
    )Corporate bonds
    
    
    2,786
    
    
    
    (15
    )
    
    
    682
    
    
    
    (810
    )
    
    
    3,468
    
    
    
    (825
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    32,747
    
    
    
    (6,376
    )
    
    
    32,747
    
    
    
    (6,376
    )Common stocks
    
    
    717
    
    
    
    (161
    )
    
    
    51,334
    
    
    
    (36,335
    )
    
    
    52,051
    
    
    
    (36,496
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    4,674
    
    
    
    (662
    )
    
    
    4,674
    
    
    
    (662
    )Fixed income
    
    
    14,850
    
    
    
    (15
    )
    
    
    1,076
    
    
    
    (289
    )
    
    
    15,926
    
    
    
    (304
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    (79
    )
    
    
    88
    
    
    
    (79
    )Total
    
    $
    18,622
    
    
    $
    (192
    )
    
    $
    90,706
    
    
    $
    (44,604
    )
    
    $
    109,328
    
    
    $
    (44,796
    )
 25




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
   (6) Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care Trusts Corpus
  Deferred Receipts Held in TrustPreneed
    
    
    PreneedFuneral
    
    
    Cemetery
    
    
    TotalTrust assets at market value
    
    $
    401,572
    
    
    $
    199,763
    
    
    $
    601,335Less:Pending withdrawals
    
    
    (7,345
    )
    
    
    (5,270
    )
    
    
    (12,615
    )Pending deposits
    
    
    1,954
    
    
    
    1,087
    
    
    
    3,041Deferred receipts held in trust
    
    $
    396,181
    
    
    $
    195,580
    
    
    $
    591,761
  Perpetual CareTrusts CorpusTrust assets at market value
    
    $
    242,542Less:Pending withdrawals
    
    
    (1,612
    )Pending deposits
    
    
    646Perpetual care trusts corpus
    
    $
    241,576
 26




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (6) Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care Trusts
Corpus(Continued)
 Investment and other income, net
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Realized gains from sales of investments
    
    $
    3,079
    
    
    $
    3,903
    
    
    $
    8,664
    
    
    $
    6,979Realized losses from sales of investments and
other
    
    
    (1,064
    )
    
    
    (1,443
    )
    
    
    (1,667
    )
    
    
    (3,390
    )Interest income, dividends and other ordinary
income
    
    
    7,581
    
    
    
    5,956
    
    
    
    15,547
    
    
    
    11,615Trust expenses and income taxes
    
    
    (2,433
    )
    
    
    (2,602
    )
    
    
    (4,929
    )
    
    
    (5,140
    )Net trust investment income
    
    
    7,163
    
    
    
    5,814
    
    
    
    17,615
    
    
    
    10,064Reclassification to deferred preneed
funeral and cemetery receipts held in
trust
    
    
    (5,459
    )
    
    
    (2,646
    )
    
    
    (13,557
    )
    
    
    (3,996
    )Reclassification to perpetual care trusts
corpus
    
    
    (1,704
    )
    
    
    (3,168
    )
    
    
    (4,058
    )
    
    
    (6,068
    )Total deferred preneed funeral and cemetery
receipts held in trust and perpetual care
trusts corpus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    340
    
    
    
    36
    
    
    
    364
    
    
    
    60Total investment and other income, net
    
    $
    340
    
    
    $
    36
    
    
    $
    364
    
    
    $
    60
 
 (1)
    
    Investment and other income, net generally consists of interest income primarily on
the Companys cash, cash equivalents and marketable securities not held in trust. For the
three and six months ended April 30, 2011, the balance includes approximately $323 of interest
income related to the recent resolution of an audit by the Internal Revenue Service. (7) Commitments and Contingencies
 Litigation
   Other Commitments and Contingencies
  27




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7) Commitments and Contingencies(Continued)
    (8) Reconciliation of Basic and Diluted Per Share Data
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended April 30, 2011Earnings from continuing operations
    
    $
    9,998Allocation of earnings to nonvested restricted stock
    
    
    (87
    )Basic earnings per common share:Earnings from continuing operations available to
common shareholders
    
    $
    9,911
    
    
    
    90,442
    
    
    $
    .11Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    624Diluted earnings per common share:Earnings from continuing operations available to
common shareholders plus stock options assumed
exercised
    
    $
    9,911
    
    
    
    91,066
    
    
    $
    .11
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended April 30, 2010Earnings from continuing operations
    
    $
    8,388Allocation of earnings to nonvested restricted stock
    
    
    (89
    )Basic earnings per common share:Earnings from continuing operations available to
common shareholders
    
    $
    8,299
    
    
    
    92,113
    
    
    $
    .09Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    274Diluted earnings per common share:Earnings from continuing operations available to
common shareholders plus stock options assumed
exercised
    
    $
    8,299
    
    
    
    92,387
    
    
    $
    .09
 28




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8) Reconciliation of Basic and Diluted Per Share Data(Continued)
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataSix Months Ended April 30, 2011Earnings from continuing operations
    
    $
    18,042Allocation of earnings to nonvested restricted stock
    
    
    (161
    )Basic earnings per common share:Earnings from continuing operations available to
common shareholders
    
    $
    17,881
    
    
    
    90,658
    
    
    $
    .20Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    467Diluted earnings per common share:Earnings from continuing operations available to
common shareholders plus stock options assumed
exercised
    
    $
    17,881
    
    
    
    91,125
    
    
    $
    .20
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataSix Months Ended April 30, 2010Earnings from continuing operations
    
    $
    15,849Allocation of earnings to nonvested restricted stock
    
    
    (167
    )Basic earnings per common share:Earnings from continuing operations available to
common shareholders
    
    $
    15,682
    
    
    
    92,082
    
    
    $
    .17Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    250Diluted earnings per common share:Earnings from continuing operations available to
common shareholders plus stock options assumed
exercised
    
    $
    15,682
    
    
    
    92,332
    
    
    $
    .17
    29




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8) Reconciliation of Basic and Diluted Per Share Data(Continued)
     (9) Segment Data
  Total Revenue
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2011
    
    
    April 30, 2010
    
    
    April 30, 2011
    
    
    April 30, 2010Funeral
    
    $
    68,635
    
    
    $
    66,736
    
    
    $
    138,408
    
    
    $
    134,378Cemetery(1)
    
    
    54,462
    
    
    
    55,072
    
    
    
    107,826
    
    
    
    105,579Corporate Trust Management(2)
    
    
    6,568
    
    
    
    6,225
    
    
    
    12,695
    
    
    
    12,088Total
    
    $
    129,665
    
    
    $
    128,033
    
    
    $
    258,929
    
    
    $
    252,045
 30




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9) Segment Data(Continued)
 Total Gross Profit
    
    
    Total Gross ProfitThree Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2011
    
    
    April 30, 2010
    
    
    April 30, 2011
    
    
    April 30, 2010Funeral
    
    $
    13,920
    
    
    $
    12,778
    
    
    $
    30,436
    
    
    $
    28,199Cemetery(1)
    
    
    5,565
    
    
    
    6,457
    
    
    
    11,711
    
    
    
    10,868Corporate Trust Management(2)
    
    
    6,156
    
    
    
    5,845
    
    
    
    11,849
    
    
    
    11,256Total
    
    $
    25,641
    
    
    $
    25,080
    
    
    $
    53,996
    
    
    $
    50,323Net Total Preneed Merchandise
    
    
    Net Total Preneed Merchandiseand Service Sales(3)
    
    
    and Service Sales(3)Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2011
    
    
    April 30, 2010
    
    
    April 30, 2011
    
    
    April 30, 2010Funeral
    
    $
    24,558
    
    
    $
    26,342
    
    
    $
    44,004
    
    
    $
    45,295Cemetery
    
    
    13,220
    
    
    
    12,334
    
    
    
    24,218
    
    
    
    22,538Total
    
    $
    37,778
    
    
    $
    38,676
    
    
    $
    68,222
    
    
    $
    67,833
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of the
cemetery segment and amounted to $1,683 and $1,346 for the three months ended April 30, 2011
and 2010, respectively, and $3,993 and $3,819 for the six months ended April 30, 2011 and
2010, respectively.(2)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and services trust earnings recognized with respect to preneed contracts
delivered during the period. Trust management fees are established by the Company at rates
consistent with industry norms based on the fair market value of the assets managed and are
paid by the trusts to the Companys subsidiary, Investors Trust, Inc. The trust earnings
represent the amount of distributable earnings as stipulated by the Companys respective trust
agreements that are generated by the trusts over the life of the preneed contracts and
allocated to those products and services delivered during the relevant periods. Trust
management fees included in funeral revenue for the three months ended April 30, 2011 and 2010
were $1,223 and $1,148, respectively, and funeral trust earnings recognized with respect to
preneed contracts delivered included in funeral revenue for the three months ended April 30,
2011 and 2010 were $3,115 and $3,176, respectively. Trust management fees included in
cemetery revenue for the three months ended April 30, 2011 and 2010 were $1,350 and $1,235,
respectively, and cemetery trust earnings recognized with respect to preneed contracts
delivered included in cemetery revenue for the three months ended April 30, 2011 and 2010 were
$880 and $666, respectively.Trust management fees included in funeral revenue for the six months ended April 30, 2011 and
2010 were $2,412 and $2,263, respectively, and funeral trust earnings for the six months ended
April 30, 2011 and 2010 were $6,020 and $6,139, respectively. Trust management fees included in
cemetery revenue for the six months ended April 30, 2011 and 2010 were $2,650 and $2,424,
respectively, and cemetery trust earnings for the six months ended April 30, 2011 and 2010 were
$1,613 and $1,262, respectively.(3)
    
    Preneed sales amounts represent total preneed funeral trust and insurance sales and
cemetery service and merchandise trust sales generated in the applicable period, net of
cancellations. 31




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9) Segment Data(Continued)
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Gross profit for reportable segments
    
    $
    25,641
    
    
    $
    25,080
    
    
    $
    53,996
    
    
    $
    50,323Corporate general and administrative expenses
    
    
    (6,650
    )
    
    
    (6,116
    )
    
    
    (13,289
    )
    
    
    (12,786
    )Hurricane related charges, net
    
    
    (54
    )
    
    
    (32
    )
    
    
    (104
    )
    
    
    (32
    )Net loss on dispositions
    
    
    (400
    )
    
    
    
    
    
    
    (400
    )
    
    
    Other operating income, net
    
    
    448
    
    
    
    265
    
    
    
    681
    
    
    
    444Interest expense
    
    
    (5,732
    )
    
    
    (5,891
    )
    
    
    (11,468
    )
    
    
    (12,347
    )Gain (loss) on early extinguishment of debt
    
    
    (1,811
    )
    
    
    
    
    
    
    (1,811
    )
    
    
    17Investment and other income, net
    
    
    340
    
    
    
    36
    
    
    
    364
    
    
    
    60Earnings from continuing operations before
income taxes
    
    $
    11,782
    
    
    $
    13,342
    
    
    $
    27,969
    
    
    $
    25,679
 32




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (10) Supplementary Information
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Service revenueFuneral
    
    $
    49,369
    
    
    $
    45,410
    
    
    $
    99,015
    
    
    $
    90,475Cemetery
    
    
    14,435
    
    
    
    15,238
    
    
    
    30,624
    
    
    
    30,80963,804
    
    
    
    60,648
    
    
    
    129,639
    
    
    
    121,284Merchandise revenueFuneral
    
    
    21,589
    
    
    
    23,981
    
    
    
    43,995
    
    
    
    48,997Cemetery
    
    
    38,732
    
    
    
    37,601
    
    
    
    74,553
    
    
    
    70,74260,321
    
    
    
    61,582
    
    
    
    118,548
    
    
    
    119,739Other revenueFuneral
    
    
    2,016
    
    
    
    1,669
    
    
    
    3,830
    
    
    
    3,308Cemetery
    
    
    3,524
    
    
    
    4,134
    
    
    
    6,912
    
    
    
    7,7145,540
    
    
    
    5,803
    
    
    
    10,742
    
    
    
    11,022Total revenue
    
    $
    129,665
    
    
    $
    128,033
    
    
    $
    258,929
    
    
    $
    252,045Service costsFuneral
    
    $
    16,563
    
    
    $
    14,824
    
    
    $
    32,124
    
    
    $
    29,389Cemetery
    
    
    10,424
    
    
    
    10,551
    
    
    
    20,770
    
    
    
    20,35426,987
    
    
    
    25,375
    
    
    
    52,894
    
    
    
    49,743Merchandise costsFuneral
    
    
    14,084
    
    
    
    14,489
    
    
    
    28,229
    
    
    
    29,001Cemetery
    
    
    24,129
    
    
    
    24,151
    
    
    
    46,784
    
    
    
    46,35538,213
    
    
    
    38,640
    
    
    
    75,013
    
    
    
    75,356Facility expensesFuneral
    
    
    24,279
    
    
    
    24,838
    
    
    
    48,051
    
    
    
    48,210Cemetery
    
    
    14,545
    
    
    
    14,100
    
    
    
    28,975
    
    
    
    28,41338,824
    
    
    
    38,938
    
    
    
    77,026
    
    
    
    76,623Total costs
    
    $
    104,024
    
    
    $
    102,953
    
    
    $
    204,933
    
    
    $
    201,722
  33




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes
  Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended April 30, 2011Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries 
    
    
    Subsidiaries 
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    67,909
    
    
    $
    562
    
    
    $
    4,503
    
    
    $
    
    
    
    $
    72,974Cemetery
    
    
    
    
    
    
    50,769
    
    
    
    860
    
    
    
    5,062
    
    
    
    
    
    
    
    56,691
    
    
    
    118,678
    
    
    
    1,422
    
    
    
    9,565
    
    
    
    
    
    
    
    129,665Costs and expenses:Funeral
    
    
    
    
    
    
    51,657
    
    
    
    319
    
    
    
    2,950
    
    
    
    
    
    
    
    54,926Cemetery
    
    
    
    
    
    
    44,495
    
    
    
    696
    
    
    
    3,907
    
    
    
    
    
    
    
    49,098
    
    
    
    96,152
    
    
    
    1,015
    
    
    
    6,857
    
    
    
    
    
    
    
    104,024Gross profit
    
    
    
    
    
    
    22,526
    
    
    
    407
    
    
    
    2,708
    
    
    
    
    
    
    
    25,641Corporate general and
administrative expenses
    
    
    (6,650
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,650
    )Hurricane related charges, net
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )Net loss on dispositions
    
    
    
    
    
    
    (400
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (400
    )Other operating income, net
    
    
    110
    
    
    
    273
    
    
    
    1
    
    
    
    64
    
    
    
    
    
    
    
    448Operating earnings (loss)
    
    
    (6,594
    )
    
    
    22,399
    
    
    
    408
    
    
    
    2,772
    
    
    
    
    
    
    
    18,985Interest income (expense)
    
    
    (1,009
    )
    
    
    (4,256
    )
    
    
    9
    
    
    
    (476
    )
    
    
    
    
    
    
    (5,732
    )Loss on early extinguishment of debt
    
    
    (1,811
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,811
    )Investment and other income, net
    
    
    340
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    340Equity in subsidiaries
    
    
    13,415
    
    
    
    217
    
    
    
    
    
    
    
    
    
    
    
    (13,632
    )
    
    
    Earnings before income taxes
    
    
    4,341
    
    
    
    18,360
    
    
    
    417
    
    
    
    2,296
    
    
    
    (13,632
    )
    
    
    11,782Income tax expense (benefit)
    
    
    (5,657
    )
    
    
    6,386
    
    
    
    133
    
    
    
    922
    
    
    
    
    
    
    
    1,784Net earnings
    
    
    9,998
    
    
    
    11,974
    
    
    
    284
    
    
    
    1,374
    
    
    
    (13,632
    )
    
    
    9,998Other comprehensive income, net
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    (12
    )
    
    
    12Comprehensive income
    
    $
    10,010
    
    
    $
    11,974
    
    
    $
    284
    
    
    $
    1,386
    
    
    $
    (13,644
    )
    
    $
    10,010
 34




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended April 30, 2010Guarantor
    
    
    GuarantorSubsidiaries 
    
    
    Subsidiaries 
    
    
    Non-GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    66,260
    
    
    $
    470
    
    
    $
    4,330
    
    
    $
    
    
    
    $
    71,060Cemetery
    
    
    
    
    
    
    50,870
    
    
    
    829
    
    
    
    5,274
    
    
    
    
    
    
    
    56,973
    
    
    
    117,130
    
    
    
    1,299
    
    
    
    9,604
    
    
    
    
    
    
    
    128,033Costs and expenses:Funeral
    
    
    
    
    
    
    50,682
    
    
    
    296
    
    
    
    3,173
    
    
    
    
    
    
    
    54,151Cemetery
    
    
    
    
    
    
    44,133
    
    
    
    649
    
    
    
    4,020
    
    
    
    
    
    
    
    48,802
    
    
    
    94,815
    
    
    
    945
    
    
    
    7,193
    
    
    
    
    
    
    
    102,953Gross profit
    
    
    
    
    
    
    22,315
    
    
    
    354
    
    
    
    2,411
    
    
    
    
    
    
    
    25,080Corporate general and administrative
expenses
    
    
    (6,116
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,116
    )Hurricane related recoveries
(charges), net
    
    
    (33
    )
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    (32
    )Other operating income, net
    
    
    26
    
    
    
    149
    
    
    
    3
    
    
    
    87
    
    
    
    
    
    
    
    265Operating earnings (loss)
    
    
    (6,123
    )
    
    
    22,464
    
    
    
    358
    
    
    
    2,498
    
    
    
    
    
    
    
    19,197Interest income (expense)
    
    
    5
    
    
    
    (5,420
    )
    
    
    (3
    )
    
    
    (473
    )
    
    
    
    
    
    
    (5,891
    )Investment and other income, net
    
    
    35
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36Equity in subsidiaries
    
    
    11,560
    
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    (11,725
    )
    
    
    Earnings from continuing
operations before income taxes
    
    
    5,477
    
    
    
    17,210
    
    
    
    355
    
    
    
    2,025
    
    
    
    (11,725
    )
    
    
    13,342Income tax expense (benefit)
    
    
    (2,914
    )
    
    
    7,061
    
    
    
    104
    
    
    
    703
    
    
    
    
    
    
    
    4,954Earnings from continuing operations
    
    
    8,391
    
    
    
    10,149
    
    
    
    251
    
    
    
    1,322
    
    
    
    (11,725
    )
    
    
    8,388Discontinued operations:Earnings from discontinued
operations before income taxes
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Income taxes
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Earnings from discontinued
operations
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Net earnings
    
    
    8,391
    
    
    
    10,152
    
    
    
    251
    
    
    
    1,322
    
    
    
    (11,725
    )
    
    
    8,391Other comprehensive income, net
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    (1
    )
    
    
    1Comprehensive income
    
    $
    8,392
    
    
    $
    10,152
    
    
    $
    251
    
    
    $
    1,323
    
    
    $
    (11,726
    )
    
    $
    8,392
 35




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Six Months Ended April 30, 2011Guarantor
    
    
    GuarantorSubsidiaries 
    
    
    Subsidiaries 
    
    
    Non-GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    136,608
    
    
    $
    1,046
    
    
    $
    9,186
    
    
    $
    
    
    
    $
    146,840Cemetery
    
    
    
    
    
    
    100,381
    
    
    
    1,575
    
    
    
    10,133
    
    
    
    
    
    
    
    112,089
    
    
    
    236,989
    
    
    
    2,621
    
    
    
    19,319
    
    
    
    
    
    
    
    258,929Costs and expenses:Funeral
    
    
    
    
    
    
    101,747
    
    
    
    612
    
    
    
    6,045
    
    
    
    
    
    
    
    108,404Cemetery
    
    
    
    
    
    
    87,475
    
    
    
    1,287
    
    
    
    7,767
    
    
    
    
    
    
    
    96,529
    
    
    
    189,222
    
    
    
    1,899
    
    
    
    13,812
    
    
    
    
    
    
    
    204,933Gross profit
    
    
    
    
    
    
    47,767
    
    
    
    722
    
    
    
    5,507
    
    
    
    
    
    
    
    53,996Corporate general and
administrative expenses
    
    
    (13,289
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,289
    )Hurricane related charges, net
    
    
    (104
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (104
    )Net loss on dispositions
    
    
    
    
    
    
    (400
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (400
    )Other operating income, net
    
    
    128
    
    
    
    434
    
    
    
    1
    
    
    
    118
    
    
    
    
    
    
    
    681Operating earnings (loss)
    
    
    (13,265
    )
    
    
    47,801
    
    
    
    723
    
    
    
    5,625
    
    
    
    
    
    
    
    40,884Interest income (expense)
    
    
    (1,835
    )
    
    
    (8,721
    )
    
    
    14
    
    
    
    (926
    )
    
    
    
    
    
    
    (11,468
    )Loss on early extinguishment of debt
    
    
    (1,811
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,811
    )Investment and other income, net
    
    
    364
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    364Equity in subsidiaries
    
    
    25,007
    
    
    
    387
    
    
    
    
    
    
    
    
    
    
    
    (25,394
    )
    
    
    Earnings before income taxes
    
    
    8,460
    
    
    
    39,467
    
    
    
    737
    
    
    
    4,699
    
    
    
    (25,394
    )
    
    
    27,969Income tax expense (benefit)
    
    
    (9,582
    )
    
    
    14,664
    
    
    
    243
    
    
    
    4,602
    
    
    
    
    
    
    
    9,927Net earnings
    
    
    18,042
    
    
    
    24,803
    
    
    
    494
    
    
    
    97
    
    
    
    (25,394
    )
    
    
    18,042Other comprehensive income, net
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    (9
    )
    
    
    9Comprehensive income
    
    $
    18,051
    
    
    $
    24,803
    
    
    $
    494
    
    
    $
    106
    
    
    $
    (25,403
    )
    
    $
    18,051
 36




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Six Months Ended April 30, 2010Guarantor
    
    
    GuarantorSubsidiaries 
    
    
    Subsidiaries 
    
    
    Non-GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    133,104
    
    
    $
    955
    
    
    $
    8,721
    
    
    $
    
    
    
    $
    142,780Cemetery
    
    
    
    
    
    
    97,546
    
    
    
    1,401
    
    
    
    10,318
    
    
    
    
    
    
    
    109,265
    
    
    
    230,650
    
    
    
    2,356
    
    
    
    19,039
    
    
    
    
    
    
    
    252,045Costs and expenses:Funeral
    
    
    
    
    
    
    99,671
    
    
    
    559
    
    
    
    6,370
    
    
    
    
    
    
    
    106,600Cemetery
    
    
    
    
    
    
    85,706
    
    
    
    1,269
    
    
    
    8,147
    
    
    
    
    
    
    
    95,122
    
    
    
    185,377
    
    
    
    1,828
    
    
    
    14,517
    
    
    
    
    
    
    
    201,722Gross profit
    
    
    
    
    
    
    45,273
    
    
    
    528
    
    
    
    4,522
    
    
    
    
    
    
    
    50,323Corporate general and
administrative expenses
    
    
    (12,786
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,786
    )Hurricane related recoveries
(charges), net
    
    
    (87
    )
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    (32
    )Other operating income, net
    
    
    42
    
    
    
    292
    
    
    
    3
    
    
    
    107
    
    
    
    
    
    
    
    444Operating earnings (loss)
    
    
    (12,831
    )
    
    
    45,565
    
    
    
    586
    
    
    
    4,629
    
    
    
    
    
    
    
    37,949Interest expense
    
    
    (482
    )
    
    
    (10,898
    )
    
    
    (11
    )
    
    
    (956
    )
    
    
    
    
    
    
    (12,347
    )Gain on early extinguishment of debt
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Investment and other income, net
    
    
    59
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60Equity in subsidiaries
    
    
    23,497
    
    
    
    245
    
    
    
    
    
    
    
    
    
    
    
    (23,742
    )
    
    
    Earnings from continuing
operations before income taxes
    
    
    10,260
    
    
    
    34,913
    
    
    
    575
    
    
    
    3,673
    
    
    
    (23,742
    )
    
    
    25,679Income tax expense (benefit)
    
    
    (5,618
    )
    
    
    14,068
    
    
    
    178
    
    
    
    1,202
    
    
    
    
    
    
    
    9,830Earnings from continuing
operations
    
    
    15,878
    
    
    
    20,845
    
    
    
    397
    
    
    
    2,471
    
    
    
    (23,742
    )
    
    
    15,849Discontinued operations:Earnings from discontinued
operations before income taxes
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46Income taxes
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Earnings from discontinued
operations
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29Net earnings
    
    
    15,878
    
    
    
    20,874
    
    
    
    397
    
    
    
    2,471
    
    
    
    (23,742
    )
    
    
    15,878Other comprehensive loss, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income
    
    $
    15,878
    
    
    $
    20,874
    
    
    $
    397
    
    
    $
    2,471
    
    
    $
    (23,742
    )
    
    $
    15,878
 37




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 April 30, 2011Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    73,363
    
    
    $
    4,025
    
    
    $
    79
    
    
    $
    843
    
    
    $
    
    
    
    $
    78,310Certificates of deposit and marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    598
    
    
    
    
    
    
    
    598Receivables, net of allowances
    
    
    3,537
    
    
    
    38,579
    
    
    
    341
    
    
    
    6,379
    
    
    
    
    
    
    
    48,836Inventories
    
    
    298
    
    
    
    32,907
    
    
    
    327
    
    
    
    2,261
    
    
    
    
    
    
    
    35,793Prepaid expenses
    
    
    1,350
    
    
    
    4,606
    
    
    
    65
    
    
    
    1,650
    
    
    
    
    
    
    
    7,671Deferred income taxes, net
    
    
    14,135
    
    
    
    11,470
    
    
    
    31
    
    
    
    2,769
    
    
    
    
    
    
    
    28,405Intercompany receivables
    
    
    2,413
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,413
    )
    
    
    Total current assets
    
    
    95,096
    
    
    
    91,587
    
    
    
    843
    
    
    
    14,500
    
    
    
    (2,413
    )
    
    
    199,613Receivables due beyond one year, net of allowances
    
    
    
    
    
    
    52,392
    
    
    
    619
    
    
    
    11,256
    
    
    
    
    
    
    
    64,267Preneed funeral receivables and trust investments
    
    
    
    
    
    
    422,939
    
    
    
    
    
    
    
    9,757
    
    
    
    
    
    
    
    432,696Preneed cemetery receivables and trust investments
    
    
    
    
    
    
    219,176
    
    
    
    1,170
    
    
    
    6,304
    
    
    
    
    
    
    
    226,650Goodwill
    
    
    
    
    
    
    227,203
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,038Cemetery property, at cost
    
    
    
    
    
    
    350,906
    
    
    
    11,101
    
    
    
    25,634
    
    
    
    
    
    
    
    387,641Property and equipment, at cost
    
    
    57,953
    
    
    
    480,203
    
    
    
    2,575
    
    
    
    39,688
    
    
    
    
    
    
    
    580,419Less accumulated depreciation
    
    
    43,228
    
    
    
    233,581
    
    
    
    1,258
    
    
    
    17,138
    
    
    
    
    
    
    
    295,205Net property and equipment
    
    
    14,725
    
    
    
    246,622
    
    
    
    1,317
    
    
    
    22,550
    
    
    
    
    
    
    
    285,214Deferred income taxes, net
    
    
    10,719
    
    
    
    77,116
    
    
    
    
    
    
    
    6,932
    
    
    
    (2,655
    )
    
    
    92,112Cemetery perpetual care trust investments
    
    
    
    
    
    
    229,475
    
    
    
    9,128
    
    
    
    3,939
    
    
    
    
    
    
    
    242,542Other assets
    
    
    10,108
    
    
    
    4,735
    
    
    
    15
    
    
    
    1,020
    
    
    
    
    
    
    
    15,878Intercompany receivables
    
    
    676,121
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (676,121
    )
    
    
    Equity in subsidiaries
    
    
    15,825
    
    
    
    9,275
    
    
    
    
    
    
    
    
    
    
    
    (25,100
    )
    
    
    Total assets
    
    $
    822,594
    
    
    $
    1,931,426
    
    
    $
    24,241
    
    
    $
    121,679
    
    
    $
    (706,289
    )
    
    $
    2,193,651LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5,817
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,817Accounts payable, accrued expenses and other
current liabilities
    
    
    12,945
    
    
    
    66,385
    
    
    
    113
    
    
    
    3,832
    
    
    
    
    
    
    
    83,275Intercompany payables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,413
    
    
    
    (2,413
    )
    
    
    Total current liabilities
    
    
    18,762
    
    
    
    66,385
    
    
    
    113
    
    
    
    6,245
    
    
    
    (2,413
    )
    
    
    89,092Long-term debt, less current maturities
    
    
    315,891
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    315,891Deferred income taxes, net
    
    
    
    
    
    
    4,327
    
    
    
    3,229
    
    
    
    5
    
    
    
    (2,655
    )
    
    
    4,906Intercompany payables
    
    
    
    
    
    
    661,804
    
    
    
    1,592
    
    
    
    12,725
    
    
    
    (676,121
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    195,697
    
    
    
    
    
    
    
    46,335
    
    
    
    
    
    
    
    242,032Deferred preneed cemetery revenue
    
    
    
    
    
    
    227,134
    
    
    
    526
    
    
    
    28,704
    
    
    
    
    
    
    
    256,364Deferred preneed funeral and cemetery receipts held
in trust
    
    
    
    
    
    
    583,505
    
    
    
    1,071
    
    
    
    7,185
    
    
    
    
    
    
    
    591,761Perpetual care trusts corpus
    
    
    
    
    
    
    228,517
    
    
    
    9,148
    
    
    
    3,911
    
    
    
    
    
    
    
    241,576Other long-term liabilities
    
    
    18,659
    
    
    
    1,766
    
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    20,456Negative equity in subsidiaries
    
    
    37,709
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,709
    )
    
    
    Total liabilities
    
    
    391,021
    
    
    
    1,969,135
    
    
    
    15,679
    
    
    
    105,141
    
    
    
    (718,898
    )
    
    
    1,762,078Common stock
    
    
    91,201
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    91,201Other
    
    
    340,345
    
    
    
    (37,811
    )
    
    
    8,238
    
    
    
    16,459
    
    
    
    13,114
    
    
    
    340,345Accumulated other comprehensive income
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    (27
    )
    
    
    27Total shareholders equity
    
    
    431,573
    
    
    
    (37,709
    )
    
    
    8,562
    
    
    
    16,538
    
    
    
    12,609
    
    
    
    431,573Total liabilities and shareholders equity
    
    $
    822,594
    
    
    $
    1,931,426
    
    
    $
    24,241
    
    
    $
    121,679
    
    
    $
    (706,289
    )
    
    $
    2,193,651
 38




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 October 31, 2010Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries 
    
    
    Subsidiaries 
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    48,270
    
    
    $
    6,055
    
    
    $
    58
    
    
    $
    1,677
    
    
    $
    
    
    
    $
    56,060Certificates of deposit and marketable securities
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Receivables, net of allowances
    
    
    3,685
    
    
    
    40,698
    
    
    
    372
    
    
    
    6,396
    
    
    
    
    
    
    
    51,151Inventories
    
    
    329
    
    
    
    32,779
    
    
    
    330
    
    
    
    2,270
    
    
    
    
    
    
    
    35,708Prepaid expenses
    
    
    1,292
    
    
    
    2,589
    
    
    
    60
    
    
    
    1,538
    
    
    
    
    
    
    
    5,479Deferred income taxes, net
    
    
    13,835
    
    
    
    11,604
    
    
    
    32
    
    
    
    2,841
    
    
    
    
    
    
    
    28,312Assets held for sale
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27Intercompany receivables
    
    
    7,782
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,782
    )
    
    
    Total current assets
    
    
    85,193
    
    
    
    93,752
    
    
    
    852
    
    
    
    14,722
    
    
    
    (7,782
    )
    
    
    186,737Receivables due beyond one year, net of allowances
    
    
    1,973
    
    
    
    53,683
    
    
    
    572
    
    
    
    11,230
    
    
    
    
    
    
    
    67,458Preneed funeral receivables and trust investments
    
    
    
    
    
    
    405,296
    
    
    
    
    
    
    
    9,622
    
    
    
    
    
    
    
    414,918Preneed cemetery receivables and trust investments
    
    
    
    
    
    
    201,960
    
    
    
    1,123
    
    
    
    6,204
    
    
    
    
    
    
    
    209,287Goodwill
    
    
    
    
    
    
    227,203
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,038Cemetery property, at cost
    
    
    
    
    
    
    349,252
    
    
    
    11,154
    
    
    
    25,598
    
    
    
    
    
    
    
    386,004Property and equipment, at cost
    
    
    56,964
    
    
    
    474,538
    
    
    
    2,509
    
    
    
    39,172
    
    
    
    
    
    
    
    573,183Less accumulated depreciation
    
    
    40,837
    
    
    
    225,118
    
    
    
    1,180
    
    
    
    16,498
    
    
    
    
    
    
    
    283,633Net property and equipment
    
    
    16,127
    
    
    
    249,420
    
    
    
    1,329
    
    
    
    22,674
    
    
    
    
    
    
    
    289,550Deferred income taxes, net
    
    
    16,620
    
    
    
    75,449
    
    
    
    
    
    
    
    9,224
    
    
    
    (3,268
    )
    
    
    98,025Cemetery perpetual care trust investments
    
    
    
    
    
    
    217,743
    
    
    
    8,973
    
    
    
    4,014
    
    
    
    
    
    
    
    230,730Non-current assets held for sale
    
    
    
    
    
    
    1,214
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,214Other assets
    
    
    6,096
    
    
    
    4,772
    
    
    
    7
    
    
    
    1,030
    
    
    
    
    
    
    
    11,905Intercompany receivables
    
    
    693,981
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (693,981
    )
    
    
    Equity in subsidiaries
    
    
    15,612
    
    
    
    8,888
    
    
    
    
    
    
    
    
    
    
    
    (24,500
    )
    
    
    Total assets
    
    $
    835,602
    
    
    $
    1,888,632
    
    
    $
    24,058
    
    
    $
    124,105
    
    
    $
    (729,531
    )
    
    $
    2,142,866LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5Accounts payable, accrued expenses and other
current liabilities
    
    
    15,524
    
    
    
    70,740
    
    
    
    151
    
    
    
    5,720
    
    
    
    
    
    
    
    92,135Liabilities associated with assets held for sale
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Intercompany payables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,782
    
    
    
    (7,782
    )
    
    
    Total current liabilities
    
    
    15,529
    
    
    
    70,748
    
    
    
    151
    
    
    
    13,502
    
    
    
    (7,782
    )
    
    
    92,148Long-term debt, less current maturities
    
    
    314,027
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314,027Deferred income taxes, net
    
    
    
    
    
    
    4,950
    
    
    
    3,268
    
    
    
    
    
    
    
    (3,268
    )
    
    
    4,950Intercompany payables
    
    
    
    
    
    
    683,501
    
    
    
    2,099
    
    
    
    8,381
    
    
    
    (693,981
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    197,148
    
    
    
    
    
    
    
    46,372
    
    
    
    
    
    
    
    243,520Deferred preneed cemetery revenue
    
    
    
    
    
    
    228,908
    
    
    
    500
    
    
    
    28,636
    
    
    
    
    
    
    
    258,044Deferred preneed funeral and cemetery receipts held
in trust
    
    
    
    
    
    
    546,876
    
    
    
    1,049
    
    
    
    6,791
    
    
    
    
    
    
    
    554,716Perpetual care trusts corpus
    
    
    
    
    
    
    216,379
    
    
    
    8,923
    
    
    
    3,938
    
    
    
    
    
    
    
    229,240Long-term liabilities associated with assets held
for sale
    
    
    
    
    
    
    714
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    714Other long-term liabilities
    
    
    18,050
    
    
    
    1,920
    
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    20,023Negative equity in subsidiaries
    
    
    62,512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62,512
    )
    
    
    Total liabilities
    
    
    410,118
    
    
    
    1,951,144
    
    
    
    15,990
    
    
    
    107,673
    
    
    
    (767,543
    )
    
    
    1,717,382Common stock
    
    
    92,294
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    92,294Other
    
    
    333,172
    
    
    
    (62,614
    )
    
    
    7,744
    
    
    
    16,362
    
    
    
    38,508
    
    
    
    333,172Accumulated other comprehensive income
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    (18
    )
    
    
    18Total shareholders equity
    
    
    425,484
    
    
    
    (62,512
    )
    
    
    8,068
    
    
    
    16,432
    
    
    
    38,012
    
    
    
    425,484Total liabilities and shareholders equity
    
    $
    835,602
    
    
    $
    1,888,632
    
    
    $
    24,058
    
    
    $
    124,105
    
    
    $
    (729,531
    )
    
    $
    2,142,866
 39




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended April 30, 2011Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries 
    
    
    Subsidiaries 
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    3,606
    
    
    $
    30,200
    
    
    $
    645
    
    
    $
    1,245
    
    
    $
    
    
    
    $
    35,696Cash flows from investing activities:Proceeds from sales of certificates
of deposit
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Purchases of certificates of deposit
and marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (585
    )
    
    
    
    
    
    
    (585
    )Proceeds from sale of assets
    
    
    
    
    
    
    285
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    285Purchase of subsidiaries and other
investments, net of cash acquired
    
    
    
    
    
    
    (1,809
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,809
    )Additions to property and equipment
    
    
    (922
    )
    
    
    (7,254
    )
    
    
    (117
    )
    
    
    (469
    )
    
    
    
    
    
    
    (8,762
    )Other
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54Net cash provided by (used in)
investing activities
    
    
    9,078
    
    
    
    (8,724
    )
    
    
    (117
    )
    
    
    (1,054
    )
    
    
    
    
    
    
    (817
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Intercompany receivables (payables)
    
    
    25,038
    
    
    
    (23,506
    )
    
    
    (507
    )
    
    
    (1,025
    )
    
    
    
    
    
    
    Repayments of long-term debt
    
    
    (194,190
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (194,190
    )Issuance of common stock
    
    
    1,199
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,199Purchase and retirement of common
stock
    
    
    (9,387
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,387
    )Debt refinancing costs
    
    
    (4,910
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,910
    )Dividends
    
    
    (5,485
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,485
    )Excess tax benefits from share-based
payment arrangements
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144Net cash provided by (used in)
financing activities
    
    
    12,409
    
    
    
    (23,506
    )
    
    
    (507
    )
    
    
    (1,025
    )
    
    
    
    
    
    
    (12,629
    )Net increase (decrease) in cash
    
    
    25,093
    
    
    
    (2,030
    )
    
    
    21
    
    
    
    (834
    )
    
    
    
    
    
    
    22,250Cash and cash equivalents, beginning of
period
    
    
    48,270
    
    
    
    6,055
    
    
    
    58
    
    
    
    1,677
    
    
    
    
    
    
    
    56,060Cash and cash equivalents, end of period
    
    $
    73,363
    
    
    $
    4,025
    
    
    $
    79
    
    
    $
    843
    
    
    $
    
    
    
    $
    78,310
 40




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended April 30, 2010Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries 
    
    
    Subsidiaries 
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (1,511
    )
    
    $
    24,505
    
    
    $
    661
    
    
    $
    2,800
    
    
    $
    
    
    
    $
    26,455Cash flows from investing activities:Proceeds from sales of marketable
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    250Purchases of certificates of deposit
and marketable securities
    
    
    (10,000
    )
    
    
    
    
    
    
    
    
    
    
    (661
    )
    
    
    
    
    
    
    (10,661
    )Additions to property and equipment
    
    
    (1,430
    )
    
    
    (6,416
    )
    
    
    (75
    )
    
    
    (445
    )
    
    
    
    
    
    
    (8,366
    )Other
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Net cash used in investing activities
    
    
    (11,430
    )
    
    
    (6,366
    )
    
    
    (75
    )
    
    
    (856
    )
    
    
    
    
    
    
    (18,727
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (847
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (847
    )Intercompany receivables (payables)
    
    
    20,725
    
    
    
    (17,604
    )
    
    
    (588
    )
    
    
    (2,533
    )
    
    
    
    
    
    
    Retirement of common stock warrants
    
    
    (107
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107
    )Issuance of common stock
    
    
    471
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    471Retirement of call options
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107Debt refinancing costs
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38
    )Dividends
    
    
    (5,589
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,589
    )Excess tax benefits from share based
payment arrangements
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Net cash provided by (used in)
financing activities
    
    
    14,748
    
    
    
    (17,604
    )
    
    
    (588
    )
    
    
    (2,533
    )
    
    
    
    
    
    
    (5,977
    )Net increase (decrease) in cash
    
    
    1,807
    
    
    
    535
    
    
    
    (2
    )
    
    
    (589
    )
    
    
    
    
    
    
    1,751Cash and cash equivalents, beginning of
period
    
    
    56,734
    
    
    
    5,096
    
    
    
    52
    
    
    
    926
    
    
    
    
    
    
    
    62,808Cash and cash equivalents, end of period
    
    $
    58,541
    
    
    $
    5,631
    
    
    $
    50
    
    
    $
    337
    
    
    $
    
    
    
    $
    64,559
 41




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12) Dispositions and Acquisitions
   October 31, 2010AssetsReceivables
    
    $
    20Inventories
    
    
    7Assets held for sale
    
    $
    27Net property and equipment
    
    $
    383Cemetery property
    
    
    90Preneed cemetery receivables and trust investments
    
    
    463Cemetery perpetual care trust investments
    
    
    278Non-current assets held for sale
    
    $
    1,214LiabilitiesLiabilities associated with assets held for sale
    
    $
    8Deferred preneed cemetery receipts held in trust
    
    $
    436Perpetual care trusts corpus
    
    
    278Long-term liabilities associated with assets held for sale
    
    $
    714
 (13) Consolidated Comprehensive Income
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Net earnings
    
    $
    9,998
    
    
    $
    8,391
    
    
    $
    18,042
    
    
    $
    15,878Other comprehensive income:Unrealized appreciation of
investments, net of deferred
tax expense of ($7), ($1) and
($5), respectively
    
    
    12
    
    
    
    1
    
    
    
    9
    
    
    
    Reduction in net unrealized
losses associated with
available-for-sale securities
of the trusts
    
    
    25,900
    
    
    
    35,437
    
    
    
    42,981
    
    
    
    55,667Reclassification of the net
unrealized losses activity
attributable to the deferred
preneed funeral and cemetery
receipts held in trust and
perpetual care trusts corpus
    
    
    (25,900
    )
    
    
    (35,437
    )
    
    
    (42,981
    )
    
    
    (55,667
    )Total other comprehensive income
    
    
    12
    
    
    
    1
    
    
    
    9
    
    
    
    Total comprehensive income
    
    $
    10,010
    
    
    $
    8,392
    
    
    $
    18,051
    
    
    $
    15,878
 42




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (14) Long-term Debt
 April 30, 2011
    
    
    October 31, 2010Long-term debt:3.125% senior convertible notes due
2014, net of unamortized discount of
$8,966 and $10,275 as of April 30, 2011
and October 31, 2010, respectively
    
    $
    77,450
    
    
    $
    76,1413.375% senior convertible notes due
2016, net of unamortized discount of
$6,760 and $7,318 as of April 30, 2011
and October 31, 2010, respectively
    
    
    38,359
    
    
    
    37,801Senior secured revolving credit facility
    
    
    
    
    
    
    6.50% senior notes due 2019
    
    
    200,000
    
    
    
    6.25% senior notes due 2013
    
    
    5,812
    
    
    
    200,000Other, principally seller financing of
acquired operations or assumption upon
acquisition, weighted average interest
rate of 8.0% as of April 30, 2011 and
October 31, 2010, partially secured by
assets of subsidiaries, with maturities
through 2022
    
    
    87
    
    
    
    90Total long-term debt
    
    
    321,708
    
    
    
    314,032Less current maturities
    
    
    5,817
    
    
    
    5$
    315,891
    
    
    $
    314,027
 Fair Value
  Senior Secured Revolving Credit Facility
   43




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (14) Long-term Debt(Continued)
  
    
    Maintenance on a rolling four quarter basis of a maximum consolidated adjusted leverage
ratio (total funded debt (net of eligible securities and readily marketable securities, but
in no event greater than $30,000) divided by EBITDA (as defined)) of not more than 4.75 to
1.00;
    
    Maintenance on a rolling four quarter basis of a maximum consolidated senior secured
leverage ratio (total funded senior secured debt divided by EBITDA (as defined))  of not
more than 2.00 to 1.00; and
    
    Maintenance on a rolling four quarter basis of a minimum consolidated interest coverage
ratio (EBITDAR (as defined) divided by interest expense paid in cash plus rent expense less
certain transaction costs to the extent such constitutes cash interest expense)  of not
less than 2.60 to 1.00
    Senior Notes
  44




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (14) Long-term Debt(Continued)
     (15) Income Taxes
  45




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (16) Subsequent Events
   46




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
 General
  Financial Summary
    47




---



##### Table of Contents



48




---



##### Table of Contents



49




---



##### Table of Contents



Funeral and CemeteryMerchandise and
    
    Cemetery PerpetualServices Trusts(1)
    
    Care Trusts(1)For the quarter ended April 30, 2011
    
    
    4.8
    %
    
    
    3.6
    %For the last twelve months ended April 30, 2011
    
    
    13.1
    %
    
    
    10.4
    %For the last five years ended April 30, 2011
    
    
    3.3
    %
    
    
    4.3
    %
 
 (1)
    
    Periods less than a year represent actual returns. Periods of one year or
more represent annualized returns. Critical Accounting Policies
  Results of Operations
  50




---



##### Table of Contents



Three Months Ended April 30, 2011 Compared to Three Months Ended April 30, 2010
 Funeral Operations
 Three Months Ended April 30,2011
    
    
    2010
    
    
    Increase(In millions)Funeral Revenue:Funeral Home Locations
    
    $
    68.6
    
    
    $
    66.7
    
    
    $
    1.9Corporate Trust Management (1)
    
    
    4.3
    
    
    
    4.3
    
    
    
    Total Funeral Revenue
    
    $
    72.9
    
    
    $
    71.0
    
    
    $
    1.9Funeral Costs:Funeral Home Locations
    
    $
    54.7
    
    
    $
    53.9
    
    
    $
    .8Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Funeral Costs
    
    $
    54.9
    
    
    $
    54.1
    
    
    $
    .8Funeral Gross Profit:Funeral Home Locations
    
    $
    13.9
    
    
    $
    12.8
    
    
    $
    1.1Corporate Trust Management (1)
    
    
    4.1
    
    
    
    4.1
    
    
    
    Total Funeral Gross Profit
    
    $
    18.0
    
    
    $
    16.9
    
    
    $
    1.1
 Same-Store Analysis for the Three Months Ended April 30, 2011 and 2010
 Change in Average Revenue
    
    Change in Same-Store
    
    Same-Store Cremation RatePer Funeral Service
    
    Funeral Services
    
    2011
    
    20101.3% (1)
    
    
    0.8
    %
    
    
    43.2
    %
    
    
    42.1
    %
 
 (1)
    
    Corporate trust management consists of the trust management fees and funeral
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
distributable earnings as stipulated by our respective trust agreements that are generated by
the trusts over the life of the preneed contracts and allocated to those products and services
delivered during the relevant periods. See Notes 3 and 6 to the condensed consolidated
financial statements included herein for information regarding the cost basis and market value
of the trust assets and current performance of the trusts (i.e., current realized gains and
losses, interest income and dividends). Trust management fees included in funeral revenue for
the three months ended April 30, 2011 and 2010 were $1.2 million and $1.1 million,
respectively. Funeral trust earnings recognized in funeral revenue for the three months ended
April 30, 2011 and 2010 were $3.1 million and $3.2 million, respectively.   51




---



##### Table of Contents



Cemetery Operations
 Three Months Ended April 30,Increase2011
    
    
    2010
    
    
    (Decrease)(In millions)Cemetery Revenue:Cemetery Locations
    
    $
    54.5
    
    
    $
    55.1
    
    
    $
    (.6
    )Corporate Trust Management (1)
    
    
    2.2
    
    
    
    1.9
    
    
    
    .3Total Cemetery Revenue
    
    $
    56.7
    
    
    $
    57.0
    
    
    $
    (.3
    )Cemetery Costs:Cemetery Locations
    
    $
    48.9
    
    
    $
    48.6
    
    
    $
    .3Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Cemetery Costs
    
    $
    49.1
    
    
    $
    48.8
    
    
    $
    .3Cemetery Gross Profit:Cemetery Locations
    
    $
    5.6
    
    
    $
    6.5
    
    
    $
    (.9
    )Corporate Trust Management (1)
    
    
    2.0
    
    
    
    1.7
    
    
    
    .3Total Cemetery Gross Profit
    
    $
    7.6
    
    
    $
    8.2
    
    
    $
    (.6
    )
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
distributable earnings as stipulated by our respective trust agreements that are generated by
the trusts over the life of the preneed contracts and allocated to those products and services
delivered during the relevant periods. See Notes 4 and 6 to the condensed consolidated
financial statements included herein for information regarding the cost basis and market value
of the trust assets and current performance of the trusts (i.e., current realized gains and
losses, interest income and dividends). Trust management fees included in cemetery revenue
for the three months ended April 30, 2011 and 2010 were $1.3 million and $1.2 million,
respectively, and cemetery trust earnings recognized included in cemetery revenue for the
three months ended April 30, 2011 and 2010 were $0.9 million and $0.7 million, respectively.
Perpetual care trust earnings were $1.7 million and $1.4 million for the three months ended
April 30, 2011 and 2010, respectively, and are included in the revenues and gross profit of
the cemetery segment. See Notes 5 and 6 to the condensed consolidated financial statements
included herein for information regarding the cemetery perpetual care trusts.   Other
  52




---



##### Table of Contents



Preneed Sales into the Backlog
   53




---



##### Table of Contents



Six Months Ended April 30, 2011 Compared to Six Months Ended April 30, 2010
 Funeral Operations
 Six Months Ended April 30,2011
    
    
    2010
    
    
    Increase(In millions)Funeral Revenue:Funeral Home Locations
    
    $
    138.5
    
    
    $
    134.4
    
    
    $
    4.1Corporate Trust Management (1)
    
    
    8.4
    
    
    
    8.4
    
    
    
    Total Funeral Revenue
    
    $
    146.9
    
    
    $
    142.8
    
    
    $
    4.1Funeral Costs:Funeral Home Locations
    
    $
    108.0
    
    
    $
    106.2
    
    
    $
    1.8Corporate Trust Management (1)
    
    
    .4
    
    
    
    .4
    
    
    
    Total Funeral Costs
    
    $
    108.4
    
    
    $
    106.6
    
    
    $
    1.8Funeral Gross Profit:Funeral Home Locations
    
    $
    30.5
    
    
    $
    28.2
    
    
    $
    2.3Corporate Trust Management (1)
    
    
    8.0
    
    
    
    8.0
    
    
    
    Total Funeral Gross Profit
    
    $
    38.5
    
    
    $
    36.2
    
    
    $
    2.3
 Same-Store Analysis for the Six Months Ended April 30, 2011 and 2010
 Change in Average Revenue
    
    Change in Same-Store
    
    Same-Store Cremation RatePer Funeral Service
    
    Funeral Services
    
    2011
    
    20101.4% (1)
    
    
    0.9
    %
    
    
    42.5
    %
    
    
    41.7
    %
 
 (1)
    
    Corporate trust management consists of the trust management fees and funeral
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
distributable earnings as stipulated by our respective trust agreements that are generated by
the trusts over the life of the preneed contracts and allocated to those products and services
delivered during the relevant periods. See Notes 3 and 6 to the condensed consolidated
financial statements included herein for information regarding the cost basis and market value
of the trust assets and current performance of the trusts (i.e., current realized gains and
losses, interest income and dividends). Trust management fees included in funeral revenue for
the six months ended April 30, 2011 and 2010 were $2.4 million and $2.2 million, respectively.
Funeral trust earnings recognized in funeral revenue for the six months ended April 30, 2011
and 2010 were $6.0 million and $6.2 million, respectively.   54




---



##### Table of Contents



Cemetery Operations
 Six Months Ended April 30,2011
    
    
    2010
    
    
    Increase(In millions)Cemetery Revenue:Cemetery Locations
    
    $
    107.8
    
    
    $
    105.6
    
    
    $
    2.2Corporate Trust Management (1)
    
    
    4.3
    
    
    
    3.7
    
    
    
    .6Total Cemetery Revenue
    
    $
    112.1
    
    
    $
    109.3
    
    
    $
    2.8Cemetery Costs:Cemetery Locations
    
    $
    96.1
    
    
    $
    94.7
    
    
    $
    1.4Corporate Trust Management (1)
    
    
    .5
    
    
    
    .5
    
    
    
    Total Cemetery Costs
    
    $
    96.6
    
    
    $
    95.2
    
    
    $
    1.4Cemetery Gross Profit:Cemetery Locations
    
    $
    11.7
    
    
    $
    10.9
    
    
    $
    .8Corporate Trust Management (1)
    
    
    3.8
    
    
    
    3.2
    
    
    
    .6Total Cemetery Gross Profit
    
    $
    15.5
    
    
    $
    14.1
    
    
    $
    1.4
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
distributable earnings as stipulated by our respective trust agreements that are generated by
the trusts over the life of the preneed contracts and allocated to those products and services
delivered during the relevant periods. See Notes 4 and 6 to the condensed consolidated
financial statements included herein for information regarding the cost basis and market value
of the trust assets and current performance of the trusts (i.e., current realized gains and
losses, interest income and dividends). Trust management fees included in cemetery revenue
for the six months ended April 30, 2011 and 2010 were $2.7 million and $2.4 million,
respectively, and cemetery trust earnings recognized included in cemetery revenue for the six
months ended April 30, 2011 and 2010 were $1.6 million and $1.3 million, respectively.
Perpetual care trust earnings were $4.0 million and $3.8 million for the six months ended
April 30, 2011 and 2010, respectively, and are included in the revenues and gross profit of
the cemetery segment. See Notes 5 and 6 to the condensed consolidated financial statements
included herein for information regarding the cemetery perpetual care trusts.   Other
   55




---



##### Table of Contents



Preneed Sales into the Backlog
   56




---



##### Table of Contents



Liquidity and Capital Resources
 General
     57




---



##### Table of Contents



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)
    
    $
    337.4
    
    
    $
    5.8
    
    
    $
    
    
    
    $
    86.4
    
    
    $
    245.2Interest on long-term debt (2)
    
    
    121.9
    
    
    
    17.2
    
    
    
    34.5
    
    
    
    30.4
    
    
    
    39.8Operating lease obligations (3)
    
    
    28.5
    
    
    
    4.3
    
    
    
    6.0
    
    
    
    3.1
    
    
    
    15.1Purchase obligations (4)
    
    
    1.9
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    Non-competition and other agreements (5)
    
    
    1.0
    
    
    
    .3
    
    
    
    .2
    
    
    
    .3
    
    
    
    .2$
    490.7
    
    
    $
    29.5
    
    
    $
    40.7
    
    
    $
    120.2
    
    
    $
    300.3
 58




---



##### 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 April 30, 2011.(2)
    
    Includes contractual interest payments for our senior convertible notes, 6.50
percent senior notes due 2019, 6.25 percent senior notes due 2013 and third-party debt.(3)
    
    Our noncancellable operating leases are primarily for land and buildings and expire
over the next one to 20 years, except for eight leases that expire between 2032 and 2039.
This category also includes leases under our vehicle fleet leasing program. Our future
minimum lease payments for all operating leases as of April 30, 2011 are $2.4 million, $3.7
million, $3.1 million, $2.1 million, $1.5 million and $15.7 million for the years ending
October 31, 2011, 2012, 2013, 2014, 2015 and later years, respectively.(4)
    
    Represents a construction contract for a funeral home currently under construction.(5)
    
    This category includes payments pursuant to non-competition agreements with prior
owners and key employees of acquired businesses.  Expiration by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContingent Obligations
    
    Total
    
    
    1 year
    
    
    1  3 years
    
    
    3  5 years
    
    
    5 yearsCemetery perpetual care trust funding obligations (1)
    
    $
    12.6
    
    
    $
    12.6
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term obligations related to uncertain tax positions (2)
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.2$
    14.8
    
    
    $
    12.6
    
    
    $
    
    
    
    $
    
    
    
    $
    2.2
 
 (1)
    
    In those states where we have withdrawn realized net capital gains in the past from
our cemetery perpetual care trusts, regulators may seek replenishment of the subsequent
realized net capital losses either by requiring a cash deposit to the trust or by prohibiting
or restricting withdrawals of future earnings until they cover the loss. The estimated
probable funding obligation in the cemetery perpetual care trusts in these states was $12.6
million as of April 30, 2011. As of April 30, 2011, we had net unrealized losses of $30.3
million in the trusts in these states. Because some of these trusts currently have assets
with a fair market value less than the aggregate amounts required to be contributed to the
trust, any additional realized net capital losses in these trusts may result in a
corresponding funding liability and increase in cemetery costs. In those states where
realized net capital gains have not been withdrawn, we believe it is reasonably possible but
not probable that additional funding obligations may exist with an estimated amount of
approximately $2.3 million; no charge has been recorded for these amounts as of April 30,
2011.(2)
    
    In accordance with the required accounting guidance on uncertain tax positions, as
of April 30, 2011, we have recorded $2.2 million of unrecognized tax benefits and related
interest and penalties. Due to the uncertainty regarding the timing and completion of audits
and possible outcomes, it is not possible to estimate the range of increase and decrease and
the timing of any potential cash payments.  59




---



##### Table of Contents



Other,Senior
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    PrincipallySecured
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    SellerRevolving
    
    
    Senior
    
    
    Senior
    
    
    Senior
    
    
    FinancingCredit
    
    
    Convertible
    
    
    Notes Due
    
    
    Notes Due
    
    
    of AcquiredFiscal Years Ending October 31,
    
    Facility
    
    
    Notes
    
    
    2013
    
    
    2019
    
    
    Operations
    
    
    Total2011
    
    $
    
    
    
    $
    
    
    
    $
    5.8
    
    
    $
    
    
    
    $
    
    
    
    $
    5.82012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2014
    
    
    
    
    
    
    86.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86.42015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    
    
    
    
    45.1
    
    
    
    
    
    
    
    200.0
    
    
    
    .1
    
    
    
    245.2Total long-term debt
    
    $
    
    
    
    $
    131.5
    
    
    $
    5.8
    
    
    $
    200.0
    
    
    $
    .1
    
    
    $
    337.4
  Off-Balance Sheet Arrangements
  (1)
    
    the $24.8 million bond we are required to maintain to guarantee our obligations
relating to funds we withdrew in fiscal year 2001 from our preneed funeral trusts in
Florida, which is discussed above and in Note 20 to the consolidated financial
statements in our 2010 Form 10-K; and(2)
    
    the insurance-funded preneed funeral contracts, which will be funded by life
insurance or annuity contracts issued by third-party insurers, are not reflected in our
condensed consolidated balance sheets, and are discussed in Note 2(i) to the
consolidated financial statements in our 2010 Form 10-K.
 Recent Accounting Standards
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  60




---



##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 1A. Risk Factors
  61




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 Issuer Purchases of Equity Securities
 Total number of
    
    Maximumshares
    
    approximate dollarpurchased as
    
    value of shares thatTotal number
    
    Average
    
    part of publicly-
    
    may yet beof shares
    
    price paid
    
    announced plans
    
    purchased under thePeriod
    
    purchased
    
    per share
    
    or programs
    
    plans or programs(1)February 1, 2011 through February 28, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    14,394,009March 1, 2011 through March 31, 2011
    
    
    175,200
    
    
    $
    7.27
    
    
    
    175,200
    
    
    $
    13,120,287April 1, 2011 through April 30, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    13,120,287Total
    
    
    175,200
    
    
    $
    7.27
    
    
    
    175,200
    
    
    $
    13,120,287
 
 (1)
    
    We announced a $25.0 million stock repurchase program in September 2007, which was
increased by $25.0 million in December 2007 and June 2008, resulting in a $75.0 million
program. As of April 30, 2011, we had repurchased 8.9 million shares for $61.9 million at an
average price of $6.95 per share and had $13.1 million remaining under this program. In May
2011, we repurchased an additional 0.2 million shares for $1.2 million at an average price of
$7.67 per share and currently have $11.9 million remaining available under the program. 
 Item 6. Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
April 3, 2008 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended April 30, 2008)3.2
    
    By-laws of the Company, as amended and restated as of September 8, 2008 (incorporated by
reference to Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended
July 31, 2008)4.1
    
    See Exhibits 3.1 and 3.2 for provisions of the Companys Amended and Restated Articles of
Incorporation, as amended, and By-laws, as amended, defining the rights of holders of Class A
and Class B common stock4.2
    
    Specimen of Class A common stock certificate (incorporated by reference to Exhibit 3 to the
Companys Registration Statement on Form 8-A/A filed with the Commission on June 21, 2007)4.3
    
    Third Amended and Restated Credit Agreement dated April 20, 2011 by and among the Company,
Empresas Stewart-Cementerios and Empresas Stewart-Funerarias, as Borrowers, Bank of America,
N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer and The
Other Lenders party hereto (incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K filed April 21, 2011)4.4
    
    Indenture dated as of February 11, 2005 by and among Stewart Enterprises, Inc., the
Guarantors thereunder and U.S. Bank National Association, as Trustee, with respect to the 6.25
percent Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K filed February 14, 2005 (File No. 001-15449)) and Supplemental
Indenture dated as of April 15, 2011 by and among Stewart Enterprises, Inc., the subsidiary
guarantors and U.S. Bank National Associations as trustee (incorporated by reference to
Exhibit 4.1 to the Companys Current Report on Form 8-K filed April 18, 2011)
 62




---



##### Table of Contents



4.5
    
    Form of 6.25 percent Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed February 14, 2005 (File No. 001-15449))4.6
    
    Indenture dated as of April 18, 2011 by and among Stewart Enterprises, Inc., the Guarantors
and U.S. Bank National Association, as Trustee, with respect to the 6.50 percent Senior Notes
due 2019 (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K
filed April 19, 2011)4.7
    
    Form of 6.50 percent Senior Note due 2019 (incorporated by reference to Exhibit 4.2 to the
Companys Current Report on Form 8-K filed April 19, 2011)4.8
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.125 percent Senior
Convertible Notes due 2014 (including Form of 3.125 percent Senior Convertible Notes due 2014)
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed
June 27, 2007)4.9
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.375 percent Senior
Convertible Notes due 2016 (including Form of 3.375 percent Senior Convertible Notes due 2016)
(incorporated by reference to Exhibit 4.2 to the Companys Current Report on Form 8-K filed
June 27, 2007)10.1
    
    Registration Rights Agreement dated as of April 18, 2011 by and among Stewart Enterprises,
Inc., the Guarantors and the Initial Purchasers (incorporated by reference to Exhibit 10.1 to
the Companys Current Report on Form 8-K filed April 19, 2011)31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Lewis J. Derbes, Jr.,
Senior Vice President, Chief Financial Officer and Treasurer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas M. Kitchen,
President and Chief Executive Officer, and Lewis J. Derbes, Jr., Senior Vice President, Chief
Financial Officer and Treasurer
 63




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.June 8, 2011
    /s/  LEWIS J. DERBES, JR.Lewis J. Derbes, Jr.Senior Vice President,
Chief Financial Officer and TreasurerJune 8, 2011
    /s/  ANGELA M. LACOURAngela M. LacourVice President,
Corporate Controller and
Chief Accounting Officer 64




---



##### Table of Contents



Exhibit Index
 31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen,
President and Chief Executive Officer
 31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Lewis J. Derbes, Jr.,
Senior Vice President, Chief Financial Officer and Treasurer
 32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas M. Kitchen,
President and Chief Executive Officer, and Lewis J. Derbes, Jr., Senior Vice President, Chief
Financial Officer and Treasurer
 65