UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended July 31, 2008
 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 ParkwayJefferson, Louisiana
(Address of principal executive offices)
    
    70121
(Zip Code)
 
 Registrants telephone number, including area code: (504) 729-1400
 
 þ o
  Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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##### 



STEWART
ENTERPRISES, INC.
AND SUBSIDIARIES
 INDEX
 PagePart I.
    
    Financial InformationItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings 
Three Months Ended July 31, 2008 and 2007
    
    
    3Condensed Consolidated Statements of Earnings
Nine Months Ended July 31, 2008 and 2007
    
    
    4Condensed Consolidated Balance Sheets 
July 31, 2008 and October 31, 2007
    
    
    5Condensed Consolidated Statement of Shareholders Equity 
Nine Months Ended July 31, 2008
    
    
    7Condensed Consolidated Statements of Cash Flows 
Nine Months Ended July 31, 2008 and 2007
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2.
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    37Item 3.
    
    Quantitative and Qualitative Disclosures
About Market Risk
    
    
    52Item 4.
    
    Controls and Procedures
    
    
    52Part II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    52Item 1A.
    
    Risk Factors
    
    
    53Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    54Item 5.
    
    Other Information
    
    
    54Item 6.
    
    Exhibits
    
    
    55Signatures
    
    
    
    
    57
 2




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended July 31,2008
    
    
    2007Revenues:Funeral
    
    $
    68,558
    
    
    $
    66,914Cemetery
    
    
    61,870
    
    
    
    60,665130,428
    
    
    
    127,579Costs and expenses:Funeral
    
    
    53,524
    
    
    
    52,589Cemetery
    
    
    48,906
    
    
    
    48,481102,430
    
    
    
    101,070Gross profit
    
    
    27,998
    
    
    
    26,509Corporate general and administrative expenses
    
    
    (8,188
    )
    
    
    (8,343
    )Hurricane related charges, net
    
    
    (341
    )
    
    
    (210
    )Separation charges
    
    
    
    
    
    
    (48
    )Gains on dispositions and impairment (losses), net
    
    
    25
    
    
    
    (46
    )Other operating income, net
    
    
    407
    
    
    
    290Operating earnings
    
    
    19,901
    
    
    
    18,152Interest expense
    
    
    (6,000
    )
    
    
    (6,222
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (677
    )Investment and other income, net
    
    
    593
    
    
    
    810Earnings from continuing operations before income taxes
    
    
    14,494
    
    
    
    12,063Income taxes
    
    
    5,365
    
    
    
    3,853Earnings from continuing operations
    
    
    9,129
    
    
    
    8,210Discontinued operations:Loss from discontinued operations before income taxes
    
    
    
    
    
    
    (138
    )Income tax benefit
    
    
    
    
    
    
    (51
    )Loss from discontinued operations
    
    
    
    
    
    
    (87
    )Net earnings
    
    $
    9,129
    
    
    $
    8,123Basic earnings per common share:Earnings from continuing operations
    
    $
    .10
    
    
    $
    .08Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .10
    
    
    $
    .08Diluted earnings per common share:Earnings from continuing operations
    
    $
    .10
    
    
    $
    .08Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .10
    
    
    $
    .08Weighted average common shares outstanding (in thousands):Basic
    
    
    92,203
    
    
    
    102,479Diluted
    
    
    92,414
    
    
    
    102,714Dividends declared per common share
    
    $
    .025
    
    
    $
    .025
  3




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Nine Months Ended July 31,2008
    
    
    2007Revenues:Funeral
    
    $
    218,862
    
    
    $
    212,410Cemetery
    
    
    178,658
    
    
    
    184,043397,520
    
    
    
    396,453Costs and expenses:Funeral
    
    
    163,260
    
    
    
    160,415Cemetery
    
    
    143,558
    
    
    
    145,757306,818
    
    
    
    306,172Gross profit
    
    
    90,702
    
    
    
    90,281Corporate general and administrative expenses
    
    
    (24,226
    )
    
    
    (23,129
    )Hurricane related charges, net
    
    
    (351
    )
    
    
    (2,343
    )Separation charges
    
    
    
    
    
    
    (580
    )Gains on dispositions and impairment (losses), net
    
    
    153
    
    
    
    44Other operating income, net
    
    
    753
    
    
    
    1,441Operating earnings
    
    
    67,031
    
    
    
    65,714Interest expense
    
    
    (17,981
    )
    
    
    (19,274
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (677
    )Investment and other income, net
    
    
    1,670
    
    
    
    2,427Earnings from continuing operations before income taxes
    
    
    50,720
    
    
    
    48,190Income taxes
    
    
    18,766
    
    
    
    14,191Earnings from continuing operations
    
    
    31,954
    
    
    
    33,999Discontinued operations:Loss from discontinued operations before income taxes
    
    
    
    
    
    
    (519
    )Income tax benefit
    
    
    
    
    
    
    (198
    )Loss from discontinued operations
    
    
    
    
    
    
    (321
    )Net earnings
    
    $
    31,954
    
    
    $
    33,678Basic earnings per common share:Earnings from continuing operations
    
    $
    .34
    
    
    $
    .32Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .34
    
    
    $
    .32Diluted earnings per common share:Earnings from continuing operations
    
    
    .34
    
    
    
    .32Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    
    .34
    
    
    
    .32Weighted average common shares outstanding (in thousands):Basic
    
    
    94,504
    
    
    
    104,215Diluted
    
    
    94,676
    
    
    
    104,384Dividends declared per common share
    
    $
    .075
    
    
    $
    .075
  4




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 July 31,
    
    
    October 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    48,693
    
    
    $
    71,545Marketable securities
    
    
    38
    
    
    
    262Receivables, net of allowances
    
    
    78,248
    
    
    
    60,615Inventories
    
    
    35,900
    
    
    
    36,061Prepaid expenses
    
    
    8,927
    
    
    
    6,355Deferred income taxes, net
    
    
    8,479
    
    
    
    8,621Total current assets
    
    
    180,285
    
    
    
    183,459Receivables due beyond one year, net of allowances
    
    
    69,802
    
    
    
    83,608Preneed funeral receivables and trust investments
    
    
    439,821
    
    
    
    515,053Preneed cemetery receivables and trust investments
    
    
    223,293
    
    
    
    255,679Goodwill
    
    
    273,188
    
    
    
    273,286Cemetery property, at cost
    
    
    377,137
    
    
    
    374,800Property and equipment, at cost:Land
    
    
    43,767
    
    
    
    43,767Buildings
    
    
    317,035
    
    
    
    310,968Equipment and other
    
    
    175,919
    
    
    
    164,246536,721
    
    
    
    518,981Less accumulated depreciation
    
    
    230,580
    
    
    
    213,063Net property and equipment
    
    
    306,141
    
    
    
    305,918Deferred income taxes, net
    
    
    181,060
    
    
    
    192,859Cemetery perpetual care trust investments
    
    
    207,425
    
    
    
    236,503Other assets
    
    
    17,302
    
    
    
    17,809Total assets
    
    $
    2,275,454
    
    
    $
    2,438,974
  5




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 July 31,
    
    
    October 31,2008
    
    
    2007LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    27
    
    
    $
    198Accounts payable
    
    
    23,286
    
    
    
    26,606Accrued payroll and other benefits
    
    
    16,376
    
    
    
    16,316Accrued insurance
    
    
    21,939
    
    
    
    21,252Accrued interest
    
    
    6,589
    
    
    
    5,576Other current liabilities
    
    
    15,461
    
    
    
    17,958Income taxes payable
    
    
    1,131
    
    
    
    4,177Total current liabilities
    
    
    84,809
    
    
    
    92,083Long-term debt, less current maturities
    
    
    450,097
    
    
    
    450,115Deferred preneed funeral revenue
    
    
    250,482
    
    
    
    256,603Deferred preneed cemetery revenue
    
    
    279,855
    
    
    
    284,507Non-controlling interest in funeral and cemetery trusts
    
    
    581,686
    
    
    
    683,052Other long-term liabilities
    
    
    19,749
    
    
    
    13,869Total liabilities
    
    
    1,666,678
    
    
    
    1,780,229Commitments and contingenciesNon-controlling interest in perpetual care trusts
    
    
    205,636
    
    
    
    235,427Shareholders 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 88,681,765 and 94,865,387
shares at July 31, 2008 and October 31, 2007,
respectively
    
    
    88,682
    
    
    
    94,865Class B authorized 5,000,000 shares; issued
and outstanding 3,555,020 shares at July 31,
2008 and October 31, 2007; 10 votes per share
convertible into an equal number of Class A
shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    538,778
    
    
    
    583,789Accumulated deficit
    
    
    (227,903
    )
    
    
    (258,902
    )Accumulated other comprehensive income:Unrealized appreciation of investments
    
    
    28
    
    
    
    11Total accumulated other comprehensive income
    
    
    28
    
    
    
    11Total shareholders equity
    
    
    403,140
    
    
    
    423,318Total liabilities and shareholders equity
    
    $
    2,275,454
    
    
    $
    2,438,974
  6




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
(Dollars in thousands, except per share amounts)
 Additional
    
    
    
    
    
    
    Unrealized
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Accumulated
    
    
    Appreciation of
    
    
    ShareholdersStock (1)
    
    
    Capital
    
    
    Deficit
    
    
    Investments
    
    
    EquityBalance October 31, 2007
    
    $
    98,420
    
    
    $
    583,789
    
    
    $
    (258,902
    )
    
    $
    11
    
    
    $
    423,318Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    31,954
    
    
    
    
    
    
    
    31,954Other comprehensive income:Unrealized appreciation
of investments, net of
deferred tax expense of
($9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    17Total other comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    17Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    31,954
    
    
    
    17
    
    
    
    31,971Cumulative effect of
adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    (955
    )
    
    
    
    
    
    
    (955
    )Restricted stock activity
    
    
    28
    
    
    
    332
    
    
    
    
    
    
    
    
    
    
    
    360Issuance of common stock
    
    
    160
    
    
    
    1,013
    
    
    
    
    
    
    
    
    
    
    
    1,173Stock options exercised
    
    
    247
    
    
    
    1,162
    
    
    
    
    
    
    
    
    
    
    
    1,409Share-based compensation
    
    
    
    
    
    
    1,431
    
    
    
    
    
    
    
    
    
    
    
    1,431Tax benefit associated
with stock options
exercised
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    
    
    
    
    127Purchase and retirement of
common stock
    
    
    (6,618
    )
    
    
    (42,009
    )
    
    
    
    
    
    
    
    
    
    
    (48,627
    )Dividends ($.075 per share)
    
    
    
    
    
    
    (7,067
    )
    
    
    
    
    
    
    
    
    
    
    (7,067
    )Balance July 31, 2008
    
    $
    92,237
    
    
    $
    538,778
    
    
    $
    (227,903
    )
    
    $
    28
    
    
    $
    403,140
 
 (1)
    
    Amount includes 88,682 and 94,865 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of July 31, 2008 and October 31, 2007, respectively,
and includes 3,555 shares (in thousands) of Class B common stock.  7




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Nine Months Ended July 31,2008
    
    
    2007Cash flows from operating activities:Net earnings
    
    $
    31,954
    
    
    $
    33,678Adjustments to reconcile net earnings to net cash provided by operating activities:(Gains) on dispositions and impairment losses, net
    
    
    (153
    )
    
    
    514Depreciation and amortization
    
    
    21,188
    
    
    
    20,033Provision for doubtful accounts
    
    
    5,742
    
    
    
    6,934Share-based compensation
    
    
    1,431
    
    
    
    1,146Loss on early extinguishment of debt
    
    
    
    
    
    
    677Excess tax benefits from share-based payment arrangements
    
    
    (171
    )
    
    
    (108
    )Provision for deferred income taxes
    
    
    5,844
    
    
    
    5,062Other
    
    
    973
    
    
    
    1,160Changes in assets and liabilities:(Increase) decrease in receivables
    
    
    (3,902
    )
    
    
    1,652Increase in prepaid expenses
    
    
    (2,574
    )
    
    
    (3,193
    )Increase in inventories and cemetery property
    
    
    (2,072
    )
    
    
    (2,261
    )Decrease in accounts payable and accrued expenses
    
    
    (477
    )
    
    
    (6,545
    )Net effect of preneed funeral production and maturities:(Increase) decrease in preneed funeral receivables and trust investments
    
    
    7,711
    
    
    
    (665
    )Decrease in deferred preneed funeral revenue
    
    
    (5,767
    )
    
    
    (5,260
    )Increase (decrease) in funeral non-controlling interest
    
    
    (5,395
    )
    
    
    3,247Net effect of preneed cemetery production and deliveries:Increase in preneed cemetery receivables and trust investments
    
    
    (52
    )
    
    
    (2,710
    )Decrease in deferred preneed cemetery revenue
    
    
    (4,652
    )
    
    
    (7,884
    )Increase in cemetery non-controlling interest
    
    
    3,712
    
    
    
    9,238Increase (decrease) in other
    
    
    (1,087
    )
    
    
    84Net cash provided by operating activities
    
    
    52,253
    
    
    
    54,799Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    20,219
    
    
    
    Purchases of marketable securities
    
    
    (19,955
    )
    
    
    (148
    )Proceeds from sale of assets, net
    
    
    358
    
    
    
    1,645Purchase of subsidiaries and other investments, net of cash acquired
    
    
    (1,378
    )
    
    
    (6,134
    )Insurance proceeds related to hurricane damaged properties
    
    
    
    
    
    
    1,400Additions to property and equipment
    
    
    (20,370
    )
    
    
    (23,120
    )Other
    
    
    75
    
    
    
    56Net cash used in investing activities
    
    
    (21,051
    )
    
    
    (26,301
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    
    
    
    
    250,000Repayments of long-term debt
    
    
    (190
    )
    
    
    (176,461
    )Debt issue costs
    
    
    
    
    
    
    (5,572
    )Proceeds from sale of common stock warrants
    
    
    
    
    
    
    43,850Issuance of common stock
    
    
    1,659
    
    
    
    2,521Purchase of call options
    
    
    
    
    
    
    (60,000
    )Purchase and retirement of common stock
    
    
    (48,627
    )
    
    
    (64,201
    )Dividends
    
    
    (7,067
    )
    
    
    (7,724
    )Excess tax benefits from share-based payment arrangements
    
    
    171
    
    
    
    108Net cash used in financing activities
    
    
    (54,054
    )
    
    
    (17,479
    )Net increase (decrease) in cash
    
    
    (22,852
    )
    
    
    11,019Cash and cash equivalents, beginning of period
    
    
    71,545
    
    
    
    43,870Cash and cash equivalents, end of period
    
    $
    48,693
    
    
    $
    54,889Supplemental cash flow information:Cash paid during the period for:Income taxes, net
    
    $
    11,767
    
    
    $
    9,044Interest
    
    $
    15,799
    
    
    $
    18,096Non-cash investing and financing activities:Issuance of common stock to executive officers and directors
    
    $
    923
    
    
    $
    1,028Issuance of restricted stock, net of forfeitures
    
    $
    260
    
    
    $
    4,186
  8




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##### 



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




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1)
    
    Basis of Presentation(Continued)
    Weighted AverageNumber of Shares
    
    Exercise Price perGrant Type
    
    Granted
    
    Share
    
    Vesting Period
    
    Vesting ConditionStock Options
    
    
    403,750
    
    
    $
    8.12
    
    
    Primarily equal
one-fourth portions
over 4 years
    
    Service conditionStock Options
    
    
    157,500
    
    
    $
    8.34
    
    
    Primarily equal
one-third portions
over 3 years
    
    Market conditionRestricted Stock
    
    
    55,000
    
    
    $
    8.31
    
    
    Primarily equal
one-third portions
over 3 years
    
    Performance condition
  (f)
    
    Reclassifications
  (2)
    
    New Accounting Principles
 Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty
in Income Taxes  an Interpretation of FASB Statement No. 109 (FIN 48)
  10




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2)
    
    New Accounting Principles(Continued)
   Other, not yet adopted
     11




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##### 



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




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3)     Preneed Funeral Activities(Continued)
  Preneed Funeral Receivables and Trust Investments
  July 31, 2008
    
    
    October 31, 2007Trust assets
    
    $
    404,603
    
    
    $
    477,335Receivables from customers
    
    
    45,975
    
    
    
    48,488450,578
    
    
    
    525,823Allowance for cancellations
    
    
    (10,757
    )
    
    
    (10,770
    )Preneed funeral receivables and trust investments
    
    $
    439,821
    
    
    $
    515,053
  July 31, 2008Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    32,672
    
    
    $
    
    
    
    $
    
    
    
    $
    32,672U.S. Government, agencies and
municipalities
    
    
    12,584
    
    
    
    268
    
    
    
    (1
    )
    
    
    12,851Corporate bonds
    
    
    57,636
    
    
    
    454
    
    
    
    (4,470
    )
    
    
    53,620Preferred stocks
    
    
    72,954
    
    
    
    100
    
    
    
    (13,017
    )
    
    
    60,037Common stocks
    
    
    198,901
    
    
    
    17,391
    
    
    
    (23,995
    )
    
    
    192,297Mutual funds
    
    
    34,464
    
    
    
    336
    
    
    
    (2,651
    )
    
    
    32,149Insurance contracts and other long-
term investments
    
    
    19,629
    
    
    
    104
    
    
    
    
    
    
    
    19,733Trust investments
    
    $
    428,840
    
    
    $
    18,653
    
    
    $
    (44,134
    )
    
    
    403,359Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94.1
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,244Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    404,603
 13




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3)     Preneed Funeral Activities(Continued)
  July 31, 2008Due in one year or less
    
    $
    5,146Due in one to five years
    
    
    32,810Due in five to ten years
    
    
    28,459Thereafter
    
    
    56$
    66,471
  Three Months Ended July 31,
    
    Nine Months Ended July 31,2008
    
    2007
    
    2008
    
    2007Purchases
    
    $
    10,153
    
    
    $
    14,337
    
    
    $
    19,009
    
    
    $
    96,423Sales
    
    
    7,743
    
    
    
    15,128
    
    
    
    20,517
    
    
    
    92,546Realized gains on sales
    
    
    1,087
    
    
    
    1,020
    
    
    
    2,825
    
    
    
    6,782Realized losses on sales
    
    
    (309
    )
    
    
    (57
    )
    
    
    (620
    )
    
    
    (977
    )Impairment losses on
other than temporarily
impaired trust assets
    
    
    (10,614
    )
    
    
    
    
    
    
    (21,876
    )
    
    
    (371
    )Deposits
    
    
    8,129
    
    
    
    8,250
    
    
    
    24,111
    
    
    
    24,364Withdrawals
    
    
    11,362
    
    
    
    11,137
    
    
    
    35,499
    
    
    
    33,943
  (4)     Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  July 31, 2008
    
    
    October 31, 2007Trust assets
    
    $
    186,846
    
    
    $
    215,541Receivables from customers
    
    
    41,333
    
    
    
    46,906228,179
    
    
    
    262,447Allowance for cancellations
    
    
    (4,886
    )
    
    
    (6,768
    )Preneed cemetery receivables and trust investments
    
    $
    223,293
    
    
    $
    255,679
  14




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4)     Preneed Cemetery Merchandise and Service Activities(Continued)
 July 31, 2008Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    15,496
    
    
    $
    
    
    
    $
    
    
    
    $
    15,496U.S. Government, agencies and
municipalities
    
    
    13,908
    
    
    
    550
    
    
    
    (3
    )
    
    
    14,455Corporate bonds
    
    
    12,187
    
    
    
    158
    
    
    
    (868
    )
    
    
    11,477Preferred stocks
    
    
    26,054
    
    
    
    20
    
    
    
    (4,878
    )
    
    
    21,196Common stocks
    
    
    103,321
    
    
    
    7,806
    
    
    
    (12,968
    )
    
    
    98,159Mutual funds
    
    
    30,002
    
    
    
    117
    
    
    
    (4,853
    )
    
    
    25,266Insurance contracts and other long-term investments
    
    
    298
    
    
    
    
    
    
    
    
    
    
    
    298Trust investments
    
    $
    201,266
    
    
    $
    8,651
    
    
    $
    (23,570
    )
    
    
    186,347Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92.6
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    499Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    186,846
  July 31, 2008Due in one year or less
    
    $
    3,700Due in one to five years
    
    
    14,334Due in five to ten years
    
    
    7,692Thereafter
    
    
    206$
    25,932
  Three Months Ended July 31,
    
    Nine Months Ended July 31,2008
    
    2007
    
    2008
    
    2007Purchases
    
    $
    7,302
    
    
    $
    38,419
    
    
    $
    13,933
    
    
    $
    182,756Sales
    
    
    3,356
    
    
    
    36,162
    
    
    
    10,014
    
    
    
    174,969Realized gains on sales
    
    
    577
    
    
    
    2,634
    
    
    
    1,650
    
    
    
    9,372Realized losses on sales
    
    
    (89
    )
    
    
    (20
    )
    
    
    (285
    )
    
    
    (193
    )Impairment losses on
other than temporarily
impaired trust assets
    
    
    (3,259
    )
    
    
    (4
    )
    
    
    (9,178
    )
    
    
    (549
    )Deposits
    
    
    4,815
    
    
    
    4,622
    
    
    
    13,432
    
    
    
    13,551Withdrawals
    
    
    4,327
    
    
    
    4,926
    
    
    
    14,897
    
    
    
    14,329
  (5)     Cemetery Interment Rights and Perpetual Care Trusts
  15




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5)     Cemetery Interment Rights and Perpetual Care Trusts(Continued)
   July 31, 2008Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    12,174
    
    
    $
    
    
    
    $
    
    
    
    $
    12,174U.S. Government, agencies and
municipalities
    
    
    8,934
    
    
    
    300
    
    
    
    (61
    )
    
    
    9,173Corporate bonds
    
    
    45,078
    
    
    
    830
    
    
    
    (2,076
    )
    
    
    43,832Preferred stocks
    
    
    68,749
    
    
    
    13
    
    
    
    (14,451
    )
    
    
    54,311Common stocks
    
    
    77,315
    
    
    
    9,258
    
    
    
    (9,413
    )
    
    
    77,160Mutual funds
    
    
    9,581
    
    
    
    162
    
    
    
    (609
    )
    
    
    9,134Insurance contracts and other
long-term investments
    
    
    708
    
    
    
    80
    
    
    
    
    
    
    
    788Trust investments
    
    $
    222,539
    
    
    $
    10,643
    
    
    $
    (26,610
    )
    
    
    206,572Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92.8
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    853Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    207,425
  July 31, 2008Due in one year or less
    
    $
    535Due in one to five years
    
    
    31,483Due in five to ten years
    
    
    20,383Thereafter
    
    
    604$
    53,005
  Three Months Ended July 31,
    
    Nine Months Ended July 31,2008
    
    2007
    
    2008
    
    2007Purchases
    
    $
    16,376
    
    
    $
    23,564
    
    
    $
    46,640
    
    
    $
    56,330Sales
    
    
    17,841
    
    
    
    14,331
    
    
    
    42,899
    
    
    
    47,104Realized gains on sales
    
    
    1,287
    
    
    
    1,749
    
    
    
    4,334
    
    
    
    4,136Realized losses on sales
    
    
    
    
    
    
    (35
    )
    
    
    (7
    )
    
    
    (325
    )Impairment losses on
other than temporarily
impaired trust assets
    
    
    (5,032
    )
    
    
    
    
    
    
    (8,577
    )
    
    
    (770
    )Deposits
    
    
    2,186
    
    
    
    2,153
    
    
    
    6,147
    
    
    
    6,066Withdrawals
    
    
    2,350
    
    
    
    2,357
    
    
    
    7,351
    
    
    
    7,778
  16




---



##### 



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)     Non-Controlling Interest in Funeral and Cemetery Trusts and in Perpetual Care Trusts
  Non-controllingNon-controlling Interest
    
    
    Interest inPreneed
    
    
    Preneed
    
    
    
    
    
    
    PerpetualFuneral
    
    
    Cemetery
    
    
    Total
    
    
    Care TrustsTrust assets at market value
    
    $
    404,603
    
    
    $
    186,846
    
    
    $
    591,449
    
    
    $
    207,425Less:Pending withdrawals
    
    
    (9,090
    )
    
    
    (4,214
    )
    
    
    (13,304
    )
    
    
    (2,570
    )Pending deposits
    
    
    2,238
    
    
    
    1,303
    
    
    
    3,541
    
    
    
    781Non-controlling interest
    
    $
    397,751
    
    
    $
    183,935
    
    
    $
    581,686
    
    
    $
    205,636
 Investment and other income, net
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Non-controlling interest:Realized gains
    
    $
    2,951
    
    
    $
    5,403
    
    
    $
    8,809
    
    
    $
    20,290Realized losses
    
    
    (398
    )
    
    
    (112
    )
    
    
    (912
    )
    
    
    (1,495
    )Impairment losses on other than
temporarily impaired trust assets
    
    
    (18,905
    )
    
    
    (4
    )
    
    
    (39,631
    )
    
    
    (1,690
    )Interest income, dividend and other
ordinary income
    
    
    7,876
    
    
    
    7,644
    
    
    
    23,257
    
    
    
    20,878Trust expenses and income taxes
    
    
    (2,639
    )
    
    
    (3,135
    )
    
    
    (8,380
    )
    
    
    (8,571
    )Net trust investment income
    
    
    (11,115
    )
    
    
    9,796
    
    
    
    (16,857
    )
    
    
    29,412Non-controlling interest in funeral and
cemetery trust investment income
    
    
    9,182
    
    
    
    (6,690
    )
    
    
    18,140
    
    
    
    (21,755
    )Non-controlling interest in perpetual
care trust investment income
    
    
    1,933
    
    
    
    (3,106
    )
    
    
    (1,283
    )
    
    
    (7,657
    )Total non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    593
    
    
    
    810
    
    
    
    1,670
    
    
    
    2,427Total investment and other income, net
    
    $
    593
    
    
    $
    810
    
    
    $
    1,670
    
    
    $
    2,427
 
 (1)
    
    Investment and other income, net consists of interest income primarily on the
Companys cash, cash equivalents and marketable securities not held in trust. 17




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7)     Commitments and Contingencies
 Litigation
 Henrietta Torres and Teresa Fiore, on behalf of themselves and all others similarly situated
and the General Public v. Stewart Enterprises, Inc., et al
     Funeral Consumers Alliance, Inc., et al. v. Service Corporation International, Alderwoods
Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville Casket Co.
  18




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7)     Commitments and Contingencies(Continued)
    Pioneer Valley Casket Co., Inc., et al. v. Service Corporation International, Alderwoods
Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville Casket Co.,
    In Re: State Attorney General Civil Investigative Demands
 19




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7)     Commitments and Contingencies(Continued)
  Other Litigation
  Securities and Exchange Commission Investigation
  Employee Retention Plan
  Other
  20




---



##### 



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
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended July 31, 2008Earnings from continuing operations
    
    $
    9,129Basic earnings per common share:Earnings from continuing
operations available to common
shareholders
    
    $
    9,129
    
    
    
    92,203
    
    
    $
    .10Effect of dilutive securities:Time-vest stock options
assumed exercised and
restricted stock
    
    
    
    
    
    
    211Diluted earnings per common share:Earnings from continuing
operations available to common
shareholders plus time-vest
stock options assumed
exercised and restricted stock
    
    $
    9,129
    
    
    
    92,414
    
    
    $
    .10
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended July 31, 2007Earnings from continuing operations
    
    $
    8,210Basic earnings per common share:Earnings from continuing
operations available to common
shareholders
    
    $
    8,210
    
    
    
    102,479
    
    
    $
    .08Effect of dilutive securities:Time-vest stock options
assumed exercised and
restricted stock
    
    
    
    
    
    
    235Diluted earnings per common share:Earnings from continuing
operations available to common
shareholders plus time-vest
stock options assumed
exercised and restricted stock
    
    $
    8,210
    
    
    
    102,714
    
    
    $
    .08
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataNine Months Ended July 31, 2008Earnings from continuing operations
    
    $
    31,954Basic earnings per common share:Earnings from continuing
operations available to common
shareholders
    
    $
    31,954
    
    
    
    94,504
    
    
    $
    .34Effect of dilutive securities:Time-vest stock options
assumed exercised and
restricted stock
    
    
    
    
    
    
    172Diluted earnings per common share:Earnings from continuing
operations available to common
shareholders plus time-vest
stock options assumed
exercised and restricted stock
    
    $
    31,954
    
    
    
    94,676
    
    
    $
    .34
 21




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8)     Reconciliation of Basic and Diluted Per Share Data(Continued)
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataNine Months Ended July 31, 2007Earnings from continuing operations
    
    $
    33,999Basic earnings per common share:Earnings from continuing
operations available to common
shareholders
    
    $
    33,999
    
    
    
    104,215
    
    
    $
    .32Effect of dilutive securities:Time-vest stock options
assumed exercised and
restricted stock
    
    
    
    
    
    
    169Diluted earnings per common share:Earnings from continuing
operations available to common
shareholders plus time-vest
stock options assumed
exercised and restricted stock
    
    $
    33,999
    
    
    
    104,384
    
    
    $
    .32
      (9)     Segment Data
  22




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9)     Segment Data(Continued)
  Funeral Revenue
    
    
    Cemetery Revenue (1)
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2008
    
    
    July 31, 2007
    
    
    July 31, 2008
    
    
    July 31, 2007
    
    
    July 31, 2008
    
    
    July 31, 2007Eastern Division
    
    $
    28,105
    
    
    $
    27,671
    
    
    $
    32,839
    
    
    $
    34,344
    
    
    $
    60,944
    
    
    $
    62,015Western Division
    
    
    35,843
    
    
    
    34,666
    
    
    
    26,738
    
    
    
    23,855
    
    
    
    62,581
    
    
    
    58,521Corporate Trust
Management
(2)
    
    
    4,610
    
    
    
    4,577
    
    
    
    2,293
    
    
    
    2,466
    
    
    
    6,903
    
    
    
    7,043Total
    
    $
    68,558
    
    
    $
    66,914
    
    
    $
    61,870
    
    
    $
    60,665
    
    
    $
    130,428
    
    
    $
    127,579
 Funeral Revenue
    
    
    Cemetery Revenue (1)
    
    
    Total RevenueNine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2008
    
    
    July 31, 2007
    
    
    July 31, 2008
    
    
    July 31, 2007
    
    
    July 31, 2008
    
    
    July 31, 2007Eastern Division
    
    $
    89,987
    
    
    $
    89,059
    
    
    $
    98,001
    
    
    $
    108,519
    
    
    $
    187,988
    
    
    $
    197,578Western Division
    
    
    114,760
    
    
    
    109,446
    
    
    
    73,665
    
    
    
    68,382
    
    
    
    188,425
    
    
    
    177,828Corporate Trust
Management
(2)
    
    
    14,115
    
    
    
    13,905
    
    
    
    6,992
    
    
    
    7,142
    
    
    
    21,107
    
    
    
    21,047Total
    
    $
    218,862
    
    
    $
    212,410
    
    
    $
    178,658
    
    
    $
    184,043
    
    
    $
    397,520
    
    
    $
    396,453
 Funeral Gross Profit
    
    
    Cemetery Gross Profit (1)
    
    
    Total Gross ProfitThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2008
    
    
    July 31, 2007
    
    
    July 31, 2008
    
    
    July 31, 2007
    
    
    July 31, 2008
    
    
    July 31, 2007Eastern Division
    
    $
    3,914
    
    
    $
    3,059
    
    
    $
    4,434
    
    
    $
    4,735
    
    
    $
    8,348
    
    
    $
    7,794Western Division
    
    
    6,718
    
    
    
    6,915
    
    
    
    6,468
    
    
    
    5,115
    
    
    
    13,186
    
    
    
    12,030Corporate Trust
Management
(2)
    
    
    4,402
    
    
    
    4,351
    
    
    
    2,062
    
    
    
    2,334
    
    
    
    6,464
    
    
    
    6,685Total
    
    $
    15,034
    
    
    $
    14,325
    
    
    $
    12,964
    
    
    $
    12,184
    
    
    $
    27,998
    
    
    $
    26,509
 Funeral Gross Profit
    
    
    Cemetery Gross Profit (1)
    
    
    Total Gross ProfitNine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2008
    
    
    July 31, 2007
    
    
    July 31, 2008
    
    
    July 31, 2007
    
    
    July 31, 2008
    
    
    July 31, 2007Eastern Division
    
    $
    16,211
    
    
    $
    15,378
    
    
    $
    12,059
    
    
    $
    17,581
    
    
    $
    28,270
    
    
    $
    32,959Western Division
    
    
    25,924
    
    
    
    23,263
    
    
    
    16,796
    
    
    
    13,984
    
    
    
    42,720
    
    
    
    37,247Corporate Trust
Management
(2)
    
    
    13,467
    
    
    
    13,354
    
    
    
    6,245
    
    
    
    6,721
    
    
    
    19,712
    
    
    
    20,075Total
    
    $
    55,602
    
    
    $
    51,995
    
    
    $
    35,100
    
    
    $
    38,286
    
    
    $
    90,702
    
    
    $
    90,281
 Net Preneed Funeral
    
    
    Net Preneed Cemetery
    
    
    Net Total PreneedMerchandise and
    
    
    Merchandise and
    
    
    Merchandise andService Sales (3)
    
    
    Service Sales (3)
    
    
    Service Sales (3)Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2008
    
    
    July 31, 2007
    
    
    July 31, 2008
    
    
    July 31, 2007
    
    
    July 31, 2008
    
    
    July 31, 2007Eastern Division
    
    $
    11,288
    
    
    $
    11,219
    
    
    $
    9,679
    
    
    $
    9,852
    
    
    $
    20,967
    
    
    $
    21,071Western Division
    
    
    14,716
    
    
    
    13,417
    
    
    
    4,565
    
    
    
    4,565
    
    
    
    19,281
    
    
    
    17,982Total
    
    $
    26,004
    
    
    $
    24,636
    
    
    $
    14,244
    
    
    $
    14,417
    
    
    $
    40,248
    
    
    $
    39,053
 23




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9)     Segment Data(Continued)
 Net Preneed Funeral
    
    
    Net Preneed Cemetery
    
    
    Net Total PreneedMerchandise
    
    
    Merchandise and
    
    
    Merchandise andand Service Sales (3)
    
    
    Service Sales (3)
    
    
    Service Sales (3)Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2008
    
    
    July 31, 2007
    
    
    July 31, 2008
    
    
    July 31, 2007
    
    
    July 31, 2008
    
    
    July 31, 2007Eastern Division
    
    $
    31,501
    
    
    $
    33,652
    
    
    $
    27,867
    
    
    $
    29,174
    
    
    $
    59,368
    
    
    $
    62,826Western Division
    
    
    41,462
    
    
    
    42,006
    
    
    
    12,700
    
    
    
    12,546
    
    
    
    54,162
    
    
    
    54,552Total
    
    $
    72,963
    
    
    $
    75,658
    
    
    $
    40,567
    
    
    $
    41,720
    
    
    $
    113,530
    
    
    $
    117,378
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of the
related geographic segment and amounted to $2,635 and $2,498 for the three months ended July
31, 2008 and 2007, respectively, and $8,040 and $7,323 for the nine months ended July 31, 2008
and 2007, respectively.(2)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and service trust earnings recognized with respect to preneed contracts
delivered during the period. Trust management fees are established by the Company at rates
consistent with industry norms and are paid by the trusts to the Companys subsidiary,
Investors Trust, Inc. The trust earnings represent earnings realized over the life of the
preneed contracts delivered during the relevant periods. Trust management fees included in
funeral revenue for the three months ended July 31, 2008 and 2007 were $1,264 and $1,472,
respectively, and funeral trust earnings for the three months ended July 31, 2008 and 2007
were $3,346 and $3,105, respectively. Trust management fees included in cemetery revenue for
the three months ended July 31, 2008 and 2007 were $1,255 and $1,345, respectively, and
cemetery trust earnings for the three months ended July 31, 2008 and 2007 were $1,038 and
$1,121, respectively. Trust management fees included in funeral revenue for the nine months
ended July 31, 2008 and 2007 were $3,957 and $4,400, respectively, and funeral trust earnings
for the nine months ended July 31, 2008 and 2007 were $10,158 and $9,505, respectively. Trust
management fees included in cemetery revenue for the nine months ended July 31, 2008 and 2007
were $3,844 and $3,983, respectively, and cemetery trust earnings for the nine months ended
July 31, 2008 and 2007 were $3,148 and $3,159, respectively.(3)
    
    Preneed sales amounts represent total preneed funeral and cemetery service and
merchandise sales generated in the applicable period, net of cancellations. These sales are
deferred and are recorded as revenue in the period the services are performed or the
merchandise is delivered.  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Gross profit for reportable segments
    
    $
    27,998
    
    
    $
    26,509
    
    
    $
    90,702
    
    
    $
    90,281Corporate general and administrative expenses
    
    
    (8,188
    )
    
    
    (8,343
    )
    
    
    (24,226
    )
    
    
    (23,129
    )Hurricane related charges, net
    
    
    (341
    )
    
    
    (210
    )
    
    
    (351
    )
    
    
    (2,343
    )Separation charges
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    (580
    )Gains on dispositions and impairment (losses), net
    
    
    25
    
    
    
    (46
    )
    
    
    153
    
    
    
    44Other operating income, net
    
    
    407
    
    
    
    290
    
    
    
    753
    
    
    
    1,441Interest expense
    
    
    (6,000
    )
    
    
    (6,222
    )
    
    
    (17,981
    )
    
    
    (19,274
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (677
    )
    
    
    
    
    
    
    (677
    )Investment and other income, net
    
    
    593
    
    
    
    810
    
    
    
    1,670
    
    
    
    2,427Earnings from continuing operations before
income taxes
    
    $
    14,494
    
    
    $
    12,063
    
    
    $
    50,720
    
    
    $
    48,190
 24




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (10)     Supplementary Information
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Service revenueFuneral
    
    $
    42,795
    
    
    $
    40,341
    
    
    $
    136,202
    
    
    $
    128,709Cemetery
    
    
    15,726
    
    
    
    15,058
    
    
    
    48,592
    
    
    
    47,32858,521
    
    
    
    55,399
    
    
    
    184,794
    
    
    
    176,037Merchandise revenueFuneral
    
    
    23,872
    
    
    
    24,452
    
    
    
    76,800
    
    
    
    77,394Cemetery
    
    
    42,227
    
    
    
    41,087
    
    
    
    118,299
    
    
    
    124,01866,099
    
    
    
    65,539
    
    
    
    195,099
    
    
    
    201,412Other revenueFuneral
    
    
    1,891
    
    
    
    2,121
    
    
    
    5,860
    
    
    
    6,307Cemetery
    
    
    3,917
    
    
    
    4,520
    
    
    
    11,767
    
    
    
    12,6975,808
    
    
    
    6,641
    
    
    
    17,627
    
    
    
    19,004Total revenue
    
    $
    130,428
    
    
    $
    127,579
    
    
    $
    397,520
    
    
    $
    396,453Service costsFuneral
    
    $
    15,403
    
    
    $
    15,235
    
    
    $
    45,979
    
    
    $
    44,253Cemetery
    
    
    11,515
    
    
    
    11,218
    
    
    
    32,043
    
    
    
    32,25026,918
    
    
    
    26,453
    
    
    
    78,022
    
    
    
    76,503Merchandise costsFuneral
    
    
    15,116
    
    
    
    15,381
    
    
    
    47,094
    
    
    
    47,626Cemetery
    
    
    23,615
    
    
    
    24,123
    
    
    
    69,818
    
    
    
    73,16738,731
    
    
    
    39,504
    
    
    
    116,912
    
    
    
    120,793General and administrative expensesFuneral
    
    
    23,005
    
    
    
    21,973
    
    
    
    70,187
    
    
    
    68,536Cemetery
    
    
    13,776
    
    
    
    13,140
    
    
    
    41,697
    
    
    
    40,34036,781
    
    
    
    35,113
    
    
    
    111,884
    
    
    
    108,876Total costs
    
    $
    102,430
    
    
    $
    101,070
    
    
    $
    306,818
    
    
    $
    306,172
  25




---



##### 



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
   26




---



##### 



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




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended July 31, 2007Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    61,689
    
    
    $
    379
    
    
    $
    4,846
    
    
    $
    
    
    
    $
    66,914Cemetery
    
    
    
    
    
    
    54,757
    
    
    
    794
    
    
    
    5,114
    
    
    
    
    
    
    
    60,665
    
    
    
    116,446
    
    
    
    1,173
    
    
    
    9,960
    
    
    
    
    
    
    
    127,579Costs and expenses:Funeral
    
    
    
    
    
    
    49,259
    
    
    
    276
    
    
    
    3,054
    
    
    
    
    
    
    
    52,589Cemetery
    
    
    
    
    
    
    43,819
    
    
    
    636
    
    
    
    4,026
    
    
    
    
    
    
    
    48,481
    
    
    
    93,078
    
    
    
    912
    
    
    
    7,080
    
    
    
    
    
    
    
    101,070Gross profit
    
    
    
    
    
    
    23,368
    
    
    
    261
    
    
    
    2,880
    
    
    
    
    
    
    
    26,509Corporate general and administrative
expenses
    
    
    (8,343
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,343
    )Hurricane related charges, net
    
    
    
    
    
    
    (210
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (210
    )Separation charges
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    (46
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46
    )Other operating income, net
    
    
    19
    
    
    
    215
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    290Operating earnings (loss)
    
    
    (8,324
    )
    
    
    23,279
    
    
    
    261
    
    
    
    2,936
    
    
    
    
    
    
    
    18,152Interest expense
    
    
    (2,158
    )
    
    
    (3,242
    )
    
    
    (37
    )
    
    
    (785
    )
    
    
    
    
    
    
    (6,222
    )Loss on early extinguishment of debt
    
    
    (677
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (677
    )Investment and other income, net
    
    
    792
    
    
    
    13
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    810Equity in subsidiaries
    
    
    19,346
    
    
    
    510
    
    
    
    
    
    
    
    
    
    
    
    (19,856
    )
    
    
    Earnings from continuing operations
before income taxes
    
    
    8,979
    
    
    
    20,560
    
    
    
    224
    
    
    
    2,156
    
    
    
    (19,856
    )
    
    
    12,063Income tax expense (benefit)
    
    
    856
    
    
    
    3,406
    
    
    
    85
    
    
    
    (494
    )
    
    
    
    
    
    
    3,853Earnings from continuing operations
    
    
    8,123
    
    
    
    17,154
    
    
    
    139
    
    
    
    2,650
    
    
    
    (19,856
    )
    
    
    8,210Discontinued operations:Loss from discontinued operations
before income taxes
    
    
    
    
    
    
    (138
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (138
    )Income tax benefit
    
    
    
    
    
    
    (51
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )Loss from discontinued operations
    
    
    
    
    
    
    (87
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (87
    )Net earnings
    
    
    8,123
    
    
    
    17,067
    
    
    
    139
    
    
    
    2,650
    
    
    
    (19,856
    )
    
    
    8,123Other comprehensive income (loss), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income
    
    $
    8,123
    
    
    $
    17,067
    
    
    $
    139
    
    
    $
    2,650
    
    
    $
    (19,856
    )
    
    $
    8,123
 28




---



##### 



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




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Nine Months Ended July 31, 2007Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    196,247
    
    
    $
    1,154
    
    
    $
    15,009
    
    
    $
    
    
    
    
    212,410Cemetery
    
    
    
    
    
    
    165,634
    
    
    
    2,313
    
    
    
    16,096
    
    
    
    
    
    
    
    184,043
    
    
    
    361,881
    
    
    
    3,467
    
    
    
    31,105
    
    
    
    
    
    
    
    396,453Costs and expenses:Funeral
    
    
    
    
    
    
    150,321
    
    
    
    782
    
    
    
    9,312
    
    
    
    
    
    
    
    160,415Cemetery
    
    
    
    
    
    
    131,879
    
    
    
    1,869
    
    
    
    12,009
    
    
    
    
    
    
    
    145,757
    
    
    
    282,200
    
    
    
    2,651
    
    
    
    21,321
    
    
    
    
    
    
    
    306,172Gross profit
    
    
    
    
    
    
    79,681
    
    
    
    816
    
    
    
    9,784
    
    
    
    
    
    
    
    90,281Corporate general and
administrative expenses
    
    
    (23,129
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,129
    )Hurricane related charges, net
    
    
    (3
    )
    
    
    (1,045
    )
    
    
    (1,295
    )
    
    
    
    
    
    
    
    
    
    
    (2,343
    )Separation charges
    
    
    (384
    )
    
    
    (196
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (580
    )Gains on dispositions and
impairment (losses), net
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44Other operating income, net
    
    
    296
    
    
    
    950
    
    
    
    1
    
    
    
    194
    
    
    
    
    
    
    
    1,441Operating earnings (loss)
    
    
    (23,220
    )
    
    
    79,434
    
    
    
    (478
    )
    
    
    9,978
    
    
    
    
    
    
    
    65,714Interest expense
    
    
    (5,739
    )
    
    
    (11,511
    )
    
    
    (153
    )
    
    
    (1,871
    )
    
    
    
    
    
    
    (19,274
    )Loss on early extinguishment of debt
    
    
    (677
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (677
    )Investment and other income, net
    
    
    2,378
    
    
    
    39
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    2,427Equity in subsidiaries
    
    
    59,762
    
    
    
    758
    
    
    
    
    
    
    
    
    
    
    
    (60,520
    )
    
    
    Earnings (loss) from continuing
operations before income taxes
    
    
    32,504
    
    
    
    68,720
    
    
    
    (631
    )
    
    
    8,117
    
    
    
    (60,520
    )
    
    
    48,190Income tax expense (benefit)
    
    
    (1,174
    )
    
    
    14,126
    
    
    
    (234
    )
    
    
    1,473
    
    
    
    
    
    
    
    14,191Earnings (loss) from continuing
operations
    
    
    33,678
    
    
    
    54,594
    
    
    
    (397
    )
    
    
    6,644
    
    
    
    (60,520
    )
    
    
    33,999Discontinued operations:Loss from discontinued
operations before income taxes
    
    
    
    
    
    
    (519
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (519
    )Income tax benefit
    
    
    
    
    
    
    (198
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (198
    )Loss from discontinued operations
    
    
    
    
    
    
    (321
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (321
    )Net earnings (loss)
    
    
    33,678
    
    
    
    54,273
    
    
    
    (397
    )
    
    
    6,644
    
    
    
    (60,520
    )
    
    
    33,678Other comprehensive income, net
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (3
    )
    
    
    3Comprehensive income (loss)
    
    $
    33,681
    
    
    $
    54,273
    
    
    $
    (397
    )
    
    $
    6,647
    
    
    $
    (60,523
    )
    
    $
    33,681
 30




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 July 31, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    38,871
    
    
    $
    7,889
    
    
    $
    33
    
    
    $
    1,900
    
    
    $
    
    
    
    $
    48,693Marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    38Receivables, net of allowances
    
    
    20,552
    
    
    
    52,704
    
    
    
    484
    
    
    
    4,508
    
    
    
    
    
    
    
    78,248Inventories
    
    
    334
    
    
    
    32,768
    
    
    
    316
    
    
    
    2,482
    
    
    
    
    
    
    
    35,900Prepaid expenses
    
    
    1,602
    
    
    
    5,834
    
    
    
    64
    
    
    
    1,427
    
    
    
    
    
    
    
    8,927Deferred income taxes, net
    
    
    1,253
    
    
    
    5,969
    
    
    
    56
    
    
    
    1,201
    
    
    
    
    
    
    
    8,479Total current assets
    
    
    62,612
    
    
    
    105,164
    
    
    
    953
    
    
    
    11,556
    
    
    
    
    
    
    
    180,285Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    53,429
    
    
    
    376
    
    
    
    15,997
    
    
    
    
    
    
    
    69,802Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    429,604
    
    
    
    
    
    
    
    10,217
    
    
    
    
    
    
    
    439,821Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    213,545
    
    
    
    1,134
    
    
    
    8,614
    
    
    
    
    
    
    
    223,293Goodwill
    
    
    
    
    
    
    253,353
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    273,188Cemetery property, at cost
    
    
    
    
    
    
    340,144
    
    
    
    11,540
    
    
    
    25,453
    
    
    
    
    
    
    
    377,137Property and equipment, at cost
    
    
    47,965
    
    
    
    449,078
    
    
    
    1,829
    
    
    
    37,849
    
    
    
    
    
    
    
    536,721Less accumulated depreciation
    
    
    29,414
    
    
    
    186,602
    
    
    
    780
    
    
    
    13,784
    
    
    
    
    
    
    
    230,580Net property and equipment
    
    
    18,551
    
    
    
    262,476
    
    
    
    1,049
    
    
    
    24,065
    
    
    
    
    
    
    
    306,141Deferred income taxes, net
    
    
    32,913
    
    
    
    144,865
    
    
    
    
    
    
    
    6,592
    
    
    
    (3,310
    )
    
    
    181,060Cemetery perpetual care trust investments
    
    
    
    
    
    
    195,457
    
    
    
    8,355
    
    
    
    3,613
    
    
    
    
    
    
    
    207,425Other assets
    
    
    9,836
    
    
    
    6,375
    
    
    
    16
    
    
    
    1,075
    
    
    
    
    
    
    
    17,302Intercompany receivables
    
    
    839,387
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (839,387
    )
    
    
    Equity in subsidiaries
    
    
    26,156
    
    
    
    7,244
    
    
    
    
    
    
    
    
    
    
    
    (33,400
    )
    
    
    Total assets
    
    $
    989,455
    
    
    $
    2,011,656
    
    
    $
    23,471
    
    
    $
    126,969
    
    
    $
    (876,097
    )
    
    $
    2,275,454LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    27
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    27Accounts payable
    
    
    2,011
    
    
    
    19,674
    
    
    
    105
    
    
    
    1,496
    
    
    
    
    
    
    
    23,286Accrued expenses and other current
liabilities
    
    
    15,649
    
    
    
    43,018
    
    
    
    9
    
    
    
    2,820
    
    
    
    
    
    
    
    61,496Total current liabilities
    
    
    17,687
    
    
    
    62,692
    
    
    
    114
    
    
    
    4,316
    
    
    
    
    
    
    
    84,809Long-term debt, less current maturities
    
    
    450,097
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,097Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    3,310
    
    
    
    
    
    
    
    (3,310
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    822,442
    
    
    
    3,994
    
    
    
    12,951
    
    
    
    (839,387
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    204,797
    
    
    
    
    
    
    
    45,685
    
    
    
    
    
    
    
    250,482Deferred preneed cemetery revenue
    
    
    
    
    
    
    251,924
    
    
    
    322
    
    
    
    27,609
    
    
    
    
    
    
    
    279,855Non-controlling interest in funeral and
cemetery trusts
    
    
    
    
    
    
    575,057
    
    
    
    1,035
    
    
    
    5,594
    
    
    
    
    
    
    
    581,686Other long-term liabilities
    
    
    16,491
    
    
    
    3,134
    
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    19,749Negative equity in subsidiaries
    
    
    102,040
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (102,040
    )
    
    
    Total liabilities
    
    
    586,315
    
    
    
    1,920,046
    
    
    
    8,775
    
    
    
    96,279
    
    
    
    (944,737
    )
    
    
    1,666,678Non-controlling interest in perpetual
care trusts
    
    
    
    
    
    
    193,650
    
    
    
    8,372
    
    
    
    3,614
    
    
    
    
    
    
    
    205,636Common stock
    
    
    92,237
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    92,237Other
    
    
    310,875
    
    
    
    (102,142
    )
    
    
    6,000
    
    
    
    26,996
    
    
    
    69,146
    
    
    
    310,875Accumulated other comprehensive income
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    (28
    )
    
    
    28Total shareholders equity
    
    
    403,140
    
    
    
    (102,040
    )
    
    
    6,324
    
    
    
    27,076
    
    
    
    68,640
    
    
    
    403,140Total liabilities and shareholders equity
    
    $
    989,455
    
    
    $
    2,011,656
    
    
    $
    23,471
    
    
    $
    126,969
    
    
    $
    (876,097
    )
    
    $
    2,275,454
 31




---



##### 



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, 2007Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    63,202
    
    
    $
    6,685
    
    
    $
    36
    
    
    $
    1,622
    
    
    $
    
    
    
    $
    71,545Marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    262
    
    
    
    
    
    
    
    262Receivables, net of allowances
    
    
    4,054
    
    
    
    51,619
    
    
    
    103
    
    
    
    4,839
    
    
    
    
    
    
    
    60,615Inventories
    
    
    368
    
    
    
    32,765
    
    
    
    328
    
    
    
    2,600
    
    
    
    
    
    
    
    36,061Prepaid expenses
    
    
    950
    
    
    
    4,306
    
    
    
    3
    
    
    
    1,096
    
    
    
    
    
    
    
    6,355Deferred income taxes, net
    
    
    1,334
    
    
    
    5,785
    
    
    
    78
    
    
    
    1,424
    
    
    
    
    
    
    
    8,621Total current assets
    
    
    69,908
    
    
    
    101,160
    
    
    
    548
    
    
    
    11,843
    
    
    
    
    
    
    
    183,459Receivables due beyond one year, net of allowances
    
    
    10,358
    
    
    
    53,926
    
    
    
    928
    
    
    
    18,396
    
    
    
    
    
    
    
    83,608Preneed funeral receivables and trust investments
    
    
    
    
    
    
    504,534
    
    
    
    
    
    
    
    10,519
    
    
    
    
    
    
    
    515,053Preneed cemetery receivables and trust investments
    
    
    
    
    
    
    245,056
    
    
    
    1,199
    
    
    
    9,424
    
    
    
    
    
    
    
    255,679Goodwill
    
    
    
    
    
    
    253,451
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    273,286Cemetery property, at cost
    
    
    
    
    
    
    338,274
    
    
    
    11,408
    
    
    
    25,118
    
    
    
    
    
    
    
    374,800Property and equipment, at cost
    
    
    43,395
    
    
    
    436,588
    
    
    
    1,699
    
    
    
    37,299
    
    
    
    
    
    
    
    518,981Less accumulated depreciation
    
    
    26,701
    
    
    
    172,924
    
    
    
    663
    
    
    
    12,775
    
    
    
    
    
    
    
    213,063Net property and equipment
    
    
    16,694
    
    
    
    263,664
    
    
    
    1,036
    
    
    
    24,524
    
    
    
    
    
    
    
    305,918Deferred income taxes, net
    
    
    29,238
    
    
    
    156,254
    
    
    
    
    
    
    
    9,913
    
    
    
    (2,546
    )
    
    
    192,859Cemetery perpetual care trust investments
    
    
    
    
    
    
    224,182
    
    
    
    8,322
    
    
    
    3,999
    
    
    
    
    
    
    
    236,503Other assets
    
    
    9,664
    
    
    
    7,039
    
    
    
    16
    
    
    
    1,090
    
    
    
    
    
    
    
    17,809Intercompany receivables
    
    
    897,546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (897,546
    )
    
    
    Equity in subsidiaries
    
    
    21,124
    
    
    
    6,826
    
    
    
    
    
    
    
    
    
    
    
    (27,950
    )
    
    
    Total assets
    
    $
    1,054,532
    
    
    $
    2,154,366
    
    
    $
    23,505
    
    
    $
    134,613
    
    
    $
    (928,042
    )
    
    $
    2,438,974LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    198
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    198Accounts payable
    
    
    2,196
    
    
    
    21,284
    
    
    
    1,075
    
    
    
    2,051
    
    
    
    
    
    
    
    26,606Accrued expenses and other current liabilities
    
    
    16,654
    
    
    
    45,934
    
    
    
    
    
    
    
    2,691
    
    
    
    
    
    
    
    65,279Total current liabilities
    
    
    19,048
    
    
    
    67,218
    
    
    
    1,075
    
    
    
    4,742
    
    
    
    
    
    
    
    92,083Long-term debt, less current maturities
    
    
    450,115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,115Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    2,546
    
    
    
    
    
    
    
    (2,546
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    869,802
    
    
    
    4,419
    
    
    
    23,325
    
    
    
    (897,546
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    212,166
    
    
    
    
    
    
    
    44,437
    
    
    
    
    
    
    
    256,603Deferred preneed cemetery revenue
    
    
    
    
    
    
    255,266
    
    
    
    515
    
    
    
    28,726
    
    
    
    
    
    
    
    284,507Non-controlling interest in funeral and cemetery
trusts
    
    
    
    
    
    
    674,977
    
    
    
    1,119
    
    
    
    6,956
    
    
    
    
    
    
    
    683,052Other long-term liabilities
    
    
    11,717
    
    
    
    2,152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,869Negative equity in subsidiaries
    
    
    150,334
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150,334
    )
    
    
    Total liabilities
    
    
    631,214
    
    
    
    2,081,581
    
    
    
    9,674
    
    
    
    108,186
    
    
    
    (1,050,426
    )
    
    
    1,780,229Non-controlling interest in perpetual care trusts
    
    
    
    
    
    
    223,119
    
    
    
    8,309
    
    
    
    3,999
    
    
    
    
    
    
    
    235,427Common stock
    
    
    98,420
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    98,420Other
    
    
    324,887
    
    
    
    (150,436
    )
    
    
    5,198
    
    
    
    22,365
    
    
    
    122,873
    
    
    
    324,887Accumulated other comprehensive income
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    (11
    )
    
    
    11Total shareholders equity
    
    
    423,318
    
    
    
    (150,334
    )
    
    
    5,522
    
    
    
    22,428
    
    
    
    122,384
    
    
    
    423,318Total liabilities and shareholders equity
    
    $
    1,054,532
    
    
    $
    2,154,366
    
    
    $
    23,505
    
    
    $
    134,613
    
    
    $
    (928,042
    )
    
    $
    2,438,974
 32




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Nine Months Ended July 31, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating activities
    
    $
    (22,882
    )
    
    $
    63,484
    
    
    $
    464
    
    
    $
    11,187
    
    
    $
    
    
    
    $
    52,253Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    19,969
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    20,219Purchases of marketable securities
    
    
    (19,952
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (19,955
    )Proceeds from sale of assets, net
    
    
    
    
    
    
    358
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    358Purchase of subsidiaries and other investments,
net of cash acquired
    
    
    (1,378
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,378
    )Additions to property and equipment
    
    
    (5,147
    )
    
    
    (14,399
    )
    
    
    (42
    )
    
    
    (782
    )
    
    
    
    
    
    
    (20,370
    )Other
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75Net cash used in investing activities
    
    
    (6,508
    )
    
    
    (13,966
    )
    
    
    (42
    )
    
    
    (535
    )
    
    
    
    
    
    
    (21,051
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (190
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (190
    )Intercompany receivables (payables)
    
    
    59,113
    
    
    
    (48,314
    )
    
    
    (425
    )
    
    
    (10,374
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    1,659
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,659Purchase and retirement of common stock
    
    
    (48,627
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,627
    )Dividends
    
    
    (7,067
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,067
    )Excess tax benefits from share-based payment
arrangements
    
    
    171
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    171Net cash provided by (used in) financing activities
    
    
    5,059
    
    
    
    (48,314
    )
    
    
    (425
    )
    
    
    (10,374
    )
    
    
    
    
    
    
    (54,054
    )Net increase (decrease) in cash
    
    
    (24,331
    )
    
    
    1,204
    
    
    
    (3
    )
    
    
    278
    
    
    
    
    
    
    
    (22,852
    )Cash and cash equivalents, beginning of period
    
    
    63,202
    
    
    
    6,685
    
    
    
    36
    
    
    
    1,622
    
    
    
    
    
    
    
    71,545Cash and cash equivalents, end of period
    
    $
    38,871
    
    
    $
    7,889
    
    
    $
    33
    
    
    $
    1,900
    
    
    $
    
    
    
    $
    48,693
 33




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Nine Months Ended July 31, 2007Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating activities
    
    $
    (13,518
    )
    
    $
    58,627
    
    
    $
    (250
    )
    
    $
    9,940
    
    
    $
    
    
    
    $
    54,799Cash flows from investing activities:Purchases of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148
    )
    
    
    
    
    
    
    (148
    )Proceeds from sale of assets, net
    
    
    
    
    
    
    1,645
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,645Purchase of subsidiaries and other investments,
net of cash acquired
    
    
    
    
    
    
    (6,134
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,134
    )Insurance proceeds related to hurricane damaged
properties
    
    
    
    
    
    
    1,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,400Additions to property and equipment
    
    
    (5,436
    )
    
    
    (16,651
    )
    
    
    (69
    )
    
    
    (964
    )
    
    
    
    
    
    
    (23,120
    )Other
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56Net cash used in investing activities
    
    
    (5,436
    )
    
    
    (19,684
    )
    
    
    (69
    )
    
    
    (1,112
    )
    
    
    
    
    
    
    (26,301
    )Cash flows from financing activities:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from long-term debt
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000Repayments of long-term debt
    
    
    (146,461
    )
    
    
    
    
    
    
    
    
    
    
    (30,000
    )
    
    
    
    
    
    
    (176,461
    )Intercompany receivables (payables)
    
    
    11,629
    
    
    
    (33,786
    )
    
    
    300
    
    
    
    21,857
    
    
    
    
    
    
    
    Debt issue costs
    
    
    (5,572
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,572
    )Proceeds from sale of common stock warrants
    
    
    43,850
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,850Issuance of common stock
    
    
    2,521
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,521Purchase of call options
    
    
    (60,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60,000
    )Purchase and retirement of common stock
    
    
    (64,201
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,201
    )Dividends
    
    
    (7,724
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,724
    )Excess tax benefits from share-based payment
arrangements
    
    
    108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108Net cash provided by (used in) financing activities
    
    
    24,150
    
    
    
    (33,786
    )
    
    
    300
    
    
    
    (8,143
    )
    
    
    
    
    
    
    (17,479
    )Net increase (decrease) in cash
    
    
    5,196
    
    
    
    5,157
    
    
    
    (19
    )
    
    
    685
    
    
    
    
    
    
    
    11,019Cash and cash equivalents, beginning of period
    
    
    39,120
    
    
    
    3,254
    
    
    
    37
    
    
    
    1,459
    
    
    
    
    
    
    
    43,870Cash and cash equivalents, end of period
    
    $
    44,316
    
    
    $
    8,411
    
    
    $
    18
    
    
    $
    2,144
    
    
    $
    
    
    
    $
    54,889
 (12)
    
    Dispositions and Acquisitions
 Dispositions
  Acquisitions
  34




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Discontinued Operations and Acquisitions(Continued)
  (13)
    
    Separation Charges
  (14)
    
    Consolidated Comprehensive Income
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net earnings
    
    $
    9,129
    
    
    $
    8,123
    
    
    $
    31,954
    
    
    $
    33,678Other comprehensive income (loss):Unrealized appreciation (depreciation)
of investments, net of deferred tax
(expense) benefit of $17, $, ($9),
and ($2), respectively
    
    
    (26
    )
    
    
    
    
    
    
    17
    
    
    
    3(Increase) reduction in net unrealized
losses associated with
available-for-sale securities of the
trusts
    
    
    (45,065
    )
    
    
    (23,628
    )
    
    
    (98,678
    )
    
    
    (8,384
    )Reclassification of the net unrealized
losses activity attributable to the
non-controlling interest holders
    
    
    45,065
    
    
    
    23,628
    
    
    
    98,678
    
    
    
    8,384Total other comprehensive income (loss)
    
    
    (26
    )
    
    
    
    
    
    
    17
    
    
    
    3Total comprehensive income
    
    $
    9,103
    
    
    $
    8,123
    
    
    $
    31,971
    
    
    $
    33,681
 (15)
    
    Hurricane Related Charges
  35




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (15)
    
    Hurricane Related Charges(Continued)
   (16)
    
    Income Taxes
   (17)
    
    Subsequent Events
  36




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
 General
       37




---



##### 



Financial Summary
      38




---



##### 



Critical Accounting Policies
  39




---



##### 



Results of Operations
  40




---



##### 



Three Months Ended July 31, 2008 Compared to Three Months Ended July 31, 2007Continuing
Operations
 Funeral Operations
 Three Months Ended July 31,Increase2008
    
    
    2007
    
    
    (Decrease)(In millions)Funeral Revenue:Eastern Division
    
    $
    28.1
    
    
    $
    27.7
    
    
    $
    .4Western Division
    
    
    35.8
    
    
    
    34.7
    
    
    
    1.1Corporate Trust Management (1)
    
    
    4.6
    
    
    
    4.5
    
    
    
    .1Total Funeral Revenue
    
    $
    68.5
    
    
    $
    66.9
    
    
    $
    1.6Funeral Costs:Eastern Division
    
    $
    24.2
    
    
    $
    24.6
    
    
    $
    (.4
    )Western Division
    
    
    29.1
    
    
    
    27.8
    
    
    
    1.3Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Funeral Costs
    
    $
    53.5
    
    
    $
    52.6
    
    
    $
    .9Funeral Gross Profit:Eastern Division
    
    $
    3.9
    
    
    $
    3.1
    
    
    $
    .8Western Division
    
    
    6.7
    
    
    
    6.9
    
    
    
    (.2
    )Corporate Trust Management (1)
    
    
    4.4
    
    
    
    4.3
    
    
    
    .1Total Funeral Gross Profit
    
    $
    15.0
    
    
    $
    14.3
    
    
    $
    .7
 Same-Store Analysis
 Change in Average
    
    Change in
    
    Same-StoreRevenue Per
    
    Same-Store
    
    Cremation RateFuneral Service
    
    Funeral Services
    
    2008
    
    2007Eastern Division
    
    
    2.0
    %
    
    
    (.3
    )%
    
    
    36.5
    %
    
    
    36.2
    %Western Division
    
    
    4.1
    %
    
    
    (1.9
    )%
    
    
    42.2
    %
    
    
    42.6
    %Total
    
    
    3.5
    % (1)
    
    
    (1.2
    )%
    
    
    39.7
    %
    
    
    39.8
    %
 
 (1)
    
    Corporate trust management consists of trust management fees and funeral merchandise
and service trust earnings recognized with respect to preneed contracts delivered during the
period. Trust management fees are established by the Company at rates consistent with
industry norms and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust
earnings represent the earnings realized over the life of the preneed contracts delivered
during the relevant periods. See Notes 3 and 6 to the condensed consolidated financial
statements included herein for information regarding the cost basis and market value of the
trust assets and current performance of the trusts (i.e., current realized gains and losses,
interest income and dividends). Trust management fees included in funeral revenue for the
three months ended July 31, 2008 and 2007 were $1.3 million and $1.4 million, respectively.
As corporate trust management is considered a separate operating segment, trust earnings are
included in the total average revenue per funeral service presented, not in the Eastern or
Western divisions average revenue per funeral service. Funeral trust earnings for the three
months ended July 31, 2008 and 2007 were $3.3 million and $3.1 million, respectively. Consolidated OperationsFuneral
  41




---



##### 



Segment DiscussionFuneral
   Cemetery Operations
 Three Months Ended July 31,Increase2008
    
    
    2007
    
    
    (Decrease)(In millions)Cemetery Revenue:Eastern Division
    
    $
    32.8
    
    
    $
    34.3
    
    
    $
    (1.5
    )Western Division
    
    
    26.8
    
    
    
    23.9
    
    
    
    2.9Corporate Trust Management (1)
    
    
    2.3
    
    
    
    2.5
    
    
    
    (.2
    )Total Cemetery Revenue
    
    $
    61.9
    
    
    $
    60.7
    
    
    $
    1.2Cemetery Costs:Eastern Division
    
    $
    28.4
    
    
    $
    29.6
    
    
    $
    (1.2
    )Western Division
    
    
    20.3
    
    
    
    18.7
    
    
    
    1.6Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Cemetery Costs
    
    $
    48.9
    
    
    $
    48.5
    
    
    $
    .4Cemetery Gross Profit:Eastern Division
    
    $
    4.4
    
    
    $
    4.7
    
    
    $
    (.3
    )Western Division
    
    
    6.5
    
    
    
    5.2
    
    
    
    1.3Corporate Trust Management (1)
    
    
    2.1
    
    
    
    2.3
    
    
    
    (.2
    )Total Cemetery Gross Profit
    
    $
    13.0
    
    
    $
    12.2
    
    
    $
    .8
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and service trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms and are paid by the trusts to our subsidiary, Investors Trust, Inc. The
trust earnings represent the earnings realized over the life of the preneed contracts
delivered during the relevant periods. See Notes 4 and 6 to the condensed consolidated
financial statements 42




---



##### 



included herein for information regarding the cost basis and market value
of the trust assets and current performance of the trusts (i.e., current realized gains and losses, interest income and
dividends). Trust management fees included in cemetery revenue for the three months ended July
31, 2008 and 2007 were $1.3 million and $1.4 million, respectively, and cemetery trust earnings
for the three months ended July 31, 2008 and 2007 were $1.0 million and $1.1 million,
respectively. Perpetual care trust earnings are included in the revenues and gross profit of
the related geographic segment. Consolidated OperationsCemetery
    Segment DiscussionCemetery
     Other
  43




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##### 



Preneed Sales into and Deliveries out of the Backlog
   44




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##### 



Nine Months Ended July 31, 2008 Compared to Nine Months Ended July 31, 2007Continuing Operations
 Funeral Operations
 Nine Months Ended July 31,2008
    
    
    2007
    
    
    Increase(In millions)Funeral Revenue:Eastern Division
    
    $
    90.0
    
    
    $
    89.1
    
    
    $
    .9Western Division
    
    
    114.8
    
    
    
    109.4
    
    
    
    5.4Corporate Trust Management (1)
    
    
    14.1
    
    
    
    13.9
    
    
    
    .2Total Funeral Revenue
    
    $
    218.9
    
    
    $
    212.4
    
    
    $
    6.5Funeral Costs:Eastern Division
    
    $
    73.8
    
    
    $
    73.7
    
    
    $
    .1Western Division
    
    
    88.9
    
    
    
    86.2
    
    
    
    2.7Corporate Trust Management (1)
    
    
    .6
    
    
    
    .5
    
    
    
    .1Total Funeral Costs
    
    $
    163.3
    
    
    $
    160.4
    
    
    $
    2.9Funeral Gross Profit:Eastern Division
    
    $
    16.2
    
    
    $
    15.4
    
    
    $
    .8Western Division
    
    
    25.9
    
    
    
    23.2
    
    
    
    2.7Corporate Trust Management (1)
    
    
    13.5
    
    
    
    13.4
    
    
    
    .1Total Funeral Gross Profit
    
    $
    55.6
    
    
    $
    52.0
    
    
    $
    3.6
 Same-Store Analysis
 Change in Average
    
    Change in
    
    Same-StoreRevenue Per
    
    Same-Store
    
    Cremation RateFuneral Service
    
    Funeral Services
    
    2008
    
    2007Eastern Division
    
    
    .5
    %
    
    
    .4
    %
    
    
    35.9
    %
    
    
    35.0
    %Western Division
    
    
    3.6
    %
    
    
    2.1
    %
    
    
    42.9
    %
    
    
    42.3
    %Total
    
    
    2.3
    % (1)
    
    
    1.4
    %
    
    
    39.9
    %
    
    
    39.2
    %
 
 (1)
    
    Corporate trust management consists of trust management fees and funeral merchandise
and service trust earnings recognized with respect to preneed contracts delivered during the
period. Trust management fees are established by the Company at rates consistent with
industry norms and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust
earnings represent the earnings realized over the life of the preneed contracts delivered
during the relevant periods. See Notes 3 and 6 to the condensed consolidated financial
statements included herein for information regarding the cost basis and market value of the
trust assets and current performance of the trusts (i.e., current realized gains and losses,
interest income and dividends). Trust management fees included in funeral revenue for the
nine months ended July 31, 2008 and 2007 were $4.0 million and $4.4 million, respectively. As
corporate trust management is considered a separate operating segment, trust earnings are
included in the total average revenue per funeral service presented, not in the Eastern or
Western divisions average revenue per funeral service. Funeral trust earnings for the nine
months ended July 31, 2008 and 2007 were $10.1 million and $9.5 million, respectively. Consolidated OperationsFuneral
  45




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##### 



Segment DiscussionFuneral
   Cemetery Operations
 Nine Months Ended July 31,Increase2008
    
    
    2007
    
    
    (Decrease)(In millions)Cemetery Revenue:Eastern Division
    
    $
    98.0
    
    
    $
    108.5
    
    
    $
    (10.5
    )Western Division
    
    
    73.7
    
    
    
    68.4
    
    
    
    5.3Corporate Trust Management (1)
    
    
    7.0
    
    
    
    7.2
    
    
    
    (.2
    )Total Cemetery Revenue
    
    $
    178.7
    
    
    $
    184.1
    
    
    $
    (5.4
    )Cemetery Costs:Eastern Division
    
    $
    86.0
    
    
    $
    91.0
    
    
    $
    (5.0
    )Western Division
    
    
    56.9
    
    
    
    54.4
    
    
    
    2.5Corporate Trust Management (1)
    
    
    .7
    
    
    
    .4
    
    
    
    .3Total Cemetery Costs
    
    $
    143.6
    
    
    $
    145.8
    
    
    $
    (2.2
    )Cemetery Gross Profit:Eastern Division
    
    $
    12.0
    
    
    $
    17.5
    
    
    $
    (5.5
    )Western Division
    
    
    16.8
    
    
    
    14.0
    
    
    
    2.8Corporate Trust Management (1)
    
    
    6.3
    
    
    
    6.8
    
    
    
    (.5
    )Total Cemetery Gross Profit
    
    $
    35.1
    
    
    $
    38.3
    
    
    $
    (3.2
    )
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and service trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms and are paid by the trusts to our subsidiary, Investors Trust, Inc. The
trust earnings represent the earnings realized over the life of the preneed contracts
delivered during the relevant periods. See Notes 4 and 6 to the condensed consolidated
financial statements included herein for information regarding the cost basis and market value
of the trust assets and current performance of the trusts (i.e., current realized gains and
losses, interest income and dividends). Trust management fees included in cemetery revenue
for the nine months ended July 31, 2008 and 2007 were $3.8 million and $4.0 million,
respectively, and cemetery trust earnings for both the nine months ended July 31, 2008 and
2007 were $3.2 million. Perpetual care trust earnings are included in the revenues and gross
profit of the 46




---



##### 



related geographic segment. Consolidated OperationsCemetery
    Segment DiscussionCemetery
     Other
  47




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##### 



48




---



##### 



Preneed Sales into and Deliveries out of the Backlog
   Liquidity and Capital Resources
 General
    49




---



##### 



Cash Flow
    Contractual Obligations and Commercial Commitments
  50




---



##### 



Payments Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    More ThanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsLong-term debt obligations (1)
    
    $
    450.1
    
    
    $
    
    
    
    $
    
    
    
    $
    200.0
    
    
    $
    250.1Interest on long-term debt (2)
    
    
    119.4
    
    
    
    20.6
    
    
    
    41.3
    
    
    
    41.3
    
    
    
    16.2Operating and capital lease obligations (3)
    
    
    28.9
    
    
    
    1.1
    
    
    
    7.2
    
    
    
    3.7
    
    
    
    16.9Non-competition and other agreements (4)
    
    
    1.4
    
    
    
    .4
    
    
    
    .7
    
    
    
    .3
    
    
    
    $
    599.8
    
    
    $
    22.1
    
    
    $
    49.2
    
    
    $
    245.3
    
    
    $
    283.2
 
 (1)
    
    See below for a breakdown of our future scheduled principal payments and maturities
of our long-term debt by type as of July 31, 2008.(2)
    
    Includes contractual interest payments for our senior convertible notes, senior
notes and third-party debt.(3)
    
    Our noncancellable operating leases are primarily for land and buildings and expire
over the next one to 15 years, except for six leases that expire between 2032 and 2039. In
the first quarter of 2008, we entered into a capital lease for equipment with a two-year term
for approximately $0.4 million. Our future minimum lease payments as of July 31, 2008 are
$1.1 million, $4.1 million, $3.1 million, $2.1 million, $1.6 million, and $16.9 million for
the years ending October 31, 2008, 2009, 2010, 2011, 2012 and later years, respectively.(4)
    
    We have entered into non-competition agreements with prior owners and key employees
of acquired subsidiaries that expire at various times through 2012. This category also
includes separation pay related to former executive officers.   Other, PrincipallyRevolving
    
    
Senior
    
    
    
    
    
    
    
    Seller FinancingFiscal Year Ending
    
    Credit
    
    
    Convertible
    
    
    Senior
    
    
    of AcquiredOctober 31,
    
    Facility
    
    
    Notes
    
    
    Notes
    
    
    Operations
    
    
    Total2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    
    
    
    
    250.0
    
    
    
    200.0
    
    
    
    .1
    
    
    
    450.1Total long-term debt
    
    $
    
    
    
    $
    250.0
    
    
    $
    200.0
    
    
    $
    .1
    
    
    $
    450.1
 Off-Balance Sheet Arrangements
  (1)
    
    the $30.8 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 19 to the consolidated financial
statements in our 2007 Form 10-K; and
 51




---



##### 



(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 2007 Form 10-K.
 Recent Accounting Standards
  Item 3. Quantitative and Qualitative Disclosures About Market Risk
   Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  PART II. OTHER INFORMATION
 Item 1. Legal Proceedings
  52




---



##### 



Item 1A. Risk Factors
   Potential continuing uncertainty resulting from the recent Service Corporation International
(SCI) acquisition proposal and related matters may adversely affect our business and cause
volatility in the trading price of our common stock.
     53




---



##### 



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(1)
    
    plans or programsMay 1, 2008 through May 31, 2008
    
    
    1,000,000
    
    
    $
    6.91
    
    
    
    1,000,000
    
    
    $
    5,918,049June 1, 2008 through June 30, 2008
    
    
    268,708
    
    
    $
    6.75
    
    
    
    268,708
    
    
    $
    29,104,970July 1, 2008 through July 31, 2008
    
    
    349,492
    
    
    $
    7.25
    
    
    
    349,492
    
    
    $
    26,571,185Total
    
    
    1,618,200
    
    
    $
    6.96
    
    
    
    1,618,200
    
    
    $
    26,571,185
 
 (1)
    
    On September 19, 2007, we announced that our Board of Directors had authorized a new
$25.0 million stock repurchase program. Repurchases under the program are limited to our
Class A common stock, and are made in the open market or in privately negotiated transactions
at such times and in such amounts as management deems appropriate, depending upon market
conditions and other factors. On December 20, 2007, we announced a $25.0 million increase in
this program. On June 19, 2008, we announced an additional $25.0 million increase to the
program, which increased the program to $75.0 million. As of July 31, 2008, we had
repurchased 6.6 million shares for $48.4 million at an average price of $7.32 per share under
this program. Item 5. Other Information
  54




---



##### 



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, 20084.1
    
    See Exhibits 3.1 and 3.2 for provisions of the Companys Amended and Restated Articles of
Incorporation, as amended, and By-laws, as amended, defining the rights of holders of Class A
and Class B common stock4.2
    
    Specimen of Class A common stock certificate (incorporated by reference to Exhibit 4.2 to
Amendment No. 3 to the Companys Registration Statement on Form S-1 (Registration No.
33-42336) filed with the Commission on October 7, 1991)4.3
    
    Rights Agreement, dated as of October 28, 1999, between Stewart Enterprises, Inc. and
ChaseMellon Shareholder Services, L.L.C. as Rights Agent (incorporated by reference to Exhibit
1 to the Companys Form 8-A filed November 4, 1999)4.4
    
    Amendment No. 1 to the Rights Agreement dated June 26, 2007 between Stewart Enterprises, Inc.
and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.4 to the Companys
Current Report on Form 8-K filed June 27, 2007)4.5
    
    Amended and Restated Credit Agreement dated November 19, 2004 by and among the Company,
Empresas Stewart-Cementerios and Empresas Stewart-Funerarias, as Borrowers, Bank of America,
N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer and The
Other Lenders party hereto (incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K filed November 23, 2004)4.6
    
    Indenture dated as of February 11, 2005 by and among Stewart Enterprises, Inc., the
Guarantors thereunder and U.S. Bank National Association, as Trustee, with respect to the 6.25
percent Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K filed February 14, 2005)4.7
    
    Form of 6.25 percent Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed February 14, 2005)4.8
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.125 percent Senior
Convertible Notes due 2014 (including Form of 3.125 percent Senior Convertible Notes due 2014)
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed
June 27, 2007)4.9
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.375 percent Senior
Convertible Notes due 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)4.10
    
    Registration Rights Agreement dated June 27, 2007 by and among Stewart Enterprises, Inc., the
guarantors named therein and the Initial Purchasers (incorporated by reference to Exhibit 4.3
to the Companys Current Report on Form 8-K filed June 27, 2007)
 
 55




---



##### 



10.1
    
    Amendment No. 2 to Employment Agreement dated May 1, 2008 between the Company and Thomas J.
Crawford (incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form
10-Q for the quarter ended April 30, 2008)10.2
    
    Amendment No. 1 to Employment Agreement dated May 1, 2008 between the Company and Thomas M.
Kitchen (incorporated by reference to Exhibit 10.2 to the Companys Quarterly Report on Form
10-Q for the quarter ended April 30, 2008)10.3
    
    Stewart Enterprises, Inc. Retention Plan and Summary Plan Description effective June 18, 200810.4
    
    Amended and Restated Stewart Enterprises, Inc. Retention Plan and Summary Plan Description
effective August 1, 200810.5
    
    Form of First Amendment to Indemnity Agreements between Stewart Enterprises, Inc. and its
Directors10.6
    
    Amendment to Stewart Enterprises, Inc. Supplemental Executive Retirement Plan effective June
17, 200831.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
 56




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 SIGNATURES
  STEWART ENTERPRISES, INC.September 9, 2008
    /s/ THOMAS M. KITCHENThomas M. KitchenSenior Executive Vice President and
Chief Financial OfficerSeptember 9, 2008
    /s/ ANGELA M. LACOURAngela M. LacourVice President
Corporate Controller
Chief Accounting Officer 57




---



##### 



Exhibit Index
 3.2
    
    By-laws of the Company, as amended and restated as of September 8, 200810.3
    
    Stewart Enterprises, Inc. Retention Plan and Summary Plan Description effective June 18, 200810.4
    
    Amended and Restated Stewart Enterprises, Inc. Retention Plan and Summary Plan Description
effective August 1, 200810.5
    
    Form of First Amendment to Indemnity Agreements between Stewart Enterprises, Inc. and its
Directors10.6
    
    Amendment to Stewart Enterprises, Inc. Supplemental Executive Retirement Plan effective June
17, 200831.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
 58