##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended April 30, 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
    
    72-0693290(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1333 South Clearview ParkwayJefferson, Louisiana
    
    70121(Address of principal executive offices)
    
    (Zip Code)
 
 Registrants telephone number, including area code: (504) 729-1400
 
 þ o
  Large accelerated filer
þ
    
    Accelerated filer
o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
INDEX
  
 PagePart I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings 
Three Months Ended April 30, 2008 and 2007
    
    
    3Condensed Consolidated Statements of Earnings
Six Months Ended April 30, 2008 and 2007
    
    
    4Condensed Consolidated Balance Sheets 
April 30, 2008 and October 31, 2007
    
    
    5Condensed Consolidated Statement of Shareholders Equity 
Six Months Ended April 30, 2008
    
    
    7Condensed Consolidated Statements of Cash Flows 
Six Months Ended April 30, 2008 and 2007
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    36Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    52Item 4. Controls and Procedures
    
    
    52Part II. Other InformationItem 1. Legal Proceedings
    
    
    52Item 1A. Risk Factors
    
    
    52Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    53Item 4. Submission of Matters to a Vote of Security Holders
    
    
    53Item 6. Exhibits
    
    
    54Signatures
    
    
    56Amended and Restated Articles of IncorporationAmendment No.2 to Employment Agreement - Thomas J. CrawfordAmendment No.1 to Employment Agreement - Thomas M. KitchenCalculation of Ratio of Earnings to Fixed ChargesCertification of Pursuant to Section 302Certification of Pursuant to Section 302Certification of Pursuant to Section 906
  2




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended April 30,2008
    
    
    2007Revenues:Funeral
    
    $
    76,855
    
    
    $
    73,333Cemetery
    
    
    59,964
    
    
    
    63,695136,819
    
    
    
    137,028Costs and expenses:Funeral
    
    
    54,289
    
    
    
    54,381Cemetery
    
    
    46,896
    
    
    
    49,872101,185
    
    
    
    104,253Gross profit
    
    
    35,634
    
    
    
    32,775Corporate general and administrative expenses
    
    
    (7,803
    )
    
    
    (7,744
    )Hurricane related charges, net
    
    
    (169
    )
    
    
    (283
    )Separation charges
    
    
    
    
    
    
    (47
    )Gains on dispositions and impairment (losses), net
    
    
    (19
    )
    
    
    (8
    )Other operating income, net
    
    
    104
    
    
    
    884Operating earnings
    
    
    27,747
    
    
    
    25,577Interest expense
    
    
    (6,093
    )
    
    
    (6,295
    )Investment and other income, net
    
    
    357
    
    
    
    567Earnings from continuing operations before income taxes
    
    
    22,011
    
    
    
    19,849Income taxes
    
    
    8,071
    
    
    
    6,033Earnings from continuing operations
    
    
    13,940
    
    
    
    13,816Discontinued operations:Loss from discontinued operations before income taxes
    
    
    
    
    
    
    (341
    )Income tax benefit
    
    
    
    
    
    
    (154
    )Loss from discontinued operations
    
    
    
    
    
    
    (187
    )Net earnings
    
    $
    13,940
    
    
    $
    13,629Basic earnings per common share:Earnings from continuing operations
    
    $
    .15
    
    
    $
    .13Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .15
    
    
    $
    .13Diluted earnings per common share:Earnings from continuing operations
    
    $
    .15
    
    
    $
    .13Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .15
    
    
    $
    .13Weighted average common shares outstanding (in thousands):Basic
    
    
    94,525
    
    
    
    105,300Diluted
    
    
    94,635
    
    
    
    105,540Dividends declared per common share
    
    $
    .025
    
    
    $
    .025
  3




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Six Months Ended April 30,2008
    
    
    2007Revenues:Funeral
    
    $
    150,304
    
    
    $
    145,496Cemetery
    
    
    116,788
    
    
    
    123,378267,092
    
    
    
    268,874Costs and expenses:Funeral
    
    
    109,736
    
    
    
    107,826Cemetery
    
    
    94,652
    
    
    
    97,276204,388
    
    
    
    205,102Gross profit
    
    
    62,704
    
    
    
    63,772Corporate general and administrative expenses
    
    
    (16,038
    )
    
    
    (14,786
    )Hurricane related charges, net
    
    
    (10
    )
    
    
    (2,133
    )Separation charges
    
    
    
    
    
    
    (532
    )Gains on dispositions and impairment (losses), net
    
    
    128
    
    
    
    90Other operating income, net
    
    
    346
    
    
    
    1,151Operating earnings
    
    
    47,130
    
    
    
    47,562Interest expense
    
    
    (11,981
    )
    
    
    (13,052
    )Investment and other income, net
    
    
    1,077
    
    
    
    1,617Earnings from continuing operations before income taxes
    
    
    36,226
    
    
    
    36,127Income taxes
    
    
    13,401
    
    
    
    10,338Earnings from continuing operations
    
    
    22,825
    
    
    
    25,789Discontinued operations:Loss from discontinued operations before income taxes
    
    
    
    
    
    
    (381
    )Income tax benefit
    
    
    
    
    
    
    (147
    )Loss from discontinued operations
    
    
    
    
    
    
    (234
    )Net earnings
    
    $
    22,825
    
    
    $
    25,555Basic earnings per common share:Earnings from continuing operations
    
    $
    .24
    
    
    $
    .24Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .24
    
    
    $
    .24Diluted earnings per common share:Earnings from continuing operations
    
    $
    .24
    
    
    $
    .24Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .24
    
    
    $
    .24Weighted average common shares outstanding (in thousands):Basic
    
    
    95,667
    
    
    
    105,097Diluted
    
    
    95,838
    
    
    
    105,248Dividends declared per common share
    
    $
    .05
    
    
    $
    .05
  4




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 April 30,
    
    
    October 31,ASSETS
    
    2008
    
    
    2007Current assets:Cash and cash equivalents
    
    $
    35,252
    
    
    $
    71,545Marketable securities
    
    
    10,025
    
    
    
    262Receivables, net of allowances
    
    
    64,344
    
    
    
    60,615Inventories
    
    
    36,860
    
    
    
    36,061Prepaid expenses
    
    
    10,285
    
    
    
    6,355Deferred income taxes, net
    
    
    8,283
    
    
    
    8,621Total current assets
    
    
    165,049
    
    
    
    183,459Receivables due beyond one year, net of allowances
    
    
    81,264
    
    
    
    83,608Preneed funeral receivables and trust investments
    
    
    471,519
    
    
    
    515,053Preneed cemetery receivables and trust investments
    
    
    234,531
    
    
    
    255,679Goodwill
    
    
    273,188
    
    
    
    273,286Cemetery property, at cost
    
    
    378,359
    
    
    
    374,800Property and equipment, at cost:Land
    
    
    43,767
    
    
    
    43,767Buildings
    
    
    314,940
    
    
    
    310,968Equipment and other
    
    
    171,806
    
    
    
    164,246530,513
    
    
    
    518,981Less accumulated depreciation
    
    
    224,984
    
    
    
    213,063Net property and equipment
    
    
    305,529
    
    
    
    305,918Deferred income taxes, net
    
    
    193,933
    
    
    
    192,859Cemetery perpetual care trust investments
    
    
    223,547
    
    
    
    236,503Other assets
    
    
    17,929
    
    
    
    17,809Total assets
    
    $
    2,344,848
    
    
    $
    2,438,974
  5




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 April 30,
    
    
    October 31,LIABILITIES AND SHAREHOLDERS EQUITY
    
    2008
    
    
    2007Current liabilities:Current maturities of long-term debt
    
    $
    66
    
    
    $
    198Accounts payable
    
    
    26,331
    
    
    
    26,606Accrued payroll and other benefits
    
    
    13,621
    
    
    
    16,316Accrued insurance
    
    
    22,601
    
    
    
    21,252Accrued interest
    
    
    5,537
    
    
    
    5,576Other current liabilities
    
    
    15,374
    
    
    
    17,958Income taxes payable
    
    
    3,955
    
    
    
    4,177Total current liabilities
    
    
    87,485
    
    
    
    92,083Long-term debt, less current maturities
    
    
    450,097
    
    
    
    450,115Deferred preneed funeral revenue
    
    
    251,179
    
    
    
    256,603Deferred preneed cemetery revenue
    
    
    284,263
    
    
    
    284,507Non-controlling interest in funeral and cemetery trusts
    
    
    624,037
    
    
    
    683,052Other long-term liabilities
    
    
    19,152
    
    
    
    13,869Total liabilities
    
    
    1,716,213
    
    
    
    1,780,229Commitments
and contingenciesNon-controlling interest in perpetual care trusts
    
    
    221,804
    
    
    
    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 90,262,993 and 94,865,387
shares at April 30, 2008 and October 31,
2007, respectively
    
    
    90,263
    
    
    
    94,865Class B authorized 5,000,000 shares; issued
and outstanding 3,555,020 shares at April 30,
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
    
    
    549,991
    
    
    
    583,789Accumulated deficit
    
    
    (237,032
    )
    
    
    (258,902
    )Accumulated other comprehensive income:Unrealized appreciation of investments
    
    
    54
    
    
    
    11Total accumulated other comprehensive income
    
    
    54
    
    
    
    11Total shareholders equity
    
    
    406,831
    
    
    
    423,318Total liabilities and shareholders equity
    
    $
    2,344,848
    
    
    $
    2,438,974
  6




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
(Dollars in thousands, except per share amounts)
 Additional
    
    
    
    
    
    
    Unrealized
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Accumulated
    
    
    Appreciation of
    
    
    ShareholdersStock(1)
    
    
    Capital
    
    
    Deficit
    
    
    Investments
    
    
    EquityBalance October 31, 2007
    
    $
    98,420
    
    
    $
    583,789
    
    
    $
    (258,902
    )
    
    $
    11
    
    
    $
    423,318Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    22,825
    
    
    
    
    
    
    
    22,825Other comprehensive income:Unrealized appreciation
of investments, net of
deferred tax expense of
($26)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    43Total other comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    43Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    22,825
    
    
    
    43
    
    
    
    22,868Cumulative effect of
adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    (955
    )
    
    
    
    
    
    
    (955
    )Restricted stock activity
    
    
    25
    
    
    
    199
    
    
    
    
    
    
    
    
    
    
    
    224Issuance of common stock
    
    
    146
    
    
    
    941
    
    
    
    
    
    
    
    
    
    
    
    1,087Stock options exercised
    
    
    227
    
    
    
    1,066
    
    
    
    
    
    
    
    
    
    
    
    1,293Share-based compensation
    
    
    
    
    
    
    950
    
    
    
    
    
    
    
    
    
    
    
    950Tax benefit associated
with stock options
exercised
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    
    
    
    
    127Purchase and retirement of
common stock
    
    
    (5,000
    )
    
    
    (32,320
    )
    
    
    
    
    
    
    
    
    
    
    (37,320
    )Dividends ($.05 per share)
    
    
    
    
    
    
    (4,761
    )
    
    
    
    
    
    
    
    
    
    
    (4,761
    )Balance April 30, 2008
    
    $
    93,818
    
    
    $
    549,991
    
    
    $
    (237,032
    )
    
    $
    54
    
    
    $
    406,831
 
 (1)
    
    Amount includes 90,263 and 94,865 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of April 30, 2008 and October 31, 2007, respectively,
and includes 3,555 shares (in thousands) of Class B common stock.  7




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Six Months Ended April 30,2008
    
    
    2007Cash flows from operating activities:Net earnings
    
    $
    22,825
    
    
    $
    25,555Adjustments to reconcile net earnings to net cash provided by operating activities:(Gains) on dispositions and impairment losses, net
    
    
    (128
    )
    
    
    265Depreciation and amortization
    
    
    13,985
    
    
    
    13,268Provision for doubtful accounts
    
    
    3,638
    
    
    
    3,401Share-based compensation
    
    
    950
    
    
    
    691Excess tax benefits from share-based payment arrangements
    
    
    (165
    )
    
    
    (37
    )Provision (benefit) for deferred income taxes
    
    
    2,594
    
    
    
    (3,138
    )Other
    
    
    1,118
    
    
    
    806Changes in assets and liabilities:(Increase) decrease in receivables
    
    
    (5,706
    )
    
    
    9,106Increase in prepaid expenses
    
    
    (3,933
    )
    
    
    (4,281
    )(Increase) decrease in inventories and cemetery property
    
    
    (4,368
    )
    
    
    103Decrease in accounts payable and accrued expenses
    
    
    (1,644
    )
    
    
    (8,561
    )Net effect of preneed funeral production and maturities:(Increase) decrease in preneed funeral receivables and trust investments
    
    
    6,654
    
    
    
    (1,470
    )Decrease in deferred preneed funeral revenue
    
    
    (5,070
    )
    
    
    (6,132
    )Increase (decrease) in funeral non-controlling interest
    
    
    (4,814
    )
    
    
    2,790Net effect of preneed cemetery production and deliveries:(Increase) decrease in preneed cemetery receivables and trust investments
    
    
    3,101
    
    
    
    (2,956
    )Decrease in deferred preneed cemetery revenue
    
    
    (244
    )
    
    
    (5,575
    )Increase in cemetery non-controlling interest
    
    
    453
    
    
    
    8,550Increase (decrease) in other
    
    
    (849
    )
    
    
    146Net cash provided by operating activities
    
    
    28,397
    
    
    
    32,531Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    10,219
    
    
    
    Purchases of marketable securities
    
    
    (19,897
    )
    
    
    (141
    )Proceeds from sale of assets, net
    
    
    338
    
    
    
    1,635Purchase of subsidiaries and other investments, net of cash acquired
    
    
    (1,378
    )
    
    
    (2,805
    )Insurance proceeds related to hurricane damaged properties
    
    
    
    
    
    
    1,400Additions to property and equipment
    
    
    (13,385
    )
    
    
    (13,605
    )Other
    
    
    21
    
    
    
    35Net cash used in investing activities
    
    
    (24,082
    )
    
    
    (13,481
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (150
    )
    
    
    (13,561
    )Issuance of common stock
    
    
    1,458
    
    
    
    2,414Purchase and retirement of common stock
    
    
    (37,320
    )
    
    
    Dividends
    
    
    (4,761
    )
    
    
    (5,265
    )Excess tax benefits from share-based payment arrangements
    
    
    165
    
    
    
    37Net cash used in financing activities
    
    
    (40,608
    )
    
    
    (16,375
    )Net increase (decrease) in cash
    
    
    (36,293
    )
    
    
    2,675Cash and cash equivalents, beginning of period
    
    
    71,545
    
    
    
    43,870Cash and cash equivalents, end of period
    
    $
    35,252
    
    
    $
    46,545Supplemental cash flow information:Cash paid during the period for:Income taxes, net
    
    $
    10,697
    
    
    $
    5,632Interest
    
    $
    11,437
    
    
    $
    13,246Non-cash investing and financing activities:Issuance of common stock to executive officers and directors
    
    $
    922
    
    
    $
    1,028Issuance of restricted stock, net of forfeitures
    
    $
    236
    
    
    $
    2,931
  8




---



##### Table of Contents



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




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis
of Presentation(Continued)
    WeightedNumber
    
    Averageof Shares
    
    Exercise PriceGrant Type
    
    Granted
    
    per Share
    
    Vesting Period
    
    Vesting ConditionStock Options
    
    
    384,750
    
    
    $
    8.18
    
    
    Equal one-fourth portions over 4 years
    
    Service conditionStock Options
    
    
    135,000
    
    
    $
    8.47
    
    
    Equal one-third portions over 3 years
    
    Market conditionRestricted Stock
    
    
    45,000
    
    
    $
    8.47
    
    
    Equal one-third portions over 3 years
    
    Performance condition
  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




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities
   Preneed Funeral Receivables and Trust Investments
  April 30, 2008
    
    
    October 31, 2007Trust assets
    
    $
    436,207
    
    
    $
    477,335Receivables from customers
    
    
    46,241
    
    
    
    48,488482,448
    
    
    
    525,823Allowance for cancellations
    
    
    (10,929
    )
    
    
    (10,770
    )Preneed funeral receivables and trust investments
    
    $
    471,519
    
    
    $
    515,053
  13




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
 April 30, 2008Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    36,344
    
    
    $
    
    
    
    $
    
    
    
    $
    36,344U.S. Government, agencies and
municipalities
    
    
    18,445
    
    
    
    494
    
    
    
    (1
    )
    
    
    18,938Corporate bonds
    
    
    58,636
    
    
    
    752
    
    
    
    (2,226
    )
    
    
    57,162Preferred stocks
    
    
    66,848
    
    
    
    175
    
    
    
    (5,998
    )
    
    
    61,025Common stocks
    
    
    205,777
    
    
    
    21,237
    
    
    
    (19,170
    )
    
    
    207,844Mutual funds
    
    
    34,410
    
    
    
    939
    
    
    
    (1,732
    )
    
    
    33,617Insurance contracts and other long-
term investments
    
    
    19,951
    
    
    
    87
    
    
    
    
    
    
    
    20,038Trust investments
    
    $
    440,411
    
    
    $
    23,684
    
    
    $
    (29,127
    )
    
    
    434,968Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98.8
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,239Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    436,207
  April 30, 2008Due in one year or less
    
    $
    2,343Due in one to five years
    
    
    37,148Due in five to ten years
    
    
    36,349Thereafter
    
    
    260$
    76,100
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Purchases
    
    $
    2,470
    
    
    $
    48,497
    
    
    $
    8,856
    
    
    $
    82,086Sales
    
    
    3,154
    
    
    
    43,547
    
    
    
    12,774
    
    
    
    77,418Realized gains on sales
    
    
    612
    
    
    
    3,148
    
    
    
    1,738
    
    
    
    5,762Realized losses on sales
    
    
    (98
    )
    
    
    (529
    )
    
    
    (311
    )
    
    
    (920
    )Impairment losses on
other than temporarily
impaired trust assets
    
    
    (6,901
    )
    
    
    
    
    
    
    (11,262
    )
    
    
    (371
    )Deposits
    
    
    7,589
    
    
    
    8,696
    
    
    
    15,982
    
    
    
    16,114Withdrawals
    
    
    12,209
    
    
    
    11,576
    
    
    
    24,137
    
    
    
    22,806
  (4) Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
 14




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
  April 30, 2008
    
    
    October 31, 2007Trust assets
    
    $
    197,804
    
    
    $
    215,541Receivables from customers
    
    
    42,417
    
    
    
    46,906240,221
    
    
    
    262,447Allowance for cancellations
    
    
    (5,690
    )
    
    
    (6,768
    )Preneed cemetery receivables and trust investments
    
    $
    234,531
    
    
    $
    255,679
  April 30, 2008Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    16,806
    
    
    $
    
    
    
    $
    
    
    
    $
    16,806U.S. Government, agencies and
municipalities
    
    
    14,608
    
    
    
    695
    
    
    
    
    
    
    
    15,303Corporate bonds
    
    
    12,192
    
    
    
    237
    
    
    
    (354
    )
    
    
    12,075Preferred stocks
    
    
    25,645
    
    
    
    36
    
    
    
    (2,800
    )
    
    
    22,881Common stocks
    
    
    101,544
    
    
    
    9,360
    
    
    
    (8,752
    )
    
    
    102,152Mutual funds
    
    
    30,262
    
    
    
    231
    
    
    
    (2,622
    )
    
    
    27,871Insurance contracts and other long-
term investments
    
    
    238
    
    
    
    
    
    
    
    
    
    
    
    238Trust investments
    
    $
    201,295
    
    
    $
    10,559
    
    
    $
    (14,528
    )
    
    
    197,326Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98.0
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    197,804
  April 30, 2008Due in one year or less
    
    $
    2,079Due in one to five years
    
    
    16,356Due in five to ten years
    
    
    8,748Thereafter
    
    
    195$
    27,378
 15




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4)
    
    Preneed Cemetery Merchandise and Service Activities(Continued)
  Three Months Ended April 30,
    
    Six Months Ended April 30,2008
    
    2007
    
    2008
    
    2007Purchases
    
    $
    3,720
    
    
    $
    87,315
    
    
    $
    6,631
    
    
    $
    144,337Sales
    
    
    4,118
    
    
    
    87,954
    
    
    
    6,658
    
    
    
    138,807Realized gains on sales
    
    
    706
    
    
    
    3,581
    
    
    
    1,073
    
    
    
    6,738Realized losses on sales
    
    
    (167
    )
    
    
    (62
    )
    
    
    (196
    )
    
    
    (173
    )Impairment losses on
other than temporarily
impaired trust assets
    
    
    (3,616
    )
    
    
    
    
    
    
    (5,919
    )
    
    
    (545
    )Deposits
    
    
    4,192
    
    
    
    4,482
    
    
    
    8,396
    
    
    
    8,929Withdrawals
    
    
    6,044
    
    
    
    5,267
    
    
    
    10,556
    
    
    
    9,404
  (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts
   April 30, 2008Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    9,416
    
    
    $
    
    
    
    $
    
    
    
    $
    9,416U.S. Government, agencies and
municipalities
    
    
    11,587
    
    
    
    413
    
    
    
    (48
    )
    
    
    11,952Corporate bonds
    
    
    46,300
    
    
    
    1,230
    
    
    
    (836
    )
    
    
    46,694Preferred stocks
    
    
    66,279
    
    
    
    228
    
    
    
    (5,460
    )
    
    
    61,047Common stocks
    
    
    80,759
    
    
    
    11,284
    
    
    
    (8,911
    )
    
    
    83,132Mutual funds
    
    
    9,576
    
    
    
    492
    
    
    
    (363
    )
    
    
    9,705Insurance contracts and other
long-term investments
    
    
    677
    
    
    
    82
    
    
    
    (1
    )
    
    
    758Trust investments
    
    $
    224,594
    
    
    $
    13,729
    
    
    $
    (15,619
    )
    
    
    222,704Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99.2
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    843Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    223,547
 16




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  April 30, 2008Due in one year or less
    
    $
    1,277Due in one to five years
    
    
    32,372Due in five to ten years
    
    
    24,385Thereafter
    
    
    612$
    58,646
  Three Months Ended April 30,
    
    Six Months Ended April 30,2008
    
    2007
    
    2008
    
    2007Purchases
    
    $
    16,647
    
    
    $
    12,899
    
    
    $
    30,264
    
    
    $
    32,766Sales
    
    
    12,935
    
    
    
    10,247
    
    
    
    25,058
    
    
    
    32,773Realized gains on sales
    
    
    1,795
    
    
    
    1,022
    
    
    
    3,047
    
    
    
    2,387Realized losses on sales
    
    
    (7
    )
    
    
    (63
    )
    
    
    (7
    )
    
    
    (290
    )Impairment losses on
other than temporarily
impaired trust assets
    
    
    (1,393
    )
    
    
    (446
    )
    
    
    (3,545
    )
    
    
    (770
    )Deposits
    
    
    1,988
    
    
    
    2,050
    
    
    
    3,961
    
    
    
    3,913Withdrawals
    
    
    2,187
    
    
    
    2,273
    
    
    
    5,001
    
    
    
    5,421
   (6)
    
    Non-Controlling Interest in Funeral and Cemetery Trusts and in Perpetual Care
Trusts
  Non-controlling Interest
    
    
    Non-controllingPreneed
    
    
    Preneed
    
    
    
    
    
    
    Interest in PerpetualFuneral
    
    
    Cemetery
    
    
    Total
    
    
    Care TrustsTrust assets at market value
    
    $
    436,207
    
    
    $
    197,804
    
    
    $
    634,011
    
    
    $
    223,547Less:Pending withdrawals
    
    
    (9,457
    )
    
    
    (4,134
    )
    
    
    (13,591
    )
    
    
    (2,606
    )Pending deposits
    
    
    2,222
    
    
    
    1,395
    
    
    
    3,617
    
    
    
    863Non-controlling interest
    
    $
    428,972
    
    
    $
    195,065
    
    
    $
    624,037
    
    
    $
    221,804
 Investment and other income, net
  17




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (6)
    
    Non-Controlling Interest in Funeral and Cemetery Trusts and in Perpetual Care Trusts(Continued)
 Three Months Ended April 30,
    
    
    Six Months Ended April 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Non-controlling interest:Realized gains
    
    $
    3,113
    
    
    $
    7,751
    
    
    $
    5,858
    
    
    $
    14,887Realized losses
    
    
    (272
    )
    
    
    (654
    )
    
    
    (514
    )
    
    
    (1,383
    )Impairment losses on other than
temporarily impaired trust assets
    
    
    (11,910
    )
    
    
    (446
    )
    
    
    (20,726
    )
    
    
    (1,686
    )Interest income, dividend and other
ordinary income
    
    
    7,321
    
    
    
    7,388
    
    
    
    15,381
    
    
    
    13,234Trust expenses and income taxes
    
    
    (3,070
    )
    
    
    (2,909
    )
    
    
    (5,741
    )
    
    
    (5,436
    )Net trust investment income
    
    
    (4,818
    )
    
    
    11,130
    
    
    
    (5,742
    )
    
    
    19,616Non-controlling interest in funeral and
cemetery trust investment income
    
    
    7,138
    
    
    
    (8,898
    )
    
    
    8,958
    
    
    
    (15,065
    )Non-controlling interest in perpetual
care trust investment income
    
    
    (2,320
    )
    
    
    (2,232
    )
    
    
    (3,216
    )
    
    
    (4,551
    )Total non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    357
    
    
    
    567
    
    
    
    1,077
    
    
    
    1,617Total investment and other income, net
    
    $
    357
    
    
    $
    567
    
    
    $
    1,077
    
    
    $
    1,617
 
 (1)
    
    Investment and other income, net consists of interest income primarily on the
Companys cash, cash equivalents and marketable securities not held in trust. (7)
    
    Commitments and Contingencies
 Litigation
 Henrietta Torres and Teresa Fiore, on behalf of themselves and all others similarly situated
and the General Public v. Stewart Enterprises, Inc., et al
   18




---



##### Table of Contents



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




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7)
    
    Commitments and Contingencies(Continued)
    In Re: State Attorney General Civil Investigative Demands
 Other Litigation
  Securities and Exchange Commission Investigation
  Other
  20




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8)
    
    Reconciliation of Basic and Diluted Per Share Data
 Earnings
    
    
    Shares
    
    
    Per ShareThree Months Ended April 30, 2008
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataEarnings from continuing operations
    
    $
    13,940Basic earnings per common share:Earnings from continuing
operations available to common
shareholders
    
    $
    13,940
    
    
    
    94,525
    
    
    $
    .15Effect of dilutive securities:Time-vest stock options
assumed exercised and
restricted stock
    
    
    
    
    
    
    110Diluted earnings per common share:Earnings from continuing
operations available to common
shareholders plus time-vest
stock options assumed
exercised and restricted stock
    
    $
    13,940
    
    
    
    94,635
    
    
    $
    .15
 Earnings
    
    
    Shares
    
    
    Per ShareThree Months Ended April 30, 2007
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataEarnings from continuing operations
    
    $
    13,816Basic earnings per common share:Earnings from continuing
operations available to common
shareholders
    
    $
    13,816
    
    
    
    105,300
    
    
    $
    .13Effect of dilutive securities:Time-vest stock options
assumed exercised and
restricted stock
    
    
    
    
    
    
    240Diluted earnings per common share:Earnings from continuing
operations available to common
shareholders plus time-vest
stock options assumed
exercised and restricted stock
    
    $
    13,816
    
    
    
    105,540
    
    
    $
    .13
 Earnings
    
    
    Shares
    
    
    Per ShareSix Months Ended April 30, 2008
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataEarnings from continuing operations
    
    $
    22,825Basic earnings per common share:Earnings from continuing
operations available to common
shareholders
    
    $
    22,825
    
    
    
    95,667
    
    
    $
    .24Effect of dilutive securities:Time-vest stock options
assumed exercised and
restricted stock
    
    
    
    
    
    
    171Diluted earnings per common share:Earnings from continuing
operations available to common
shareholders plus time-vest
stock options assumed
exercised and restricted stock
    
    $
    22,825
    
    
    
    95,838
    
    
    $
    .24
 21




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8)
    
    Reconciliation of Basic and Diluted Per Share Data(Continued)
 Earnings
    
    
    Shares
    
    
    Per ShareSix Months Ended April 30, 2007
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataEarnings from continuing operations
    
    $
    25,789Basic earnings per common share:Earnings from continuing
operations available to common
shareholders
    
    $
    25,789
    
    
    
    105,097
    
    
    $
    .24Effect of dilutive securities:Time-vest stock options
assumed exercised and
restricted stock
    
    
    
    
    
    
    151Diluted earnings per common share:Earnings from continuing
operations available to common
shareholders plus time-vest
stock options assumed
exercised and restricted stock
    
    $
    25,789
    
    
    
    105,248
    
    
    $
    .24
    (9)
    
    Segment Data
  22




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9)
    
    Segment Data(Continued)
 Funeral Revenue
    
    
    Cemetery Revenue (1)
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2008
    
    
    April 30, 2007
    
    
    April 30, 2008
    
    
    April 30, 2007
    
    
    April 30, 2008
    
    
    April 30, 2007Eastern Division
    
    $
    31,399
    
    
    $
    31,066
    
    
    $
    32,993
    
    
    $
    38,428
    
    
    $
    64,392
    
    
    $
    69,494Western Division
    
    
    40,487
    
    
    
    37,281
    
    
    
    24,565
    
    
    
    22,883
    
    
    
    65,052
    
    
    
    60,164Corporate Trust
Management
(2)
    
    
    4,969
    
    
    
    4,986
    
    
    
    2,406
    
    
    
    2,384
    
    
    
    7,375
    
    
    
    7,370Total
    
    $
    76,855
    
    
    $
    73,333
    
    
    $
    59,964
    
    
    $
    63,695
    
    
    $
    136,819
    
    
    $
    137,028Funeral Revenue
    
    
    Cemetery Revenue (1)
    
    
    Total RevenueSix Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2008
    
    
    April 30, 2007
    
    
    April 30, 2008
    
    
    April 30, 2007
    
    
    April 30, 2008
    
    
    April 30, 2007Eastern Division
    
    $
    61,882
    
    
    $
    61,387
    
    
    $
    65,163
    
    
    $
    74,176
    
    
    $
    127,045
    
    
    $
    135,563Western Division
    
    
    78,917
    
    
    
    74,780
    
    
    
    46,926
    
    
    
    44,527
    
    
    
    125,843
    
    
    
    119,307Corporate Trust
Management
(2)
    
    
    9,505
    
    
    
    9,329
    
    
    
    4,699
    
    
    
    4,675
    
    
    
    14,204
    
    
    
    14,004Total
    
    $
    150,304
    
    
    $
    145,496
    
    
    $
    116,788
    
    
    $
    123,378
    
    
    $
    267,092
    
    
    $
    268,874Funeral Gross Profit
    
    
    Cemetery Gross Profit (1)
    
    
    Total Gross ProfitThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2008
    
    
    April 30, 2007
    
    
    April 30, 2008
    
    
    April 30, 2007
    
    
    April 30, 2008
    
    
    April 30, 2007Eastern Division
    
    $
    6,957
    
    
    $
    6,437
    
    
    $
    4,336
    
    
    $
    6,734
    
    
    $
    11,293
    
    
    $
    13,171Western Division
    
    
    10,843
    
    
    
    7,695
    
    
    
    6,567
    
    
    
    4,850
    
    
    
    17,410
    
    
    
    12,545Corporate Trust
Management
(2)
    
    
    4,766
    
    
    
    4,820
    
    
    
    2,165
    
    
    
    2,239
    
    
    
    6,931
    
    
    
    7,059Total
    
    $
    22,566
    
    
    $
    18,952
    
    
    $
    13,068
    
    
    $
    13,823
    
    
    $
    35,634
    
    
    $
    32,775Funeral Gross Profit
    
    
    Cemetery Gross Profit (1)
    
    
    Total Gross ProfitSix Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2008
    
    
    April 30, 2007
    
    
    April 30, 2008
    
    
    April 30, 2007
    
    
    April 30, 2008
    
    
    April 30, 2007Eastern Division
    
    $
    12,296
    
    
    $
    12,319
    
    
    $
    7,625
    
    
    $
    12,846
    
    
    $
    19,921
    
    
    $
    25,165Western Division
    
    
    19,207
    
    
    
    16,348
    
    
    
    10,328
    
    
    
    8,870
    
    
    
    29,535
    
    
    
    25,218Corporate Trust
Management
(2)
    
    
    9,065
    
    
    
    9,003
    
    
    
    4,183
    
    
    
    4,386
    
    
    
    13,248
    
    
    
    13,389Total
    
    $
    40,568
    
    
    $
    37,670
    
    
    $
    22,136
    
    
    $
    26,102
    
    
    $
    62,704
    
    
    $
    63,772Net Preneed Funeral Merchandise
    
    
    Net Preneed Cemetery Merchandise
    
    
    Net Total Preneed Merchandiseand Service Sales (3)
    
    

and Service Sales (3)
    
    
and Service Sales (3)Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2008
    
    
    April 30, 2007
    
    
    April 30, 2008
    
    
    April 30, 2007
    
    
    April 30, 2008
    
    
    April 30, 2007Eastern Division
    
    $
    10,859
    
    
    $
    12,389
    
    
    $
    9,959
    
    
    $
    9,716
    
    
    $
    20,818
    
    
    $
    22,105Western Division
    
    
    14,187
    
    
    
    16,618
    
    
    
    4,376
    
    
    
    4,016
    
    
    
    18,563
    
    
    
    20,634Total
    
    $
    25,046
    
    
    $
    29,007
    
    
    $
    14,335
    
    
    $
    13,732
    
    
    $
    39,381
    
    
    $
    42,739
 23




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9)
    
    Segment Data(Continued)
 Net Preneed Funeral Merchandise
    
    
    Net Preneed Cemetery Merchandise
    
    
    Net Total Preneed Merchandise andand Service Sales (3)
    
    
    and Service Sales (3)
    
    
    Service Sales (3)Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2008
    
    
    April 30, 2007
    
    
    April 30, 2008
    
    
    April 30, 2007
    
    
    April 30, 2008
    
    
    April 30, 2007Eastern Division
    
    $
    20,212
    
    
    $
    22,433
    
    
    $
    18,188
    
    
    $
    19,322
    
    
    $
    38,400
    
    
    $
    41,755Western Division
    
    
    26,747
    
    
    
    28,589
    
    
    
    8,137
    
    
    
    7,981
    
    
    
    34,884
    
    
    
    36,570Total
    
    $
    46,959
    
    
    $
    51,022
    
    
    $
    26,325
    
    
    $
    27,303
    
    
    $
    73,284
    
    
    $
    78,325
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of the
related geographic segment and amounted to $2,814 and $2,480 for the three months ended April
30, 2008 and 2007, respectively, and $5,406 and $4,825 for the six months ended April 30, 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 April 30, 2008 and 2007 were $1,315 and $1,459,
respectively, and funeral trust earnings for the three months ended April 30, 2008 and 2007
were $3,654 and $3,527, respectively. Trust management fees included in cemetery revenue for
the three months ended April 30, 2008 and 2007 were $1,291 and $1,323, respectively, and
cemetery trust earnings for the three months ended April 30, 2008 and 2007 were $1,115 and
$1,061, respectively. Trust management fees included in funeral revenue for the six months
ended April 30, 2008 and 2007 were $2,693 and $2,928, respectively, and funeral trust earnings
for the six months ended April 30, 2008 and 2007 were $6,812 and $6,401, respectively. Trust
management fees included in cemetery revenue for the six months ended April 30, 2008 and 2007
were $2,590 and $2,638, respectively, and cemetery trust earnings for the six months ended
April 30, 2008 and 2007 were $2,109 and $2,037, 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 April 30,
    
    
    Six Months Ended April 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Gross profit for reportable segments
    
    $
    35,634
    
    
    $
    32,775
    
    
    $
    62,704
    
    
    $
    63,772Corporate general and administrative expenses
    
    
    (7,803
    )
    
    
    (7,744
    )
    
    
    (16,038
    )
    
    
    (14,786
    )Hurricane related charges, net
    
    
    (169
    )
    
    
    (283
    )
    
    
    (10
    )
    
    
    (2,133
    )Separation charges
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    (532
    )Gains on dispositions and impairment (losses), net
    
    
    (19
    )
    
    
    (8
    )
    
    
    128
    
    
    
    90Other operating income, net
    
    
    104
    
    
    
    884
    
    
    
    346
    
    
    
    1,151Interest expense
    
    
    (6,093
    )
    
    
    (6,295
    )
    
    
    (11,981
    )
    
    
    (13,052
    )Investment and other income, net
    
    
    357
    
    
    
    567
    
    
    
    1,077
    
    
    
    1,617Earnings from continuing operations before
income taxes
    
    $
    22,011
    
    
    $
    19,849
    
    
    $
    36,226
    
    
    $
    36,127
 24




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (10)
    
    Supplementary Information
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Service revenueFuneral
    
    $
    47,965
    
    
    $
    44,526
    
    
    $
    93,408
    
    
    $
    88,369Cemetery
    
    
    17,207
    
    
    
    16,786
    
    
    
    32,865
    
    
    
    32,27065,172
    
    
    
    61,312
    
    
    
    126,273
    
    
    
    120,639Merchandise revenueFuneral
    
    
    26,939
    
    
    
    26,708
    
    
    
    52,927
    
    
    
    52,941Cemetery
    
    
    38,868
    
    
    
    42,845
    
    
    
    76,074
    
    
    
    82,93065,807
    
    
    
    69,553
    
    
    
    129,001
    
    
    
    135,871Other revenueFuneral
    
    
    1,951
    
    
    
    2,099
    
    
    
    3,969
    
    
    
    4,186Cemetery
    
    
    3,889
    
    
    
    4,064
    
    
    
    7,849
    
    
    
    8,1785,840
    
    
    
    6,163
    
    
    
    11,818
    
    
    
    12,364Total revenue
    
    $
    136,819
    
    
    $
    137,028
    
    
    $
    267,092
    
    
    $
    268,874Service costsFuneral
    
    $
    15,252
    
    
    $
    14,633
    
    
    $
    30,581
    
    
    $
    29,016Cemetery
    
    
    10,413
    
    
    
    10,769
    
    
    
    20,527
    
    
    
    21,03225,665
    
    
    
    25,402
    
    
    
    51,108
    
    
    
    50,048Merchandise costsFuneral
    
    
    15,899
    
    
    
    16,970
    
    
    
    31,973
    
    
    
    32,247Cemetery
    
    
    22,292
    
    
    
    25,372
    
    
    
    46,203
    
    
    
    49,04438,191
    
    
    
    42,342
    
    
    
    78,176
    
    
    
    81,291General and administrative expensesFuneral
    
    
    23,138
    
    
    
    22,778
    
    
    
    47,182
    
    
    
    46,563Cemetery
    
    
    14,191
    
    
    
    13,731
    
    
    
    27,922
    
    
    
    27,20037,329
    
    
    
    36,509
    
    
    
    75,104
    
    
    
    73,763Total costs
    
    $
    101,185
    
    
    $
    104,253
    
    
    $
    204,388
    
    
    $
    205,102
  (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes
  25




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
  Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended April 30, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    71,050
    
    
    $
    535
    
    
    $
    5,270
    
    
    $
    
    
    
    $
    76,855Cemetery
    
    
    
    
    
    
    54,087
    
    
    
    896
    
    
    
    4,981
    
    
    
    
    
    
    
    59,964
    
    
    
    125,137
    
    
    
    1,431
    
    
    
    10,251
    
    
    
    
    
    
    
    136,819Costs and expenses:Funeral
    
    
    
    
    
    
    50,549
    
    
    
    325
    
    
    
    3,415
    
    
    
    
    
    
    
    54,289Cemetery
    
    
    
    
    
    
    42,444
    
    
    
    671
    
    
    
    3,781
    
    
    
    
    
    
    
    46,896
    
    
    
    92,993
    
    
    
    996
    
    
    
    7,196
    
    
    
    
    
    
    
    101,185Gross profit
    
    
    
    
    
    
    32,144
    
    
    
    435
    
    
    
    3,055
    
    
    
    
    
    
    
    35,634Corporate general and
administrative expenses
    
    
    (7,803
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,803
    )Hurricane related charges, net
    
    
    (377
    )
    
    
    37
    
    
    
    171
    
    
    
    
    
    
    
    
    
    
    
    (169
    )Gains on dispositions and
impairment (losses), net
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )Other operating income, net
    
    
    36
    
    
    
    9
    
    
    
    1
    
    
    
    58
    
    
    
    
    
    
    
    104Operating earnings (loss)
    
    
    (8,144
    )
    
    
    32,171
    
    
    
    607
    
    
    
    3,113
    
    
    
    
    
    
    
    27,747Interest expense
    
    
    (1,033
    )
    
    
    (4,528
    )
    
    
    (44
    )
    
    
    (488
    )
    
    
    
    
    
    
    (6,093
    )Investment and other income, net
    
    
    349
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    357Equity in subsidiaries
    
    
    21,479
    
    
    
    294
    
    
    
    
    
    
    
    
    
    
    
    (21,773
    )
    
    
    Earnings from continuing
operations before income
taxes
    
    
    12,651
    
    
    
    27,945
    
    
    
    563
    
    
    
    2,625
    
    
    
    (21,773
    )
    
    
    22,011Income tax expense (benefit)
    
    
    (1,289
    )
    
    
    8,494
    
    
    
    121
    
    
    
    745
    
    
    
    
    
    
    
    8,071Net earnings
    
    
    13,940
    
    
    
    19,451
    
    
    
    442
    
    
    
    1,880
    
    
    
    (21,773
    )
    
    
    13,940Other comprehensive loss, net
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    6
    
    
    
    (27
    )Comprehensive income
    
    $
    13,913
    
    
    $
    19,451
    
    
    $
    442
    
    
    $
    1,874
    
    
    $
    (21,767
    )
    
    $
    13,913
 26




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended April 30, 2007Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    67,770
    
    
    $
    408
    
    
    $
    5,155
    
    
    $
    
    
    
    $
    73,333Cemetery
    
    
    
    
    
    
    57,323
    
    
    
    803
    
    
    
    5,569
    
    
    
    
    
    
    
    63,695
    
    
    
    125,093
    
    
    
    1,211
    
    
    
    10,724
    
    
    
    
    
    
    
    137,028Costs and expenses:Funeral
    
    
    
    
    
    
    51,036
    
    
    
    269
    
    
    
    3,076
    
    
    
    
    
    
    
    54,381Cemetery
    
    
    
    
    
    
    45,489
    
    
    
    662
    
    
    
    3,721
    
    
    
    
    
    
    
    49,872
    
    
    
    96,525
    
    
    
    931
    
    
    
    6,797
    
    
    
    
    
    
    
    104,253Gross profit
    
    
    
    
    
    
    28,568
    
    
    
    280
    
    
    
    3,927
    
    
    
    
    
    
    
    32,775Corporate general and administrative
expenses
    
    
    (7,744
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,744
    )Hurricane related charges, net
    
    
    
    
    
    
    (279
    )
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (283
    )Separation charges
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )Other operating income, net
    
    
    247
    
    
    
    571
    
    
    
    1
    
    
    
    65
    
    
    
    
    
    
    
    884Operating earnings (loss)
    
    
    (7,497
    )
    
    
    28,805
    
    
    
    277
    
    
    
    3,992
    
    
    
    
    
    
    
    25,577Interest expense
    
    
    (1,824
    )
    
    
    (3,879
    )
    
    
    (58
    )
    
    
    (534
    )
    
    
    
    
    
    
    (6,295
    )Investment and other income, net
    
    
    550
    
    
    
    13
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    567Equity in subsidiaries
    
    
    21,440
    
    
    
    157
    
    
    
    
    
    
    
    
    
    
    
    (21,597
    )
    
    
    Earnings from continuing operations
before income taxes
    
    
    12,669
    
    
    
    25,096
    
    
    
    219
    
    
    
    3,462
    
    
    
    (21,597
    )
    
    
    19,849Income tax expense (benefit)
    
    
    (960
    )
    
    
    6,000
    
    
    
    83
    
    
    
    910
    
    
    
    
    
    
    
    6,033Earnings from continuing operations
    
    
    13,629
    
    
    
    19,096
    
    
    
    136
    
    
    
    2,552
    
    
    
    (21,597
    )
    
    
    13,816Discontinued operations:Loss from discontinued operations
before income taxes
    
    
    
    
    
    
    (341
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (341
    )Income tax benefit
    
    
    
    
    
    
    (154
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (154
    )Loss from discontinued operations
    
    
    
    
    
    
    (187
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (187
    )Net earnings
    
    
    13,629
    
    
    
    18,909
    
    
    
    136
    
    
    
    2,552
    
    
    
    (21,597
    )
    
    
    13,629Other comprehensive income (loss), net
    
    
    (130
    )
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    (5
    )
    
    
    (130
    )Comprehensive income
    
    $
    13,499
    
    
    $
    18,909
    
    
    $
    136
    
    
    $
    2,557
    
    
    $
    (21,602
    )
    
    $
    13,499
 27




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Six Months Ended April 30, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    139,097
    
    
    $
    1,029
    
    
    $
    10,178
    
    
    $
    
    
    
    $
    150,304Cemetery
    
    
    
    
    
    
    105,159
    
    
    
    1,723
    
    
    
    9,906
    
    
    
    
    
    
    
    116,788
    
    
    
    244,256
    
    
    
    2,752
    
    
    
    20,084
    
    
    
    
    
    
    
    267,092Costs and expenses:Funeral
    
    
    
    
    
    
    102,322
    
    
    
    633
    
    
    
    6,781
    
    
    
    
    
    
    
    109,736Cemetery
    
    
    
    
    
    
    85,339
    
    
    
    1,457
    
    
    
    7,856
    
    
    
    
    
    
    
    94,652
    
    
    
    187,661
    
    
    
    2,090
    
    
    
    14,637
    
    
    
    
    
    
    
    204,388Gross profit
    
    
    
    
    
    
    56,595
    
    
    
    662
    
    
    
    5,447
    
    
    
    
    
    
    
    62,704Corporate general and
administrative expenses
    
    
    (16,038
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,038
    )Hurricane related charges, net
    
    
    (377
    )
    
    
    37
    
    
    
    330
    
    
    
    
    
    
    
    
    
    
    
    (10
    )Gains on dispositions and
impairment (losses), net
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128Other operating income, net
    
    
    57
    
    
    
    168
    
    
    
    1
    
    
    
    120
    
    
    
    
    
    
    
    346Operating earnings (loss)
    
    
    (16,358
    )
    
    
    56,928
    
    
    
    993
    
    
    
    5,567
    
    
    
    
    
    
    
    47,130Interest expense
    
    
    (1,733
    )
    
    
    (9,047
    )
    
    
    (73
    )
    
    
    (1,128
    )
    
    
    
    
    
    
    (11,981
    )Investment and other income, net
    
    
    1,051
    
    
    
    21
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    1,077Equity in subsidiaries
    
    
    37,805
    
    
    
    492
    
    
    
    
    
    
    
    
    
    
    
    (38,297
    )
    
    
    Earnings from continuing
operations before income taxes
    
    
    20,765
    
    
    
    48,394
    
    
    
    920
    
    
    
    4,444
    
    
    
    (38,297
    )
    
    
    36,226Income tax expense (benefit)
    
    
    (2,060
    )
    
    
    14,044
    
    
    
    204
    
    
    
    1,213
    
    
    
    
    
    
    
    13,401Net earnings
    
    
    22,825
    
    
    
    34,350
    
    
    
    716
    
    
    
    3,231
    
    
    
    (38,297
    )
    
    
    22,825Other comprehensive income, net
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    (21
    )
    
    
    43Comprehensive income
    
    $
    22,868
    
    
    $
    34,350
    
    
    $
    716
    
    
    $
    3,252
    
    
    $
    (38,318
    )
    
    $
    22,868
 28




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Six Months Ended April 30, 2007Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    134,558
    
    
    $
    775
    
    
    $
    10,163
    
    
    $
    
    
    
    $
    145,496Cemetery
    
    
    
    
    
    
    110,877
    
    
    
    1,519
    
    
    
    10,982
    
    
    
    
    
    
    
    123,378
    
    
    
    245,435
    
    
    
    2,294
    
    
    
    21,145
    
    
    
    
    
    
    
    268,874Costs and expenses:Funeral
    
    
    
    
    
    
    101,062
    
    
    
    506
    
    
    
    6,258
    
    
    
    
    
    
    
    107,826Cemetery
    
    
    
    
    
    
    88,060
    
    
    
    1,233
    
    
    
    7,983
    
    
    
    
    
    
    
    97,276
    
    
    
    189,122
    
    
    
    1,739
    
    
    
    14,241
    
    
    
    
    
    
    
    205,102Gross profit
    
    
    
    
    
    
    56,313
    
    
    
    555
    
    
    
    6,904
    
    
    
    
    
    
    
    63,772Corporate general and
administrative expenses
    
    
    (14,786
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,786
    )Hurricane related charges, net
    
    
    (3
    )
    
    
    (835
    )
    
    
    (1,295
    )
    
    
    
    
    
    
    
    
    
    
    (2,133
    )Separation charges
    
    
    (384
    )
    
    
    (148
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (532
    )Gains on dispositions and
impairment (losses), net
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90Other operating income, net
    
    
    277
    
    
    
    735
    
    
    
    1
    
    
    
    138
    
    
    
    
    
    
    
    1,151Operating earnings (loss)
    
    
    (14,896
    )
    
    
    56,155
    
    
    
    (739
    )
    
    
    7,042
    
    
    
    
    
    
    
    47,562Interest expense
    
    
    (3,581
    )
    
    
    (8,269
    )
    
    
    (116
    )
    
    
    (1,086
    )
    
    
    
    
    
    
    (13,052
    )Investment and other income, net
    
    
    1,586
    
    
    
    26
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    1,617Equity in subsidiaries
    
    
    40,416
    
    
    
    248
    
    
    
    
    
    
    
    
    
    
    
    (40,664
    )
    
    
    Earnings (loss) from continuing
operations before income taxes
    
    
    23,525
    
    
    
    48,160
    
    
    
    (855
    )
    
    
    5,961
    
    
    
    (40,664
    )
    
    
    36,127Income tax expense (benefit)
    
    
    (2,030
    )
    
    
    10,720
    
    
    
    (319
    )
    
    
    1,967
    
    
    
    
    
    
    
    10,338Earnings (loss) from continuing
operations
    
    
    25,555
    
    
    
    37,440
    
    
    
    (536
    )
    
    
    3,994
    
    
    
    (40,664
    )
    
    
    25,789Discontinued operations:Loss from discontinued
operations before income taxes
    
    
    
    
    
    
    (381
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (381
    )Income tax benefit
    
    
    
    
    
    
    (147
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (147
    )Loss from discontinued operations
    
    
    
    
    
    
    (234
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (234
    )Net earnings (loss)
    
    
    25,555
    
    
    
    37,206
    
    
    
    (536
    )
    
    
    3,994
    
    
    
    (40,664
    )
    
    
    25,555Other comprehensive income, net
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (3
    )
    
    
    3Comprehensive income (loss)
    
    $
    25,558
    
    
    $
    37,206
    
    
    $
    (536
    )
    
    $
    3,997
    
    
    $
    (40,667
    )
    
    $
    25,558
 29




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 April 30, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    26,521
    
    
    $
    6,504
    
    
    $
    40
    
    
    $
    2,187
    
    
    $
    
    
    
    $
    35,252Marketable securities
    
    
    9,977
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    
    
    
    
    10,025Receivables, net of allowances
    
    
    4,175
    
    
    
    54,683
    
    
    
    707
    
    
    
    4,779
    
    
    
    
    
    
    
    64,344Inventories
    
    
    328
    
    
    
    33,731
    
    
    
    314
    
    
    
    2,487
    
    
    
    
    
    
    
    36,860Prepaid expenses
    
    
    1,316
    
    
    
    7,596
    
    
    
    32
    
    
    
    1,341
    
    
    
    
    
    
    
    10,285Deferred income taxes, net
    
    
    1,001
    
    
    
    5,901
    
    
    
    86
    
    
    
    1,295
    
    
    
    
    
    
    
    8,283Total current assets
    
    
    43,318
    
    
    
    108,415
    
    
    
    1,179
    
    
    
    12,137
    
    
    
    
    
    
    
    165,049Receivables due beyond one year, net of
allowances
    
    
    10,358
    
    
    
    53,901
    
    
    
    378
    
    
    
    16,627
    
    
    
    
    
    
    
    81,264Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    461,081
    
    
    
    
    
    
    
    10,438
    
    
    
    
    
    
    
    471,519Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    224,509
    
    
    
    1,161
    
    
    
    8,861
    
    
    
    
    
    
    
    234,531Goodwill
    
    
    
    
    
    
    253,353
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    273,188Cemetery property, at cost
    
    
    
    
    
    
    341,323
    
    
    
    11,561
    
    
    
    25,475
    
    
    
    
    
    
    
    378,359Property and equipment, at cost
    
    
    47,010
    
    
    
    444,129
    
    
    
    1,829
    
    
    
    37,545
    
    
    
    
    
    
    
    530,513Less accumulated depreciation
    
    
    28,818
    
    
    
    181,980
    
    
    
    740
    
    
    
    13,446
    
    
    
    
    
    
    
    224,984Net property and equipment
    
    
    18,192
    
    
    
    262,149
    
    
    
    1,089
    
    
    
    24,099
    
    
    
    
    
    
    
    305,529Deferred income taxes, net
    
    
    30,105
    
    
    
    158,178
    
    
    
    
    
    
    
    9,012
    
    
    
    (3,362
    )
    
    
    193,933Cemetery perpetual care trust investments
    
    
    
    
    
    
    211,567
    
    
    
    8,077
    
    
    
    3,903
    
    
    
    
    
    
    
    223,547Other assets
    
    
    10,244
    
    
    
    6,589
    
    
    
    16
    
    
    
    1,080
    
    
    
    
    
    
    
    17,929Intercompany receivables
    
    
    871,478
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (871,478
    )
    
    
    Equity in subsidiaries
    
    
    24,600
    
    
    
    7,318
    
    
    
    
    
    
    
    
    
    
    
    (31,918
    )
    
    
    Total assets
    
    $
    1,008,295
    
    
    $
    2,088,383
    
    
    $
    23,509
    
    
    $
    131,419
    
    
    $
    (906,758
    )
    
    $
    2,344,848LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    66
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    66Accounts payable
    
    
    2,026
    
    
    
    22,647
    
    
    
    216
    
    
    
    1,442
    
    
    
    
    
    
    
    26,331Accrued expenses and other current
liabilities
    
    
    16,113
    
    
    
    42,337
    
    
    
    13
    
    
    
    2,625
    
    
    
    
    
    
    
    61,088Total current liabilities
    
    
    18,205
    
    
    
    64,984
    
    
    
    229
    
    
    
    4,067
    
    
    
    
    
    
    
    87,485Long-term debt, less current maturities
    
    
    450,097
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,097Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    3,362
    
    
    
    
    
    
    
    (3,362
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    848,540
    
    
    
    4,091
    
    
    
    18,847
    
    
    
    (871,478
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    206,042
    
    
    
    
    
    
    
    45,137
    
    
    
    
    
    
    
    251,179Deferred preneed cemetery revenue
    
    
    
    
    
    
    256,679
    
    
    
    428
    
    
    
    27,156
    
    
    
    
    
    
    
    284,263Non-controlling interest in funeral and
cemetery trusts
    
    
    
    
    
    
    616,329
    
    
    
    1,080
    
    
    
    6,628
    
    
    
    
    
    
    
    624,037Other long-term liabilities
    
    
    16,224
    
    
    
    2,928
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,152Negative equity in subsidiaries
    
    
    116,938
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (116,938
    )
    
    
    Total liabilities
    
    
    601,464
    
    
    
    1,995,502
    
    
    
    9,190
    
    
    
    101,835
    
    
    
    (991,778
    )
    
    
    1,716,213Non-controlling interest in perpetual
care trusts
    
    
    
    
    
    
    209,819
    
    
    
    8,081
    
    
    
    3,904
    
    
    
    
    
    
    
    221,804Common stock
    
    
    93,818
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    93,818Other
    
    
    312,959
    
    
    
    (117,040
    )
    
    
    5,914
    
    
    
    25,596
    
    
    
    85,530
    
    
    
    312,959Accumulated other comprehensive income
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    (32
    )
    
    
    54Total shareholders equity
    
    
    406,831
    
    
    
    (116,938
    )
    
    
    6,238
    
    
    
    25,680
    
    
    
    85,020
    
    
    
    406,831Total liabilities and shareholders equity
    
    $
    1,008,295
    
    
    $
    2,088,383
    
    
    $
    23,509
    
    
    $
    131,419
    
    
    $
    (906,758
    )
    
    $
    2,344,848
 30




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 October 31, 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 tax
    
    
    
    
    
    
    
    
    
    
    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
 31




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended April 30, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating
activities
    
    $
    (8,124
    )
    
    $
    30,484
    
    
    $
    748
    
    
    $
    5,289
    
    
    $
    
    
    
    $
    28,397Cash flows from investing activities:Proceeds from sales of marketable
securities
    
    
    9,969
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    10,219Purchases of marketable securities
    
    
    (19,894
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (19,897
    )Proceeds from sale of assets, net
    
    
    
    
    
    
    338
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    338Purchase of subsidiaries and other
investments, net of cash acquired
    
    
    (1,378
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,378
    )Additions to property and equipment
    
    
    (3,668
    )
    
    
    (8,808
    )
    
    
    (416
    )
    
    
    (493
    )
    
    
    
    
    
    
    (13,385
    )Other
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Net cash used in investing activities
    
    
    (14,971
    )
    
    
    (8,449
    )
    
    
    (416
    )
    
    
    (246
    )
    
    
    
    
    
    
    (24,082
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (150
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )Intercompany receivables (payables)
    
    
    27,022
    
    
    
    (22,216
    )
    
    
    (328
    )
    
    
    (4,478
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    1,458
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,458Purchase and retirement of common stock
    
    
    (37,320
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,320
    )Dividends
    
    
    (4,761
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,761
    )Excess tax benefits from share-based
payment arrangements
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165Net cash used in financing activities
    
    
    (13,586
    )
    
    
    (22,216
    )
    
    
    (328
    )
    
    
    (4,478
    )
    
    
    
    
    
    
    (40,608
    )Net increase (decrease) in cash
    
    
    (36,681
    )
    
    
    (181
    )
    
    
    4
    
    
    
    565
    
    
    
    
    
    
    
    (36,293
    )Cash and cash equivalents, beginning of
period
    
    
    63,202
    
    
    
    6,685
    
    
    
    36
    
    
    
    1,622
    
    
    
    
    
    
    
    71,545Cash and cash equivalents, end of period
    
    $
    26,521
    
    
    $
    6,504
    
    
    $
    40
    
    
    $
    2,187
    
    
    $
    
    
    
    $
    35,252
 32




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended April 30, 2007Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (719
    )
    
    $
    27,181
    
    
    $
    (1,191
    )
    
    $
    7,260
    
    
    $
    
    
    
    $
    32,531Cash flows from investing activities:Purchases of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (141
    )
    
    
    
    
    
    
    (141
    )Proceeds from sale of assets, net
    
    
    
    
    
    
    1,635
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,635Purchase of subsidiaries and other
investments, net of cash acquired
    
    
    
    
    
    
    (2,805
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,805
    )Insurance proceeds related to
hurricane damaged properties
    
    
    
    
    
    
    1,310
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    1,400Additions to property and equipment
    
    
    (3,688
    )
    
    
    (9,281
    )
    
    
    (105
    )
    
    
    (531
    )
    
    
    
    
    
    
    (13,605
    )Other
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35Net cash used in investing activities
    
    
    (3,688
    )
    
    
    (9,106
    )
    
    
    (15
    )
    
    
    (672
    )
    
    
    
    
    
    
    (13,481
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (13,561
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,561
    )Intercompany receivables (payables)
    
    
    25,825
    
    
    
    (20,106
    )
    
    
    1,186
    
    
    
    (6,905
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    2,414
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,414Dividends
    
    
    (5,265
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,265
    )Excess tax benefits from share-based
payment arrangements
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37Net cash provided by (used in)
financing activities
    
    
    9,450
    
    
    
    (20,106
    )
    
    
    1,186
    
    
    
    (6,905
    )
    
    
    
    
    
    
    (16,375
    )Net increase (decrease) in cash
    
    
    5,043
    
    
    
    (2,031
    )
    
    
    (20
    )
    
    
    (317
    )
    
    
    
    
    
    
    2,675Cash and cash equivalents, beginning of
period
    
    
    39,120
    
    
    
    3,254
    
    
    
    37
    
    
    
    1,459
    
    
    
    
    
    
    
    43,870Cash and cash equivalents, end of period
    
    $
    44,163
    
    
    $
    1,223
    
    
    $
    17
    
    
    $
    1,142
    
    
    $
    
    
    
    $
    46,545
 (12)
    
    Dispositions and Acquisitions
 Dispositions
  Acquisitions
  33




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (13)
    
    Separation Charges
  (14)
    
    Consolidated Comprehensive Income
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net earnings
    
    $
    13,940
    
    
    $
    13,629
    
    
    $
    22,825
    
    
    $
    25,555Other comprehensive income (loss):Unrealized appreciation (depreciation)
of investments, net of deferred tax
(expense) benefit of $17, $79, ($26),
and ($2), respectively
    
    
    (27
    )
    
    
    (130
    )
    
    
    43
    
    
    
    3(Increase) reduction in net unrealized
losses associated with
available-for-sale securities of the
trusts
    
    
    3,934
    
    
    
    415
    
    
    
    (53,613
    )
    
    
    15,244Reclassification of the net unrealized
losses activity attributable to the
non-controlling interest holders
    
    
    (3,934
    )
    
    
    (415
    )
    
    
    53,613
    
    
    
    (15,244
    )Total other comprehensive income (loss)
    
    
    (27
    )
    
    
    (130
    )
    
    
    43
    
    
    
    3Total comprehensive income
    
    $
    13,913
    
    
    $
    13,499
    
    
    $
    22,868
    
    
    $
    25,558
 (15)
    
    Hurricane Related Charges
   34




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (15)
    
    Hurricane Related Charges-(Continued)
  35




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
 General
       36




---



##### Table of Contents



Financial Summary
       37




---



##### Table of Contents



Critical Accounting Policies
    38




---



##### Table of Contents



Results of Operations
  Three Months Ended April 30, 2008 Compared to Three Months Ended April 30, 2007Continuing
Operations
 Funeral Operations
 Three Months Ended April 30,Increase2008
    
    
    2007
    
    
    (Decrease)(In millions)Funeral Revenue:Eastern Division
    
    $
    31.4
    
    
    $
    31.1
    
    
    $
    .3Western Division
    
    
    40.4
    
    
    
    37.2
    
    
    
    3.2Corporate Trust Management (1)
    
    
    5.0
    
    
    
    5.0
    
    
    
    Total Funeral Revenue
    
    $
    76.8
    
    
    $
    73.3
    
    
    $
    3.5Funeral Costs:Eastern Division
    
    $
    24.4
    
    
    $
    24.6
    
    
    $
    (.2
    )Western Division
    
    
    29.6
    
    
    
    29.6
    
    
    
    Corporate Trust Management (1)
    
    
    .3
    
    
    
    .2
    
    
    
    .1Total Funeral Costs
    
    $
    54.3
    
    
    $
    54.4
    
    
    $
    (.1
    )Funeral Gross Profit:Eastern Division
    
    $
    7.0
    
    
    $
    6.5
    
    
    $
    .5Western Division
    
    
    10.8
    
    
    
    7.6
    
    
    
    3.2Corporate Trust Management (1)
    
    
    4.7
    
    
    
    4.8
    
    
    
    (.1
    )Total Funeral Gross Profit
    
    $
    22.5
    
    
    $
    18.9
    
    
    $
    3.6
 39




---



##### Table of Contents



Same-Store Analysis
 Change in Average
    
    
    
    
    
    Same-StoreRevenue Per
    
    Change in Same-Store
    
    Cremation RateFuneral Service
    
    Funeral Services
    
    2008
    
    2007Eastern Division
    
    
    1.7
    %
    
    
    (.4
    )%
    
    
    35.2
    %
    
    
    34.7
    %Western Division
    
    
    5.0
    %
    
    
    5.5
    %
    
    
    43.1
    %
    
    
    42.2
    %Total
    
    
    3.3
    % (1)
    
    
    2.9
    %
    
    
    39.9
    %
    
    
    38.9
    %
 
 (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 April 30, 2008 and 2007 were $1.3 million and $1.5 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 April 30, 2008 and 2007 were $3.7 million and $3.5 million, respectively. Consolidated OperationsFuneral
   Segment DiscussionFuneral
   40




---



##### Table of Contents



Cemetery Operations
 Three Months Ended April 30,Increase2008
    
    
    2007
    
    
    (Decrease)(In millions)Cemetery Revenue:Eastern Division
    
    $
    33.0
    
    
    $
    38.4
    
    
    $
    (5.4
    )Western Division
    
    
    24.6
    
    
    
    22.9
    
    
    
    1.7Corporate Trust Management (1)
    
    
    2.4
    
    
    
    2.4
    
    
    
    Total Cemetery Revenue
    
    $
    60.0
    
    
    $
    63.7
    
    
    $
    (3.7
    )Cemetery Costs:Eastern Division
    
    $
    28.7
    
    
    $
    31.7
    
    
    $
    (3.0
    )Western Division
    
    
    18.0
    
    
    
    18.0
    
    
    
    Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Cemetery Costs
    
    $
    46.9
    
    
    $
    49.9
    
    
    $
    (3.0
    )Cemetery Gross Profit:Eastern Division
    
    $
    4.3
    
    
    $
    6.7
    
    
    $
    (2.4
    )Western Division
    
    
    6.6
    
    
    
    4.9
    
    
    
    1.7Corporate Trust Management (1)
    
    
    2.2
    
    
    
    2.2
    
    
    
    Total Cemetery Gross Profit
    
    $
    13.1
    
    
    $
    13.8
    
    
    $
    (.7
    )
 
 (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 both the three months ended April 30, 2008 and 2007 were $1.3 million, and cemetery trust
earnings for both the three months ended April 30, 2008 and 2007 were $1.1 million. Perpetual
care trust earnings are included in the revenues and gross profit of the related geographic
segment. Consolidated OperationsCemetery
    41




---



##### Table of Contents



Segment DiscussionCemetery
     Other
   42




---



##### Table of Contents



Preneed Sales into and Deliveries out of the Backlog
   43




---



##### Table of Contents



Six Months Ended April 30, 2008 Compared to Six Months Ended April 30, 2007Continuing Operations
 Funeral Operations
 Six Months Ended April 30,2008
    
    
    2007
    
    
    Increase(In millions)Funeral Revenue:Eastern Division
    
    $
    61.9
    
    
    $
    61.4
    
    
    $
    .5Western Division
    
    
    78.9
    
    
    
    74.8
    
    
    
    4.1Corporate Trust Management (1)
    
    
    9.5
    
    
    
    9.3
    
    
    
    .2Total Funeral Revenue
    
    $
    150.3
    
    
    $
    145.5
    
    
    $
    4.8Funeral Costs:Eastern Division
    
    $
    49.6
    
    
    $
    49.1
    
    
    $
    .5Western Division
    
    
    59.7
    
    
    
    58.4
    
    
    
    1.3Corporate Trust Management (1)
    
    
    .4
    
    
    
    .3
    
    
    
    .1Total Funeral Costs
    
    $
    109.7
    
    
    $
    107.8
    
    
    $
    1.9Funeral Gross Profit:Eastern Division
    
    $
    12.3
    
    
    $
    12.3
    
    
    $
    Western Division
    
    
    19.2
    
    
    
    16.4
    
    
    
    2.8Corporate Trust Management (1)
    
    
    9.1
    
    
    
    9.0
    
    
    
    .1Total Funeral Gross Profit
    
    $
    40.6
    
    
    $
    37.7
    
    
    $
    2.9
 Same-Store Analysis
 Change in AverageRevenue Per
    
    Change in Same-Store
    
    Same StoreFuneral Service
    
    Funeral Services
    
    Cremation Rate2008
    
    2007Eastern Division
    
    
    (.2
    )%
    
    
    .7
    %
    
    
    35.6
    %
    
    
    34.5
    %Western Division
    
    
    3.3
    %
    
    
    4.0
    %
    
    
    43.2
    %
    
    
    42.2
    %Total
    
    
    1.6
    % (1)
    
    
    2.6
    %
    
    
    39.9
    %
    
    
    38.9
    %
 
 (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 six
months ended April 30, 2008 and 2007 were $2.7 million and $2.9 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 six
months ended April 30, 2008 and 2007 were $6.8 million and $6.4 million, respectively. Consolidated OperationsFuneral
  44




---



##### Table of Contents



Segment DiscussionFuneral
   Cemetery Operations
 Six Months Ended April 30,Increase2008
    
    
    2007
    
    
    (Decrease)(In millions)Cemetery Revenue:Eastern Division
    
    $
    65.2
    
    
    $
    74.2
    
    
    $
    (9.0
    )Western Division
    
    
    46.9
    
    
    
    44.5
    
    
    
    2.4Corporate Trust Management (1)
    
    
    4.7
    
    
    
    4.7
    
    
    
    Total Cemetery Revenue
    
    $
    116.8
    
    
    $
    123.4
    
    
    $
    (6.6
    )Cemetery Costs:Eastern Division
    
    $
    57.6
    
    
    $
    61.4
    
    
    $
    (3.8
    )Western Division
    
    
    36.6
    
    
    
    35.6
    
    
    
    1.0Corporate Trust Management (1)
    
    
    .5
    
    
    
    .3
    
    
    
    .2Total Cemetery Costs
    
    $
    94.7
    
    
    $
    97.3
    
    
    $
    (2.6
    )Cemetery Gross Profit:Eastern Division
    
    $
    7.6
    
    
    $
    12.8
    
    
    $
    (5.2
    )Western Division
    
    
    10.3
    
    
    
    8.9
    
    
    
    1.4Corporate Trust Management (1)
    
    
    4.2
    
    
    
    4.4
    
    
    
    (.2
    )Total Cemetery Gross Profit
    
    $
    22.1
    
    
    $
    26.1
    
    
    $
    (4.0
    )
 
 (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 both the six months ended April 30, 2008 and 2007 were 45




---



##### Table of Contents



Consolidated OperationsCemetery
    Segment DiscussionCemetery
     46




---



##### Table of Contents



Other
          47




---



##### Table of Contents



Preneed Sales into and Deliveries out of the Backlog
   Liquidity and Capital Resources
 General
   48




---



##### Table of Contents



Cash Flow
    49




---



##### Table of Contents



Contractual Obligations and Commercial Commitments
  Payments Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    More ThanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsLong-term debt obligations (1)
    
    $
    450.2
    
    
    $
    .1
    
    
    $
    
    
    
    $
    200.0
    
    
    $
    250.1Interest on long-term debt (2)
    
    
    123.5
    
    
    
    20.6
    
    
    
    41.3
    
    
    
    41.3
    
    
    
    20.3Operating and capital lease obligations (3)
    
    
    30.1
    
    
    
    2.3
    
    
    
    7.2
    
    
    
    3.7
    
    
    
    16.9Non-competition and other agreements (4)
    
    
    1.9
    
    
    
    .9
    
    
    
    .7
    
    
    
    .3
    
    
    
    $
    605.7
    
    
    $
    23.9
    
    
    $
    49.2
    
    
    $
    245.3
    
    
    $
    287.3
 
 (1)
    
    See below for a breakdown of our future scheduled principal payments and maturities
of our long-term debt by type as of April 30, 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 April 30, 2008 are
$2.3 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,PrincipallySellerRevolving
    
    
    Senior
    
    
    
    
    
    
    FinancingFiscal Year Ending
    
    Credit
    
    
    Convertible
    
    
    Senior
    
    
    of AcquiredOctober 31,
    
    Facility
    
    
    Notes
    
    
    Notes
    
    
    Operations
    
    
    Total2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    .1
    
    
    $
    .12009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    
    
    
    
    250.0
    
    
    
    200.0
    
    
    
    .1
    
    
    
    450.1Total long-term debt
    
    $
    
    
    
    $
    250.0
    
    
    $
    200.0
    
    
    $
    .2
    
    
    $
    450.2
 Off-Balance Sheet Arrangements
  50




---



##### Table of Contents



(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(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.
 Ratio of Earnings to Fixed Charges
  Six Months Ended
    
    Years Ended October 31,April 30, 2008
    
    2007
    
    2006
    
    2005
    
    2004
    
    20033.82 (1)
    
    3.05 (2)
    
    2.83 (3)
    
    1.34 (4)(5)
    
    1.97 (6)
    
    1.07 (7)
 
 (1)
    
    Pretax earnings for the six months ended April 30, 2008 include gains on
dispositions, net of impairment losses of $0.1 million.(2)
    
    Pretax earnings for fiscal year 2007 include a charge of $2.5 million related to
Hurricane Katrina, a charge of $0.6 million for separation charges primarily related to
separation pay of a former executive officer who retired in the first quarter of 2007 and $0.7
million for the loss on early extinguishment of debt related to the June 2007 senior
convertible debt transaction.(3)
    
    Pretax earnings for fiscal year 2006 include a net recovery of $1.6 million related
to Hurricane Katrina, business interruption insurance proceeds of $3.2 million related to
Hurricane Katrina, a charge of $1.0 million for separation charges related to the July 2005
restructuring of our divisions and the retirement of an executive officer and gains on
dispositions, net of impairment losses of ($0.2) million.(4)
    
    Pretax earnings for fiscal year 2005 include a charge of $9.4 million for expenses
related to Hurricane Katrina, a charge of $1.5 million for separation charges related to the
July 2005 restructuring of our divisions, $1.3 million of gains on dispositions, net of
impairment losses and $32.8 million for the loss on early extinguishment of debt related to
the 2005 debt refinancings.(5)
    
    Excludes the cumulative effect of change in accounting principles.(6)
    
    Pretax earnings for fiscal year 2004 include charges of $3.4 million for severance
and other costs related to the December 2003 workforce reductions and separation payments to a
former executive officer and ($0.2) million in gains on dispositions, net of impairment
losses.(7)
    
    Pretax earnings for fiscal year 2003 include a charge of $11.3 million for the loss
on early extinguishment of debt in connection with redemption of the ROARS, a non-cash charge
of $9.6 million for long-lived asset impairment and a charge of $2.5 million for separation
payments to former executive officers.  Recent Accounting Standards
  51




---



##### Table of Contents



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
    
 Item 1A. Risk Factors
  52




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (c)
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 Issuer Purchases of Equity Securities
 Total number of
    
    Maximumshares
    
    approximate dollarpurchased as
    
    value of shares thatTotal number
    
    Average
    
    part of publicly-
    
    may yet beof shares
    
    price paid
    
    announced plans
    
    purchased under thePeriod
    
    purchased
    
    per share
    
    or programs(1)
    
    plans or programsFebruary 1, 2008
through February
29, 2008
    
    
    381,151
    
    
    $
    6.58
    
    
    
    381,151
    
    
    $
    24,767,028March 1, 2008
through March 31,
2008
    
    
    721,700
    
    
    $
    6.17
    
    
    
    721,700
    
    
    $
    20,314,417April 1, 2008
through April 30,
2008
    
    
    1,142,900
    
    
    $
    6.55
    
    
    
    1,142,900
    
    
    $
    12,830,384Total
    
    
    2,245,751
    
    
    $
    6.43
    
    
    
    2,245,751
    
    
    $
    12,830,384
 
 (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. As of June 9, 2008, we had repurchased 6.3 million shares for $45.9 million at
an average price of $7.32 per share under this program. 
 Item 4. Submission of Matters to a Vote of Security Holders
  Nominee
    
    Number of Votes For
    
    Number of Votes WithheldThomas J. Crawford
    
    
    117,785,718
    
    
    
    810,204Thomas M. Kitchen
    
    
    114,393,526
    
    
    
    4,202,396Alden J. McDonald, Jr.
    
    
    115,353,203
    
    
    
    3,242,719James W. McFarland
    
    
    115,449,367
    
    
    
    3,146,555Ronald H. Patron
    
    
    115,318,863
    
    
    
    3,277,059Michael O. Read
    
    
    115,335,177
    
    
    
    3,260,745Ashton J. Ryan, Jr.
    
    
    111,990,202
    
    
    
    6,605,720Frank B. Stewart, Jr.
    
    
    94,888,163
    
    
    
    23,707,759
  53




---



##### Table of Contents



Item 6. Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
April 3, 20083.2
    
    By-laws of the Company, as amended and restated as of December 18, 2007 (incorporated by
reference to Exhibit 3.2 of the Companys Current Report on Form 8-K filed on December 26,
2007)4.1
    
    See Exhibits 3.1 and 3.2 for provisions of the Companys Amended and Restated Articles of
Incorporation, as amended, and By-laws, as amended, defining the rights of holders of Class A
and Class B common stock4.2
    
    Specimen of Class A common stock certificate (incorporated by reference to Exhibit 4.2 to
Amendment No. 3 to the Companys Registration Statement on Form S-1 (Registration No.
33-42336) filed with the Commission on October 7, 1991)4.3
    
    Rights Agreement, dated as of October 28, 1999, between Stewart Enterprises, Inc. and
ChaseMellon Shareholder Services, L.L.C. as Rights Agent (incorporated by reference to Exhibit
1 to the Companys Form 8-A 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)10.1
    
    Amendment No. 2 to Employment Agreement dated May 1, 2008 between the Company and Thomas J.
Crawford
 54




---



##### Table of Contents



10.2
    
    Amendment No. 1 to Employment Agreement dated May 1, 2008 between the Company and Thomas M.
Kitchen12
    
    Calculation of Ratio of Earnings to Fixed Charges31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
 55




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.June 9, 2008
    /s/ THOMAS M. KITCHENThomas M. KitchenSenior Executive Vice President and
Chief Financial OfficerJune 9, 2008
    /s/ ANGELA M. LACOURAngela M. LacourVice President
Corporate Controller
Chief Accounting Officer 56




---



##### Table of Contents



Exhibit Index
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
April 3, 200810.1
    
    Amendment No. 2 to Employment Agreement dated May 1, 2008 between the Company and Thomas J.
Crawford10.2
    
    Amendment No. 1 to Employment Agreement dated May 1, 2008 between the Company and Thomas M.
Kitchen12
    
    Calculation of Ratio of Earnings to Fixed Charges31.1
    
    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
 57