##### 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 July 31, 2007
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For
the transition period from to
 
 Commission File Number: 1-15449
 
 STEWART ENTERPRISES, INC.
  LOUISIANA
(State or other jurisdiction of incorporation or organization)
    
    72-0693290
(I.R.S. Employer Identification No.)1333 South Clearview Parkway 
Jefferson, Louisiana
    
    70121(Address of principal executive offices)
    
    (Zip Code)
 
 (504) 729-1400
 
 þ o
  o þ o
 o þ




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 INDEX
 PagePart I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings 
Three Months Ended July 31, 2007 and 2006
    
    
    3Condensed Consolidated Statements of Earnings 
Nine Months Ended July 31, 2007 and 2006
    
    
    4Condensed Consolidated Balance Sheets 
July 31, 2007 and October 31, 2006
    
    
    5Condensed Consolidated Statement of Shareholders Equity 
Nine Months Ended July 31, 2007
    
    
    7Condensed Consolidated Statements of Cash Flows 
Nine Months Ended July 31, 2007 and 2006
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    41Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    54Item 4. Controls and Procedures
    
    
    55Part II. Other InformationItem 1. Legal Proceedings
    
    
    55Item 1A. Risk Factors
    
    
    56Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    58Item 6. Exhibits
    
    
    58Signatures
    
    
    61Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification Pursuant of CEO and CFO Pursuant to Section 906
  2




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended July 31,2007
    
    
    2006Revenues:Funeral
    
    $
    67,410
    
    
    $
    68,668Cemetery
    
    
    60,900
    
    
    
    60,617128,310
    
    
    
    129,285Costs and expenses:Funeral
    
    
    53,001
    
    
    
    55,420Cemetery
    
    
    48,708
    
    
    
    48,399101,709
    
    
    
    103,819Gross profit
    
    
    26,601
    
    
    
    25,466Corporate general and administrative expenses
    
    
    (8,343
    )
    
    
    (8,517
    )Hurricane related recoveries (charges), net
    
    
    (210
    )
    
    
    1,072Separation charges
    
    
    (48
    )
    
    
    (680
    )Gains on dispositions and impairment (losses), net
    
    
    (61
    )
    
    
    (7
    )Other operating income (expense), net
    
    
    290
    
    
    
    (118
    )Operating earnings
    
    
    18,229
    
    
    
    17,216Interest expense
    
    
    (6,222
    )
    
    
    (7,092
    )Loss on early extinguishment of debt
    
    
    (677
    )
    
    
    Investment and other income, net
    
    
    810
    
    
    
    508Earnings from continuing operations before income taxes
    
    
    12,140
    
    
    
    10,632Income taxes
    
    
    3,881
    
    
    
    3,239Earnings from continuing operations
    
    
    8,259
    
    
    
    7,393Discontinued operations:Loss from discontinued operations before income taxes
    
    
    (215
    )
    
    
    (90
    )Income tax benefit
    
    
    (79
    )
    
    
    (31
    )Loss from discontinued operations
    
    
    (136
    )
    
    
    (59
    )Net earnings
    
    $
    8,123
    
    
    $
    7,334Basic earnings per common share:Earnings from continuing operations
    
    $
    .08
    
    
    $
    .07Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .08
    
    
    $
    .07Diluted earnings per common share:Earnings from continuing operations
    
    $
    .08
    
    
    $
    .07Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .08
    
    
    $
    .07Weighted average common shares outstanding (in thousands):Basic
    
    
    102,479
    
    
    
    106,177Diluted
    
    
    102,714
    
    
    
    106,255Dividends declared per common share
    
    $
    .025
    
    
    $
    .025
  3




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Nine Months Ended July 31,2007
    
    
    2006Revenues:Funeral
    
    $
    213,911
    
    
    $
    212,070Cemetery
    
    
    184,707
    
    
    
    173,989398,618
    
    
    
    386,059Costs and expenses:Funeral
    
    
    161,877
    
    
    
    162,537Cemetery
    
    
    146,400
    
    
    
    136,985308,277
    
    
    
    299,522Gross profit
    
    
    90,341
    
    
    
    86,537Corporate general and administrative expenses
    
    
    (23,129
    )
    
    
    (22,992
    )Hurricane related charges, net
    
    
    (2,343
    )
    
    
    (1,008
    )Separation charges
    
    
    (580
    )
    
    
    (956
    )Gains on dispositions and impairment (losses), net
    
    
    29
    
    
    
    152Other operating income, net
    
    
    1,441
    
    
    
    894Operating earnings
    
    
    65,759
    
    
    
    62,627Interest expense
    
    
    (19,274
    )
    
    
    (22,301
    )Loss on early extinguishment of debt
    
    
    (677
    )
    
    
    Investment and other income, net
    
    
    2,427
    
    
    
    1,628Earnings from continuing operations before income taxes
    
    
    48,235
    
    
    
    41,954Income taxes
    
    
    14,207
    
    
    
    15,047Earnings from continuing operations
    
    
    34,028
    
    
    
    26,907Discontinued operations:Earnings (loss) from discontinued operations before income taxes
    
    
    (564
    )
    
    
    184Income tax benefit
    
    
    (214
    )
    
    
    (79
    )Earnings (loss) from discontinued operations
    
    
    (350
    )
    
    
    263Net earnings
    
    $
    33,678
    
    
    $
    27,170Basic earnings per common share:Earnings from continuing operations
    
    $
    .32
    
    
    $
    .25Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .32
    
    
    $
    .25Diluted earnings per common share:Earnings from continuing operations
    
    $
    .32
    
    
    $
    .25Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .32
    
    
    $
    .25Weighted average common shares outstanding (in thousands):Basic
    
    
    104,215
    
    
    
    107,540Diluted
    
    
    104,384
    
    
    
    107,570Dividends declared per common share
    
    $
    .075
    
    
    $
    .075
  4




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 July 31,
    
    
    October 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    54,889
    
    
    $
    43,870Marketable securities
    
    
    392
    
    
    
    239Receivables, net of allowances
    
    
    60,407
    
    
    
    72,499Inventories
    
    
    36,982
    
    
    
    36,358Prepaid expenses
    
    
    9,621
    
    
    
    6,428Deferred income taxes, net
    
    
    7,693
    
    
    
    10,502Assets held for sale
    
    
    
    
    
    
    2,793Total current assets
    
    
    169,984
    
    
    
    172,689Receivables due beyond one year, net of allowances
    
    
    77,523
    
    
    
    75,350Preneed funeral receivables and trust investments
    
    
    519,001
    
    
    
    517,633Preneed cemetery receivables and trust investments
    
    
    259,230
    
    
    
    258,120Goodwill
    
    
    274,834
    
    
    
    272,976Cemetery property, at cost
    
    
    371,641
    
    
    
    371,071Property and equipment, at cost:Land
    
    
    43,867
    
    
    
    41,336Buildings
    
    
    308,145
    
    
    
    293,530Equipment and other
    
    
    159,300
    
    
    
    149,952511,312
    
    
    
    484,818Less accumulated depreciation
    
    
    207,988
    
    
    
    189,909Net property and equipment
    
    
    303,324
    
    
    
    294,909Deferred income taxes, net
    
    
    192,732
    
    
    
    173,986Cemetery perpetual care trust investments
    
    
    232,652
    
    
    
    230,203Other assets
    
    
    19,015
    
    
    
    13,640Total assets
    
    $
    2,419,936
    
    
    $
    2,380,577
  5




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 July 31,
    
    
    October 31,2007
    
    
    2006LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    275
    
    
    $
    2,839Accounts payable
    
    
    19,524
    
    
    
    19,375Accrued payroll and other benefits
    
    
    16,793
    
    
    
    17,353Accrued insurance
    
    
    21,731
    
    
    
    21,803Accrued interest
    
    
    6,621
    
    
    
    5,822Other current liabilities
    
    
    12,769
    
    
    
    18,141Income taxes payable
    
    
    1,135
    
    
    
    3,703Liabilities associated with assets held for sale
    
    
    
    
    
    
    942Total current liabilities
    
    
    78,848
    
    
    
    89,978Long-term debt, less current maturities
    
    
    450,123
    
    
    
    374,020Deferred preneed funeral revenue
    
    
    271,213
    
    
    
    274,700Deferred preneed cemetery revenue
    
    
    288,073
    
    
    
    295,989Non-controlling interest in funeral and cemetery trusts
    
    
    668,045
    
    
    
    657,607Other long-term liabilities
    
    
    13,642
    
    
    
    12,410Total liabilities
    
    
    1,769,944
    
    
    
    1,704,704Commitments and contingenciesNon-controlling interest in perpetual care trusts
    
    
    231,310
    
    
    
    228,696Non-controlling interest in perpetual care trusts
associated with assets held for sale
    
    
    
    
    
    
    284Shareholders equity:Preferred stock, $1.00 par value, 5,000,000 shares
authorized; no shares issued
    
    
    
    
    
    
    Common stock, $1.00 stated value:Class A authorized 150,000,000 shares; issued
and outstanding 94,782,120 and 101,408,227
shares at July 31, 2007 and October 31, 2006,
respectively
    
    
    94,782
    
    
    
    101,408Class B authorized 5,000,000 shares; issued
and outstanding 3,555,020 shares at July 31,
2007 and October 31, 2006, 10 votes per
share, convertible into an equal number of
Class A shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    585,382
    
    
    
    640,648Accumulated deficit
    
    
    (265,037
    )
    
    
    (298,715
    )Accumulated other comprehensive loss:Unrealized depreciation of investments
    
    
    
    
    
    
    (3
    )Total accumulated other comprehensive losses
    
    
    
    
    
    
    (3
    )Total shareholders equity
    
    
    418,682
    
    
    
    446,893Total liabilities and shareholders equity
    
    $
    2,419,936
    
    
    $
    2,380,577
  6




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
(Dollars in thousands, except per share amounts)
 Retained
    
    
    UnrealizedAdditional
    
    
    Earnings
    
    
    Appreciation
    
    
    TotalCommon
    
    
    Paid-In
    
    
    (Accumulated
    
    
    (Depreciation)
    
    
    ShareholdersStock(1)
    
    
    Capital
    
    
    Deficit)
    
    
    of Investments
    
    
    EquityBalance October 31, 2006
    
    $
    104,963
    
    
    $
    640,648
    
    
    $
    (298,715
    )
    
    $
    (3
    )
    
    $
    446,893Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    33,678
    
    
    
    
    
    
    
    33,678Other comprehensive income:Unrealized appreciation
of investments, net of
deferred tax expense of
($2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3Total other comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    33,678
    
    
    
    3
    
    
    
    33,681Restricted stock activity
    
    
    539
    
    
    
    (97
    )
    
    
    
    
    
    
    
    
    
    
    442Issuance of common stock
    
    
    200
    
    
    
    1,177
    
    
    
    
    
    
    
    
    
    
    
    1,377Stock options exercised
    
    
    333
    
    
    
    1,839
    
    
    
    
    
    
    
    
    
    
    
    2,172Share-based compensation
    
    
    
    
    
    
    1,146
    
    
    
    
    
    
    
    
    
    
    
    1,146Tax benefit associated with
stock options exercised
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    46Purchase and retirement of
common stock
    
    
    (7,698
    )
    
    
    (56,503
    )
    
    
    
    
    
    
    
    
    
    
    (64,201
    )Purchase of call options,
net of tax benefit of
$21,000
    
    
    
    
    
    
    (39,000
    )
    
    
    
    
    
    
    
    
    
    
    (39,000
    )Sale of common stock warrants
    
    
    
    
    
    
    43,850
    
    
    
    
    
    
    
    
    
    
    
    43,850Dividends ($.075 per share)
    
    
    
    
    
    
    (7,724
    )
    
    
    
    
    
    
    
    
    
    
    (7,724
    )Balance July 31, 2007
    
    $
    98,337
    
    
    $
    585,382
    
    
    $
    (265,037
    )
    
    $
    
    
    
    $
    418,682
 
 (1)
    
    Amount includes 94,782 and 101,408 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of July 31, 2007 and October 31, 2006, respectively,
and includes 3,555 shares (in thousands) of Class B common stock.  7




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Nine Months Ended July 31,2007
    
    
    2006Cash flows from operating activities:Net earnings
    
    $
    33,678
    
    
    $
    27,170Adjustments to reconcile net earnings to net cash provided by operating activities:(Gains) losses on dispositions and impairment losses, net
    
    
    514
    
    
    
    (555
    )Depreciation and amortization
    
    
    20,033
    
    
    
    19,250Provision for doubtful accounts
    
    
    6,934
    
    
    
    5,012Share-based compensation
    
    
    1,146
    
    
    
    895Loss on early extinguishment of debt
    
    
    677
    
    
    
    Excess tax benefits from share-based payment arrangements
    
    
    (108
    )
    
    
    Provision for deferred income taxes
    
    
    5,062
    
    
    
    10,671Other
    
    
    1,160
    
    
    
    1,490Changes in assets and liabilities:(Increase) decrease in receivables
    
    
    1,652
    
    
    
    (5,798
    )(Increase) decrease in inventories and cemetery property
    
    
    (2,261
    )
    
    
    1,775Increase (decrease) in accounts payable and accrued expenses
    
    
    (6,545
    )
    
    
    5,810Net effect of preneed funeral production and maturities:(Increase) decrease in preneed funeral receivables and trust investments
    
    
    (665
    )
    
    
    12,104Decrease in deferred preneed funeral revenue
    
    
    (5,260
    )
    
    
    (5,477
    )Increase (decrease) in funeral non-controlling interest
    
    
    3,247
    
    
    
    (6,163
    )Net effect of preneed cemetery production and deliveries:(Increase) decrease in preneed cemetery receivables and trust investments
    
    
    (2,710
    )
    
    
    9,074Decrease in deferred preneed cemetery revenue
    
    
    (7,884
    )
    
    
    (1,597
    )Increase in cemetery non-controlling interest
    
    
    9,238
    
    
    
    6,546Decrease in other
    
    
    (3,109
    )
    
    
    (2,107
    )Net cash provided by operating activities
    
    
    54,799
    
    
    
    78,100Cash flows from investing activities:Proceeds from sale of assets, net
    
    
    1,645
    
    
    
    761Purchase of subsidiaries, net of cash acquired
    
    
    (6,134
    )
    
    
    Insurance proceeds related to hurricane damaged properties
    
    
    1,400
    
    
    
    5,300Additions to property and equipment
    
    
    (23,120
    )
    
    
    (19,180
    )Other
    
    
    (92
    )
    
    
    23Net cash used in investing activities
    
    
    (26,301
    )
    
    
    (13,096
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    250,000
    
    
    
    Repayments of long-term debt
    
    
    (176,461
    )
    
    
    (32,474
    )Debt issue costs
    
    
    (5,572
    )
    
    
    Proceeds from sale of common stock warrants
    
    
    43,850
    
    
    
    Issuance of common stock
    
    
    2,521
    
    
    
    187Purchase of call options
    
    
    (60,000
    )
    
    
    Purchase and retirement of common stock
    
    
    (64,201
    )
    
    
    (21,046
    )Dividends
    
    
    (7,724
    )
    
    
    (8,049
    )Excess tax benefits from share-based payment arrangements
    
    
    108
    
    
    
    Other
    
    
    
    
    
    
    62Net cash used in financing activities
    
    
    (17,479
    )
    
    
    (61,320
    )Net increase in cash
    
    
    11,019
    
    
    
    3,684Cash and cash equivalents, beginning of period
    
    
    43,870
    
    
    
    40,605Cash and cash equivalents, end of period
    
    $
    54,889
    
    
    $
    44,289Supplemental cash flow information:Cash paid (received) during the period for:Income taxes, net
    
    $
    9,000
    
    
    $
    (900
    )Interest
    
    $
    18,096
    
    
    $
    17,500Non-cash investing and financing activities:Issuance of common stock to executive officers and directors
    
    $
    1,028
    
    
    $
    612Issuance of restricted stock, net of forfeitures
    
    $
    4,186
    
    
    $
    82
  8




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##### Table of Contents



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




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis of Presentation(Continued)
    WeightedNumber of
    
    AverageShares
    
    Exercise PriceGrant Type
    
    Granted
    
    per Share
    
    Vesting Period
    
    Vesting ConditionStock Options
    
    
    488,500
    
    
    $
    6.34
    
    
    Equal 25 percent
portions over 4
years
    
    Service ConditionStock Options
    
    
    540,000
    
    
    $
    7.83
    
    
    Equal 33 percent
portions over 3
years
    
    Market ConditionRestricted Stock
    
    
    52,500
    
    
    $
    6.33
    
    
    Equal 25 percent
portions over 4
years
    
    Service ConditionRestricted Stock
    
    
    510,000
    
    
    $
    7.87
    
    
    Equal 33 percent
portions over 3
years
    
    Service, Market and
Performance
Conditions
  (f)
    
    Business Interruption Insurance
  (g)
    
    Out of Period Adjustments
  10




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1)
    
    Basis of Presentation(Continued)
   Three Months Ended
    
    
    Nine Months EndedJuly 31, 2006
    
    
    July 31, 2006Out of Period
    
    
    Out of PeriodAdjustments
    
    
    AdjustmentsIncrease (Decrease)
    
    
    Increase (Decrease)Revenue:Funeral:Western division
    
    $
    
    
    
    $
    Eastern division
    
    
    
    
    
    
    Total funeral revenue
    
    
    
    
    
    
    Cemetery:Western division
    
    
    693
    
    
    
    769Eastern division
    
    
    2,372
    
    
    
    2,351Total cemetery revenue
    
    
    3,065
    
    
    
    3,120Total revenues
    
    $
    3,065
    
    
    $
    3,120Costs and expenses:Funeral:Western division
    
    $
    1,273
    
    
    $
    1,337Eastern division
    
    
    1,418
    
    
    
    1,482Total funeral costs and expenses
    
    
    2,691
    
    
    
    2,819Cemetery:Western division
    
    
    555
    
    
    
    619Eastern division
    
    
    956
    
    
    
    1,020Total cemetery costs and expenses
    
    
    1,511
    
    
    
    1,639Total costs and expenses
    
    $
    4,202
    
    
    $
    4,458Gross profit:Funeral:Western division
    
    $
    (1,273
    )
    
    $
    (1,337
    )Eastern division
    
    
    (1,418
    )
    
    
    (1,482
    )Total funeral gross profit
    
    
    (2,691
    )
    
    
    (2,819
    )Cemetery:Western division
    
    
    138
    
    
    
    150Eastern division
    
    
    1,416
    
    
    
    1,331Total cemetery gross profit
    
    
    1,554
    
    
    
    1,481Total gross profit
    
    $
    (1,137
    )
    
    $
    (1,338
    )Operating earnings
    
    $
    (1,343
    )
    
    $
    (1,544
    )Earnings from continuing operations
    
    $
    (853
    )
    
    $
    (980
    )Net earnings
    
    $
    (853
    )
    
    $
    (980
    )
 11




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1)
    
    Basis of Presentation(Continued)
 (h)
    
    Purchase and Retirement of Common Stock
  (i)
    
    Reclassifications
   Year Ended October 31,2006
    
    
    2005
    
    
    2004Decrease in preneed funeral receivables and trust investments
    
    $
    4,567
    
    
    $
    4,141
    
    
    $
    5,481Decrease in deferred preneed funeral revenue
    
    
    (15,375
    )
    
    
    (13,628
    )
    
    
    (14,162
    )Increase (decrease) in funeral non-controlling interest
    
    
    5,058
    
    
    
    2,449
    
    
    
    (5,603
    )Net effect of preneed funeral production and maturities
    
    
    (5,750
    )
    
    
    (7,038
    )
    
    
    (14,284
    )(Increase) decrease in preneed cemetery receivables and trust
investments
    
    $
    3,479
    
    
    $
    1,192
    
    
    $
    (2,646
    )Increase (decrease) in deferred preneed cemetery revenue
    
    
    10,235
    
    
    
    (8,313
    )
    
    
    7,073Increase in cemetery non-controlling interest
    
    
    11,686
    
    
    
    12,368
    
    
    
    1,994Net effect of preneed cemetery production and deliveries
    
    $
    25,400
    
    
    $
    5,247
    
    
    $
    6,421
 (2)
    
    New Accounting Principles
  12




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2)
    
    New Accounting Principles(Continued)
   (3)
    
    Preneed Funeral Activities
 Preneed Funeral Receivables and Trust Investments
  July 31, 2007
    
    
    October 31, 2006Trust assets
    
    $
    469,069
    
    
    $
    467,326Receivables from customers
    
    
    49,932
    
    
    
    50,307Preneed funeral receivables and trust
investments
    
    $
    519,001
    
    
    $
    517,633
  13




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3)
    
    Preneed Funeral Activities(Continued)
 July 31, 2007Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    39,705
    
    
    $
    
    
    
    $
    
    
    
    $
    39,705U.S. Government, agencies and
municipalities
    
    
    19,489
    
    
    
    44
    
    
    
    (190
    )
    
    
    19,343Corporate bonds
    
    
    49,153
    
    
    
    467
    
    
    
    (1,372
    )
    
    
    48,248Preferred stocks
    
    
    69,201
    
    
    
    220
    
    
    
    (5,028
    )
    
    
    64,393Common stocks
    
    
    214,384
    
    
    
    33,003
    
    
    
    (8,364
    )
    
    
    239,023Mutual funds
    
    
    34,218
    
    
    
    1,452
    
    
    
    (672
    )
    
    
    34,998Insurance contracts and other long-
term investments
    
    
    21,962
    
    
    
    91
    
    
    
    
    
    
    
    22,053Trust investments
    
    $
    448,112
    
    
    $
    35,277
    
    
    $
    (15,626
    )
    
    
    467,763Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104.4
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,306Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    469,069
  July 31, 2007Due in one year or less
    
    $
    1,549Due in one to five years
    
    
    28,533Due in five to ten years
    
    
    37,218Thereafter
    
    
    291$
    67,591
  Three Months Ended July 31,
    
    Nine Months Ended July 31,2007
    
    2006
    
    2007
    
    2006Purchases
    
    $
    14,337
    
    
    $
    12,748
    
    
    $
    96,423
    
    
    $
    64,706Sales
    
    
    15,128
    
    
    
    6,073
    
    
    
    92,546
    
    
    
    60,514Realized gains on sales
    
    
    963
    
    
    
    379
    
    
    
    5,731
    
    
    
    7,003Realized losses on sales
    
    
    
    
    
    
    
    
    
    
    (297
    )
    
    
    (1,718
    )Deposits
    
    
    8,250
    
    
    
    7,513
    
    
    
    24,364
    
    
    
    21,500Withdrawals
    
    
    11,137
    
    
    
    14,296
    
    
    
    33,943
    
    
    
    40,792
  (4)
    
    Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  14




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4)
    
    Preneed Cemetery Merchandise and Service Activities(Continued)
  July 31, 2007
    
    
    October 31, 2006Trust assets
    
    $
    208,982
    
    
    $
    201,891Receivables from customers
    
    
    50,248
    
    
    
    56,229Preneed cemetery receivables and trust investments
    
    $
    259,230
    
    
    $
    258,120
  July 31, 2007Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    14,949
    
    
    $
    
    
    
    $
    
    
    
    $
    14,949U.S. Government, agencies and
municipalities
    
    
    15,799
    
    
    
    54
    
    
    
    (76
    )
    
    
    15,777Corporate bonds
    
    
    11,501
    
    
    
    195
    
    
    
    (196
    )
    
    
    11,500Preferred stocks
    
    
    26,380
    
    
    
    32
    
    
    
    (1,876
    )
    
    
    24,536Common stocks
    
    
    106,285
    
    
    
    12,145
    
    
    
    (5,817
    )
    
    
    112,613Mutual funds
    
    
    29,131
    
    
    
    389
    
    
    
    (673
    )
    
    
    28,847Insurance contracts and other long-
term investments
    
    
    257
    
    
    
    
    
    
    
    
    
    
    
    257Trust investments
    
    $
    204,302
    
    
    $
    12,815
    
    
    $
    (8,638
    )
    
    
    208,479Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102.0
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    503Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    208,982
  July 31, 2007Due in one year or less
    
    $
    2,786Due in one to five years
    
    
    13,841Due in five to ten years
    
    
    10,365Thereafter
    
    
    285$
    27,277
 15




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4)
    
    Preneed Cemetery Merchandise and Service Activities(Continued)
  Three Months Ended July 31,
    
    Nine Months Ended July 31,2007
    
    2006
    
    2007
    
    2006Purchases
    
    $
    38,419
    
    
    $
    1,884
    
    
    $
    182,756
    
    
    $
    43,715Sales
    
    
    36,162
    
    
    
    861
    
    
    
    174,969
    
    
    
    52,405Realized gains on sales
    
    
    2,610
    
    
    
    16
    
    
    
    8,930
    
    
    
    5,092Realized losses on sales
    
    
    
    
    
    
    (286
    )
    
    
    (300
    )
    
    
    (1,593
    )Deposits
    
    
    4,622
    
    
    
    5,359
    
    
    
    13,551
    
    
    
    14,429Withdrawals
    
    
    4,926
    
    
    
    5,109
    
    
    
    14,329
    
    
    
    24,784
  (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts
   July 31, 2007Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    9,714
    
    
    $
    
    
    
    $
    
    
    
    $
    9,714U.S. Government, agencies and
municipalities
    
    
    12,390
    
    
    
    44
    
    
    
    (143
    )
    
    
    12,291Corporate bonds
    
    
    43,699
    
    
    
    1,045
    
    
    
    (551
    )
    
    
    44,193Preferred stocks
    
    
    62,349
    
    
    
    615
    
    
    
    (4,585
    )
    
    
    58,379Common stocks
    
    
    81,931
    
    
    
    16,325
    
    
    
    (4,180
    )
    
    
    94,076Mutual funds
    
    
    11,059
    
    
    
    1,251
    
    
    
    (109
    )
    
    
    12,201Insurance contracts and other
long-term investments
    
    
    827
    
    
    
    157
    
    
    
    (5
    )
    
    
    979Trust investments
    
    $
    221,969
    
    
    $
    19,437
    
    
    $
    (9,573
    )
    
    
    231,833Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104.4
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    819Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    232,652
  16




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
 July 31, 2007Due in one year or less
    
    $
    2,295Due in one to five years
    
    
    26,583Due in five to ten years
    
    
    26,448Thereafter
    
    
    1,158$
    56,484
  Three Months Ended July 31,
    
    Nine Months Ended July 31,2007
    
    2006
    
    2007
    
    2006Purchases
    
    $
    23,564
    
    
    $
    8,427
    
    
    $
    56,330
    
    
    $
    45,414Sales
    
    
    14,331
    
    
    
    7,761
    
    
    
    47,104
    
    
    
    33,212Realized gains on sales
    
    
    1,714
    
    
    
    750
    
    
    
    3,689
    
    
    
    3,394Realized losses on sales
    
    
    
    
    
    
    (430
    )
    
    
    (648
    )
    
    
    (3,456
    )Deposits
    
    
    2,153
    
    
    
    1,932
    
    
    
    6,066
    
    
    
    5,972Withdrawals
    
    
    2,357
    
    
    
    2,648
    
    
    
    7,778
    
    
    
    7,604
   (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
    
    $
    469,069
    
    
    $
    208,982
    
    
    $
    678,051
    
    
    $
    232,652Less:Pending withdrawals
    
    
    (9,235
    )
    
    
    (4,488
    )
    
    
    (13,723
    )
    
    
    (2,052
    )Pending deposits
    
    
    2,192
    
    
    
    1,525
    
    
    
    3,717
    
    
    
    710Non-controlling interest
    
    $
    462,026
    
    
    $
    206,019
    
    
    $
    668,045
    
    
    $
    231,310
 Investment and other income, net
  17




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (6)
    
    Non-Controlling Interest in Funeral and Cemetery Trusts and in Perpetual Care
Trusts(Continued)
 Three Months Ended
    
    
    Nine Months EndedJuly 31,
    
    
    July 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Non-controlling interest:Realized gains
    
    $
    5,287
    
    
    $
    1,145
    
    
    $
    18,350
    
    
    $
    15,489Realized losses
    
    
    
    
    
    
    (716
    )
    
    
    (1,245
    )
    
    
    (6,767
    )Interest income, dividend and other
ordinary income
    
    
    7,644
    
    
    
    6,205
    
    
    
    20,878
    
    
    
    20,901Trust expenses and income taxes
    
    
    (3,135
    )
    
    
    (1,978
    )
    
    
    (8,571
    )
    
    
    (8,527
    )Net trust investment income
    
    
    9,796
    
    
    
    4,656
    
    
    
    29,412
    
    
    
    21,096Non-controlling interest in funeral and
cemetery trust investments
    
    
    (6,690
    )
    
    
    (2,571
    )
    
    
    (21,755
    )
    
    
    (15,970
    )Non-controlling interest in perpetual care
trust investments
    
    
    (3,106
    )
    
    
    (2,085
    )
    
    
    (7,657
    )
    
    
    (5,126
    )Total non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    810
    
    
    
    508
    
    
    
    2,427
    
    
    
    1,628Total investment and other income, net
    
    $
    810
    
    
    $
    508
    
    
    $
    2,427
    
    
    $
    1,628
 
 (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. For the nine
months ended July 31, 2007, the balance includes approximately $594 of interest income
receivable from the Internal Revenue Service. (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




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7)
    
    Commitments and Contingencies(Continued)seeks restitution damages, disgorgement,
interest, costs and attorneys fees.
   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




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##### Table of Contents



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




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8)
    
    Reconciliation of Basic and Diluted Per Share Data
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended July 31, 2007Earnings
from continuing operations
    
    $
    8,259Basic earnings per common share:Earnings from continuing
operations available to common
shareholders
    
    $
    8,259
    
    
    
    102,479
    
    
    $
    .08Effect of dilutive securities:Time-vest stock options assumed
exercised and restricted stock
    
    
    
    
    
    
    235Diluted earnings per common share:Earnings from continuing
operations available to common
shareholders plus time-vest
stock options assumed exercised
and restricted stock
    
    $
    8,259
    
    
    
    102,714
    
    
    $
    .08
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended July 31, 2006Earnings from continuing operations
    
    $
    7,393Basic earnings per common share:Earnings from continuing
operations available to common
shareholders
    
    $
    7,393
    
    
    
    106,177
    
    
    $
    .07Effect of dilutive securities:Time-vest stock options assumed
exercised and restricted stock
    
    
    
    
    
    
    78Diluted earnings per common share:Earnings from continuing
operations available to common
shareholders plus time-vest
stock options assumed exercised
and restricted stock
    
    $
    7,393
    
    
    
    106,255
    
    
    $
    .07
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataNine Months Ended July 31, 2007Earnings from continuing operations
    
    $
    34,028Basic earnings per common share:Earnings from continuing
operations available to common
shareholders
    
    $
    34,028
    
    
    
    104,215
    
    
    $
    .32Effect of dilutive securities:Time-vest stock options assumed
exercised and restricted stock
    
    
    
    
    
    
    169Diluted earnings per common share:Earnings from continuing
operations available to common
shareholders plus time-vest
stock options assumed exercised
and restricted stock
    
    $
    34,028
    
    
    
    104,384
    
    
    $
    .32
 21




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8)
    
    Reconciliation of Basic and Diluted Per Share Data(Continued)
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataNine Months Ended July 31, 2006Earnings from continuing operations
    
    $
    26,907Basic earnings per common share:Earnings from continuing
operations available to common
shareholders
    
    $
    26,907
    
    
    
    107,540
    
    
    $
    .25Effect of dilutive securities:Time-vest stock options assumed
exercised and restricted stock
    
    
    
    
    
    
    30Diluted earnings per common share:Earnings from continuing
operations available to common
shareholders plus time-vest
stock options assumed exercised
and restricted stock
    
    $
    26,907
    
    
    
    107,570
    
    
    $
    .25
   (9)
    
    Segment Data
   22




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9)
    
    Segment Data(Continued)
 Funeral Revenue
    
    
    Cemetery Revenue(1)
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2007
    
    
    July 31, 2006
    
    
    July 31, 2007
    
    
    July 31, 2006
    
    
    July 31, 2007
    
    
    July 31, 2006Western Division
    
    $
    35,002
    
    
    $
    36,644
    
    
    $
    24,068
    
    
    $
    22,830
    
    
    $
    59,070
    
    
    $
    59,474Eastern Division
    
    
    27,830
    
    
    
    27,580
    
    
    
    34,366
    
    
    
    35,761
    
    
    
    62,196
    
    
    
    63,341Corporate Trust
Management
(2)
    
    
    4,578
    
    
    
    4,444
    
    
    
    2,466
    
    
    
    2,026
    
    
    
    7,044
    
    
    
    6,470Total
    
    $
    67,410
    
    
    $
    68,668
    
    
    $
    60,900
    
    
    $
    60,617
    
    
    $
    128,310
    
    
    $
    129,285Funeral Revenue
    
    
    Cemetery Revenue(1)
    
    
    Total RevenueNine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2007
    
    
    July 31, 2006
    
    
    July 31, 2007
    
    
    July 31, 2006
    
    
    July 31, 2007
    
    
    July 31, 2006Western Division
    
    $
    110,463
    
    
    $
    110,650
    
    
    $
    68,994
    
    
    $
    63,966
    
    
    $
    179,457
    
    
    $
    174,616Eastern Division
    
    
    89,539
    
    
    
    87,723
    
    
    
    108,571
    
    
    
    102,748
    
    
    
    198,110
    
    
    
    190,471Corporate Trust
Management
(2)
    
    
    13,909
    
    
    
    13,697
    
    
    
    7,142
    
    
    
    7,275
    
    
    
    21,051
    
    
    
    20,972Total
    
    $
    213,911
    
    
    $
    212,070
    
    
    $
    184,707
    
    
    $
    173,989
    
    
    $
    398,618
    
    
    $
    386,059Funeral Gross Profit
    
    
    Cemetery Gross Profit(1)
    
    
    Total Gross ProfitThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2007
    
    
    July 31, 2006
    
    
    July 31, 2007
    
    
    July 31, 2006
    
    
    July 31, 2007
    
    
    July 31, 2006Western Division
    
    $
    6,948
    
    
    $
    6,851
    
    
    $
    5,127
    
    
    $
    4,725
    
    
    $
    12,075
    
    
    $
    11,576Eastern Division
    
    
    3,110
    
    
    
    2,090
    
    
    
    4,729
    
    
    
    5,589
    
    
    
    7,839
    
    
    
    7,679Corporate Trust
Management
(2)
    
    
    4,351
    
    
    
    4,307
    
    
    
    2,336
    
    
    
    1,904
    
    
    
    6,687
    
    
    
    6,211Total
    
    $
    14,409
    
    
    $
    13,248
    
    
    $
    12,192
    
    
    $
    12,218
    
    
    $
    26,601
    
    
    $
    25,466Funeral Gross Profit
    
    
    Cemetery Gross Profit(1)
    
    
    Total Gross ProfitNine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2007
    
    
    July 31, 2006
    
    
    July 31, 2007
    
    
    July 31, 2006
    
    
    July 31, 2007
    
    
    July 31, 2006Western Division
    
    $
    23,332
    
    
    $
    22,673
    
    
    $
    14,017
    
    
    $
    13,059
    
    
    $
    37,349
    
    
    $
    35,732Eastern Division
    
    
    15,344
    
    
    
    13,573
    
    
    
    17,569
    
    
    
    17,038
    
    
    
    32,913
    
    
    
    30,611Corporate Trust
Management
(2)
    
    
    13,358
    
    
    
    13,287
    
    
    
    6,721
    
    
    
    6,907
    
    
    
    20,079
    
    
    
    20,194Total
    
    $
    52,034
    
    
    $
    49,533
    
    
    $
    38,307
    
    
    $
    37,004
    
    
    $
    90,341
    
    
    $
    86,537Net PreneedFuneral Merchandise
    
    
    Net
PreneedCemeteryMerchandise and
    
    
    Net TotalPreneedMerchandise andAnd Service Sales(3)
    
    
    Service Sales(3)
    
    
    Service Sales(3)Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2007
    
    
    July 31, 2006
    
    
    July 31, 2007
    
    
    July 31, 2006
    
    
    July 31, 2007
    
    
    July 31, 2006Western Division
    
    $
    13,468
    
    
    $
    14,703
    
    
    $
    4,646
    
    
    $
    4,848
    
    
    $
    18,114
    
    
    $
    19,551Eastern Division
    
    
    11,445
    
    
    
    12,083
    
    
    
    9,860
    
    
    
    10,684
    
    
    
    21,305
    
    
    
    22,767Total
    
    $
    24,913
    
    
    $
    26,786
    
    
    $
    14,506
    
    
    $
    15,532
    
    
    $
    39,419
    
    
    $
    42,318
 23




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9)
    
    Segment Data(Continued)
 Net Preneed Funeral Merchandise
    
    
    Net Preneed Cemetery Merchandise and
    
    
    Net Total Preneed Merchandise andAnd Service Sales(3)
    
    
    Service Sales(3)
    
    
    Service Sales(3)Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31, 2007
    
    
    July 31, 2006
    
    
    July 31, 2007
    
    
    July 31, 2006
    
    
    July 31, 2007
    
    
    July 31, 2006Western Division
    
    $
    42,241
    
    
    $
    41,280
    
    
    $
    12,755
    
    
    $
    13,319
    
    
    $
    54,996
    
    
    $
    54,599Eastern Division
    
    
    33,973
    
    
    
    33,453
    
    
    
    29,194
    
    
    
    31,367
    
    
    
    63,167
    
    
    
    64,820Total
    
    $
    76,214
    
    
    $
    74,733
    
    
    $
    41,949
    
    
    $
    44,686
    
    
    $
    118,163
    
    
    $
    119,419
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of
the related geographic segment and amounted to $2,511 and $2,458 for the three months ended
July 31, 2007 and 2006, respectively, and $7,356 and $7,397 for the nine months ended July 31,
2007 and 2006, respectively.(2)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and service trust earnings recognized with respect to preneed contracts
delivered during the period. Trust management fees are established by the Company at rates
consistent with industry norms and are paid by the trusts to the Companys subsidiary,
Investors Trust, Inc. The trust earnings represent earnings realized over the life of the
preneed contracts delivered during the relevant periods. Trust management fees included in
funeral revenue for the three months ended July 31, 2007 and 2006 were $1,471 and $1,342,
respectively, and funeral trust earnings for the three months ended July 31, 2007 and 2006
were $3,107 and $3,102, respectively. Trust management fees included in cemetery revenue for
the three months ended July 31, 2007 and 2006 were $1,345 and $1,202, respectively, and
cemetery trust earnings for the three months ended July 31, 2007 and 2006 were $1,121 and
$824, respectively. Trust management fees included in funeral revenue for the nine months
ended July 31, 2007 and 2006 were $4,400 and $4,109, respectively, and funeral trust earnings
for the nine months ended July 31, 2007 and 2006 were $9,509 and $9,588, respectively. Trust
management fees included in cemetery revenue for the nine months ended July 31, 2007 and 2006
were $3,983 and $3,628, respectively, and cemetery trust earnings for the nine months ended
July 31, 2007 and 2006 were $3,159 and $3,647, respectively.(3)
    
    Preneed sales amounts represent total preneed funeral and cemetery service and
merchandise sales generated in the applicable period, net of cancellations. These sales are
deferred and are recorded as revenue in the period the services are performed or the
merchandise is delivered.  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Gross profit for reportable segments
    
    $
    26,601
    
    
    $
    25,466
    
    
    $
    90,341
    
    
    $
    86,537Corporate general and administrative
expenses
    
    
    (8,343
    )
    
    
    (8,517
    )
    
    
    (23,129
    )
    
    
    (22,992
    )Hurricane related recoveries (charges), net
    
    
    (210
    )
    
    
    1,072
    
    
    
    (2,343
    )
    
    
    (1,008
    )Separation charges
    
    
    (48
    )
    
    
    (680
    )
    
    
    (580
    )
    
    
    (956
    )Gains on dispositions and impairment
(losses), net
    
    
    (61
    )
    
    
    (7
    )
    
    
    29
    
    
    
    152Other operating income (expense), net
    
    
    290
    
    
    
    (118
    )
    
    
    1,441
    
    
    
    894Interest expense
    
    
    (6,222
    )
    
    
    (7,092
    )
    
    
    (19,274
    )
    
    
    (22,301
    )Loss on early extinguishment of debt
    
    
    (677
    )
    
    
    
    
    
    
    (677
    )
    
    
    Investment and other income, net
    
    
    810
    
    
    
    508
    
    
    
    2,427
    
    
    
    1,628Earnings from continuing operations
before income taxes
    
    $
    12,140
    
    
    $
    10,632
    
    
    $
    48,235
    
    
    $
    41,954
 24




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (10)
    
    Supplementary Information
  Three Months Ended July 31,
    
    
    Nine Months Ended July 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Service revenueFuneral
    
    $
    40,632
    
    
    $
    40,976
    
    
    $
    129,622
    
    
    $
    123,305Cemetery
    
    
    15,143
    
    
    
    15,164
    
    
    
    47,571
    
    
    
    46,66255,775
    
    
    
    56,140
    
    
    
    177,193
    
    
    
    169,967Merchandise revenueFuneral
    
    
    24,656
    
    
    
    25,703
    
    
    
    77,975
    
    
    
    82,694Cemetery
    
    
    41,235
    
    
    
    41,440
    
    
    
    124,434
    
    
    
    115,24465,891
    
    
    
    67,143
    
    
    
    202,409
    
    
    
    197,938Other revenueFuneral
    
    
    2,122
    
    
    
    1,989
    
    
    
    6,314
    
    
    
    6,071Cemetery
    
    
    4,522
    
    
    
    4,013
    
    
    
    12,702
    
    
    
    12,0836,644
    
    
    
    6,002
    
    
    
    19,016
    
    
    
    18,154Total revenue
    
    $
    128,310
    
    
    $
    129,285
    
    
    $
    398,618
    
    
    $
    386,059Service costsFuneral
    
    $
    15,255
    
    
    $
    14,874
    
    
    $
    44,499
    
    
    $
    41,922Cemetery
    
    
    11,291
    
    
    
    11,419
    
    
    
    32,412
    
    
    
    31,50226,546
    
    
    
    26,293
    
    
    
    76,911
    
    
    
    73,424Merchandise costsFuneral
    
    
    15,488
    
    
    
    15,691
    
    
    
    47,986
    
    
    
    49,667Cemetery
    
    
    24,200
    
    
    
    23,107
    
    
    
    73,423
    
    
    
    66,71839,688
    
    
    
    38,798
    
    
    
    121,409
    
    
    
    116,385General and administrative expensesFuneral
    
    
    22,258
    
    
    
    24,855
    
    
    
    69,392
    
    
    
    70,948Cemetery
    
    
    13,217
    
    
    
    13,873
    
    
    
    40,565
    
    
    
    38,76535,475
    
    
    
    38,728
    
    
    
    109,957
    
    
    
    109,713Total costs
    
    $
    101,709
    
    
    $
    103,819
    
    
    $
    308,277
    
    
    $
    299,522
  25




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes
   26




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended July 31, 2007Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    62,185
    
    
    $
    379
    
    
    $
    4,846
    
    
    $
    
    
    
    $
    67,410Cemetery
    
    
    
    
    
    
    54,992
    
    
    
    794
    
    
    
    5,114
    
    
    
    
    
    
    
    60,900
    
    
    
    117,177
    
    
    
    1,173
    
    
    
    9,960
    
    
    
    
    
    
    
    128,310Costs and expenses:Funeral
    
    
    
    
    
    
    49,671
    
    
    
    276
    
    
    
    3,054
    
    
    
    
    
    
    
    53,001Cemetery
    
    
    
    
    
    
    44,046
    
    
    
    636
    
    
    
    4,026
    
    
    
    
    
    
    
    48,708
    
    
    
    93,717
    
    
    
    912
    
    
    
    7,080
    
    
    
    
    
    
    
    101,709Gross profit
    
    
    
    
    
    
    23,460
    
    
    
    261
    
    
    
    2,880
    
    
    
    
    
    
    
    26,601Corporate general and administrative
expenses
    
    
    (8,343
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,343
    )Hurricane related charges, net
    
    
    
    
    
    
    (210
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (210
    )Separation charges
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    (61
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61
    )Other operating income, net
    
    
    19
    
    
    
    215
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    290Operating earnings (loss)
    
    
    (8,324
    )
    
    
    23,356
    
    
    
    261
    
    
    
    2,936
    
    
    
    
    
    
    
    18,229Interest expense
    
    
    (2,158
    )
    
    
    (3,242
    )
    
    
    (37
    )
    
    
    (785
    )
    
    
    
    
    
    
    (6,222
    )Loss on early extinguishment of debt
    
    
    (677
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (677
    )Investment and other income, net
    
    
    792
    
    
    
    13
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    810Equity in subsidiaries
    
    
    19,346
    
    
    
    448
    
    
    
    
    
    
    
    
    
    
    
    (19,794
    )
    
    
    Earnings from continuing operations
before income taxes
    
    
    8,979
    
    
    
    20,575
    
    
    
    224
    
    
    
    2,156
    
    
    
    (19,794
    )
    
    
    12,140Income tax expense (benefit)
    
    
    856
    
    
    
    3,463
    
    
    
    56
    
    
    
    (494
    )
    
    
    
    
    
    
    3,881Earnings from continuing operations
    
    
    8,123
    
    
    
    17,112
    
    
    
    168
    
    
    
    2,650
    
    
    
    (19,794
    )
    
    
    8,259Discontinued operations:Loss from discontinued operations
before income taxes
    
    
    
    
    
    
    (215
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (215
    )Income tax benefit
    
    
    
    
    
    
    (79
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (79
    )Loss from discontinued operations
    
    
    
    
    
    
    (136
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (136
    )Net earnings
    
    
    8,123
    
    
    
    16,976
    
    
    
    168
    
    
    
    2,650
    
    
    
    (19,794
    )
    
    
    8,123Other comprehensive income (loss), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income
    
    $
    8,123
    
    
    $
    16,976
    
    
    $
    168
    
    
    $
    2,650
    
    
    $
    (19,794
    )
    
    $
    8,123
 27




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended July 31, 2006Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    63,654
    
    
    $
    412
    
    
    $
    4,602
    
    
    $
    
    
    
    $
    68,668Cemetery
    
    
    
    
    
    
    54,434
    
    
    
    801
    
    
    
    5,382
    
    
    
    
    
    
    
    60,617
    
    
    
    118,088
    
    
    
    1,213
    
    
    
    9,984
    
    
    
    
    
    
    
    129,285Costs and expenses:Funeral
    
    
    
    
    
    
    51,963
    
    
    
    241
    
    
    
    3,216
    
    
    
    
    
    
    
    55,420Cemetery
    
    
    
    
    
    
    43,278
    
    
    
    853
    
    
    
    4,268
    
    
    
    
    
    
    
    48,399
    
    
    
    95,241
    
    
    
    1,094
    
    
    
    7,484
    
    
    
    
    
    
    
    103,819Gross profit
    
    
    
    
    
    
    22,847
    
    
    
    119
    
    
    
    2,500
    
    
    
    
    
    
    
    25,466Corporate general and administrative
expenses
    
    
    (8,517
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,517
    )Hurricane related recoveries (charges), net
    
    
    (43
    )
    
    
    1,115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,072Separation charges
    
    
    (607
    )
    
    
    (73
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (680
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )Other operating income (expense), net
    
    
    3
    
    
    
    (220
    )
    
    
    5
    
    
    
    94
    
    
    
    
    
    
    
    (118
    )Operating earnings (loss)
    
    
    (9,164
    )
    
    
    23,662
    
    
    
    124
    
    
    
    2,594
    
    
    
    
    
    
    
    17,216Interest expense
    
    
    (859
    )
    
    
    (5,660
    )
    
    
    (61
    )
    
    
    (512
    )
    
    
    
    
    
    
    (7,092
    )Investment and other income, net
    
    
    508
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    508Equity in subsidiaries
    
    
    12,001
    
    
    
    162
    
    
    
    
    
    
    
    
    
    
    
    (12,163
    )
    
    
    Earnings from continuing operations
before income taxes
    
    
    2,486
    
    
    
    18,164
    
    
    
    63
    
    
    
    2,082
    
    
    
    (12,163
    )
    
    
    10,632Income tax expense (benefit)
    
    
    (4,848
    )
    
    
    5,910
    
    
    
    23
    
    
    
    2,154
    
    
    
    
    
    
    
    3,239Earnings (loss) from continuing
operations
    
    
    7,334
    
    
    
    12,254
    
    
    
    40
    
    
    
    (72
    )
    
    
    (12,163
    )
    
    
    7,393Discontinued operations:Loss from discontinued operations
before income taxes
    
    
    
    
    
    
    (88
    )
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (90
    )Income tax benefit
    
    
    
    
    
    
    (31
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31
    )Loss from discontinued operations
    
    
    
    
    
    
    (57
    )
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (59
    )Net earnings (loss)
    
    
    7,334
    
    
    
    12,197
    
    
    
    40
    
    
    
    (74
    )
    
    
    (12,163
    )
    
    
    7,334Other comprehensive loss, net
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    3
    
    
    
    (3
    )Comprehensive income (loss)
    
    $
    7,331
    
    
    $
    12,197
    
    
    $
    40
    
    
    $
    (77
    )
    
    $
    (12,160
    )
    
    $
    7,331
 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
 Nine Months Ended July 31, 2007Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    197,748
    
    
    $
    1,154
    
    
    $
    15,009
    
    
    $
    
    
    
    $
    213,911Cemetery
    
    
    
    
    
    
    166,298
    
    
    
    2,313
    
    
    
    16,096
    
    
    
    
    
    
    
    184,707
    
    
    
    364,046
    
    
    
    3,467
    
    
    
    31,105
    
    
    
    
    
    
    
    398,618Costs and expenses:Funeral
    
    
    
    
    
    
    151,783
    
    
    
    782
    
    
    
    9,312
    
    
    
    
    
    
    
    161,877Cemetery
    
    
    
    
    
    
    132,522
    
    
    
    1,869
    
    
    
    12,009
    
    
    
    
    
    
    
    146,400
    
    
    
    284,305
    
    
    
    2,651
    
    
    
    21,321
    
    
    
    
    
    
    
    308,277Gross profit
    
    
    
    
    
    
    79,741
    
    
    
    816
    
    
    
    9,784
    
    
    
    
    
    
    
    90,341Corporate general and administrative
expenses
    
    
    (23,129
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,129
    )Hurricane related charges, net
    
    
    (3
    )
    
    
    (2,340
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,343
    )Separation charges
    
    
    (384
    )
    
    
    (196
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (580
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29Other operating income, net
    
    
    296
    
    
    
    950
    
    
    
    1
    
    
    
    194
    
    
    
    
    
    
    
    1,441Operating earnings (loss)
    
    
    (23,220
    )
    
    
    78,184
    
    
    
    817
    
    
    
    9,978
    
    
    
    
    
    
    
    65,759Interest expense
    
    
    (5,739
    )
    
    
    (11,511
    )
    
    
    (153
    )
    
    
    (1,871
    )
    
    
    
    
    
    
    (19,274
    )Loss on early extinguishment of debt
    
    
    (677
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (677
    )Investment and other income, net
    
    
    2,378
    
    
    
    39
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    2,427Equity in subsidiaries
    
    
    59,762
    
    
    
    758
    
    
    
    
    
    
    
    
    
    
    
    (60,520
    )
    
    
    Earnings from continuing
operations before income taxes
    
    
    32,504
    
    
    
    67,470
    
    
    
    664
    
    
    
    8,117
    
    
    
    (60,520
    )
    
    
    48,235Income tax expense (benefit)
    
    
    (1,174
    )
    
    
    13,747
    
    
    
    161
    
    
    
    1,473
    
    
    
    
    
    
    
    14,207Earnings from continuing operations
    
    
    33,678
    
    
    
    53,723
    
    
    
    503
    
    
    
    6,644
    
    
    
    (60,520
    )
    
    
    34,028Discontinued operations:Loss from discontinued operations
before income taxes
    
    
    
    
    
    
    (564
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (564
    )Income tax benefit
    
    
    
    
    
    
    (214
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (214
    )Loss from discontinued operations
    
    
    
    
    
    
    (350
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (350
    )Net earnings
    
    
    33,678
    
    
    
    53,373
    
    
    
    503
    
    
    
    6,644
    
    
    
    (60,520
    )
    
    
    33,678Other comprehensive income, net
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (3
    )
    
    
    3Comprehensive income
    
    $
    33,681
    
    
    $
    53,373
    
    
    $
    503
    
    
    $
    6,647
    
    
    $
    (60,523
    )
    
    
    33,681
 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 Statements of Earnings and Other Comprehensive Income
 Nine Months Ended July 31, 2006Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    196,696
    
    
    $
    956
    
    
    $
    14,418
    
    
    $
    
    
    
    $
    212,070Cemetery
    
    
    
    
    
    
    156,962
    
    
    
    2,093
    
    
    
    14,934
    
    
    
    
    
    
    
    173,989
    
    
    
    353,658
    
    
    
    3,049
    
    
    
    29,352
    
    
    
    
    
    
    
    386,059Costs and expenses:Funeral
    
    
    
    
    
    
    152,669
    
    
    
    588
    
    
    
    9,280
    
    
    
    
    
    
    
    162,537Cemetery
    
    
    
    
    
    
    123,928
    
    
    
    1,843
    
    
    
    11,214
    
    
    
    
    
    
    
    136,985
    
    
    
    276,597
    
    
    
    2,431
    
    
    
    20,494
    
    
    
    
    
    
    
    299,522Gross profit
    
    
    
    
    
    
    77,061
    
    
    
    618
    
    
    
    8,858
    
    
    
    
    
    
    
    86,537Corporate general and administrative
expenses
    
    
    (22,992
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,992
    )Hurricane related charges, net
    
    
    (178
    )
    
    
    (830
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,008
    )Separation charges
    
    
    (809
    )
    
    
    (147
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (956
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    152Other operating income, net
    
    
    40
    
    
    
    642
    
    
    
    6
    
    
    
    206
    
    
    
    
    
    
    
    894Operating earnings (loss)
    
    
    (23,939
    )
    
    
    76,782
    
    
    
    624
    
    
    
    9,160
    
    
    
    
    
    
    
    62,627Interest expense
    
    
    12,296
    
    
    
    (32,879
    )
    
    
    (328
    )
    
    
    (1,390
    )
    
    
    
    
    
    
    (22,301
    )Investment and other income, net
    
    
    1,628
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,628Equity in subsidiaries
    
    
    30,851
    
    
    
    391
    
    
    
    
    
    
    
    
    
    
    
    (31,242
    )
    
    
    Earnings from continuing
operations before income taxes
    
    
    20,836
    
    
    
    44,294
    
    
    
    296
    
    
    
    7,770
    
    
    
    (31,242
    )
    
    
    41,954Income tax expense (benefit)
    
    
    (6,334
    )
    
    
    16,730
    
    
    
    108
    
    
    
    4,543
    
    
    
    
    
    
    
    15,047Earnings from continuing operations
    
    
    27,170
    
    
    
    27,564
    
    
    
    188
    
    
    
    3,227
    
    
    
    (31,242
    )
    
    
    26,907Discontinued operations:Earnings (loss) from discontinued
operations before income taxes
    
    
    
    
    
    
    (150
    )
    
    
    
    
    
    
    334
    
    
    
    
    
    
    
    184Income tax benefit
    
    
    
    
    
    
    (79
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (79
    )Earnings (loss) from discontinued
operations
    
    
    
    
    
    
    (71
    )
    
    
    
    
    
    
    334
    
    
    
    
    
    
    
    263Net earnings
    
    
    27,170
    
    
    
    27,493
    
    
    
    188
    
    
    
    3,561
    
    
    
    (31,242
    )
    
    
    27,170Other comprehensive loss, net
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    5
    
    
    
    (5
    )Comprehensive income
    
    $
    27,165
    
    
    $
    27,493
    
    
    $
    188
    
    
    $
    3,556
    
    
    $
    (31,237
    )
    
    $
    27,165
 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
 July 31, 2007Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    44,316
    
    
    $
    8,411
    
    
    $
    18
    
    
    $
    2,144
    
    
    $
    
    
    
    $
    54,889Marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    392
    
    
    
    
    
    
    
    392Receivables, net of allowances
    
    
    7,292
    
    
    
    48,269
    
    
    
    73
    
    
    
    4,773
    
    
    
    
    
    
    
    60,407Inventories
    
    
    360
    
    
    
    33,499
    
    
    
    353
    
    
    
    2,770
    
    
    
    
    
    
    
    36,982Prepaid expenses
    
    
    767
    
    
    
    7,446
    
    
    
    
    
    
    
    1,408
    
    
    
    
    
    
    
    9,621Deferred income taxes, net
    
    
    2,807
    
    
    
    7,925
    
    
    
    
    
    
    
    
    
    
    
    (3,039
    )
    
    
    7,693Total current assets
    
    
    55,542
    
    
    
    105,550
    
    
    
    444
    
    
    
    11,487
    
    
    
    (3,039
    )
    
    
    169,984Receivables due beyond one year, net of allowances
    
    
    10,358
    
    
    
    47,087
    
    
    
    945
    
    
    
    19,133
    
    
    
    
    
    
    
    77,523Preneed funeral receivables and trust investments
    
    
    
    
    
    
    507,231
    
    
    
    
    
    
    
    11,770
    
    
    
    
    
    
    
    519,001Preneed cemetery receivables and trust investments
    
    
    
    
    
    
    245,966
    
    
    
    831
    
    
    
    12,433
    
    
    
    
    
    
    
    259,230Goodwill
    
    
    
    
    
    
    255,013
    
    
    
    48
    
    
    
    19,773
    
    
    
    
    
    
    
    274,834Cemetery property, at cost
    
    
    
    
    
    
    335,807
    
    
    
    11,077
    
    
    
    24,757
    
    
    
    
    
    
    
    371,641Property and equipment, at cost
    
    
    41,505
    
    
    
    431,652
    
    
    
    1,486
    
    
    
    36,669
    
    
    
    
    
    
    
    511,312Less accumulated depreciation
    
    
    25,463
    
    
    
    169,441
    
    
    
    635
    
    
    
    12,449
    
    
    
    
    
    
    
    207,988Net property and equipment
    
    
    16,042
    
    
    
    262,211
    
    
    
    851
    
    
    
    24,220
    
    
    
    
    
    
    
    303,324Deferred income taxes, net
    
    
    25,590
    
    
    
    155,047
    
    
    
    
    
    
    
    12,095
    
    
    
    
    
    
    
    192,732Cemetery perpetual care trust investments
    
    
    
    
    
    
    220,521
    
    
    
    8,147
    
    
    
    3,984
    
    
    
    
    
    
    
    232,652Other assets
    
    
    9,790
    
    
    
    8,114
    
    
    
    16
    
    
    
    1,095
    
    
    
    
    
    
    
    19,015Equity in subsidiaries
    
    
    20,783
    
    
    
    7,054
    
    
    
    
    
    
    
    
    
    
    
    (27,837
    )
    
    
    Total assets
    
    $
    138,105
    
    
    $
    2,149,601
    
    
    $
    22,359
    
    
    $
    140,747
    
    
    $
    (30,876
    )
    
    $
    2,419,936LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    275
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    275Accounts payable
    
    
    362
    
    
    
    17,493
    
    
    
    101
    
    
    
    1,568
    
    
    
    
    
    
    
    19,524Accrued expenses and other current liabilities
    
    
    15,276
    
    
    
    40,863
    
    
    
    256
    
    
    
    2,654
    
    
    
    
    
    
    
    59,049Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    3,039
    
    
    
    
    
    
    
    (3,039
    )
    
    
    Total current liabilities
    
    
    15,913
    
    
    
    58,356
    
    
    
    3,396
    
    
    
    4,222
    
    
    
    (3,039
    )
    
    
    78,848Long-term debt, less current maturities
    
    
    450,123
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,123Intercompany payables, net
    
    
    (907,686
    )
    
    
    873,163
    
    
    
    1,932
    
    
    
    32,591
    
    
    
    
    
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    222,586
    
    
    
    
    
    
    
    48,627
    
    
    
    
    
    
    
    271,213Deferred preneed cemetery revenue
    
    
    
    
    
    
    256,410
    
    
    
    1,482
    
    
    
    30,181
    
    
    
    
    
    
    
    288,073Non-controlling interest in funeral and cemetery trusts
    
    
    
    
    
    
    667,338
    
    
    
    707
    
    
    
    
    
    
    
    
    
    
    
    668,045Other long-term liabilities
    
    
    11,507
    
    
    
    2,135
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,642Negative equity in subsidiaries
    
    
    149,566
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (149,566
    )
    
    
    Total liabilities
    
    
    (280,577
    )
    
    
    2,079,988
    
    
    
    7,517
    
    
    
    115,621
    
    
    
    (152,605
    )
    
    
    1,769,944Non-controlling interest in perpetual care trusts
    
    
    
    
    
    
    219,179
    
    
    
    8,147
    
    
    
    3,984
    
    
    
    
    
    
    
    231,310Common stock
    
    
    98,337
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    98,337Other
    
    
    320,345
    
    
    
    (149,668
    )
    
    
    6,371
    
    
    
    21,090
    
    
    
    122,207
    
    
    
    320,345Total shareholders equity
    
    
    418,682
    
    
    
    (149,566
    )
    
    
    6,695
    
    
    
    21,142
    
    
    
    121,729
    
    
    
    418,682Total liabilities and shareholders equity
    
    $
    138,105
    
    
    $
    2,149,601
    
    
    $
    22,359
    
    
    $
    140,747
    
    
    $
    (30,876
    )
    
    $
    2,419,936
 31




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 October 31, 2006Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    39,120
    
    
    $
    3,254
    
    
    $
    37
    
    
    $
    1,459
    
    
    $
    
    
    
    $
    43,870Marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    239
    
    
    
    
    
    
    
    239Receivables, net of allowances
    
    
    9,875
    
    
    
    58,810
    
    
    
    132
    
    
    
    3,682
    
    
    
    
    
    
    
    72,499Inventories
    
    
    316
    
    
    
    32,910
    
    
    
    280
    
    
    
    2,852
    
    
    
    
    
    
    
    36,358Prepaid expenses
    
    
    539
    
    
    
    3,586
    
    
    
    12
    
    
    
    2,291
    
    
    
    
    
    
    
    6,428Deferred income taxes, net
    
    
    3,835
    
    
    
    9,657
    
    
    
    
    
    
    
    
    
    
    
    (2,990
    )
    
    
    10,502Assets held for sale
    
    
    
    
    
    
    2,793
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,793Total current assets
    
    
    53,685
    
    
    
    111,010
    
    
    
    461
    
    
    
    10,523
    
    
    
    (2,990
    )
    
    
    172,689Receivables due beyond one year, net of allowances
    
    
    9,139
    
    
    
    46,086
    
    
    
    949
    
    
    
    19,176
    
    
    
    
    
    
    
    75,350Preneed funeral receivables and trust investments
    
    
    
    
    
    
    506,440
    
    
    
    
    
    
    
    11,193
    
    
    
    
    
    
    
    517,633Preneed cemetery receivables and trust investments
    
    
    
    
    
    
    243,809
    
    
    
    847
    
    
    
    13,464
    
    
    
    
    
    
    
    258,120Goodwill
    
    
    
    
    
    
    253,141
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    272,976Cemetery property, at cost
    
    
    
    
    
    
    336,119
    
    
    
    10,440
    
    
    
    24,512
    
    
    
    
    
    
    
    371,071Property and equipment, at cost
    
    
    37,126
    
    
    
    409,691
    
    
    
    1,311
    
    
    
    36,690
    
    
    
    
    
    
    
    484,818Less accumulated depreciation
    
    
    21,278
    
    
    
    155,830
    
    
    
    524
    
    
    
    12,277
    
    
    
    
    
    
    
    189,909Net property and equipment
    
    
    15,848
    
    
    
    253,861
    
    
    
    787
    
    
    
    24,413
    
    
    
    
    
    
    
    294,909Deferred income taxes, net
    
    
    6,124
    
    
    
    154,204
    
    
    
    
    
    
    
    13,658
    
    
    
    
    
    
    
    173,986Cemetery perpetual care trust investments
    
    
    
    
    
    
    222,067
    
    
    
    8,136
    
    
    
    
    
    
    
    
    
    
    
    230,203Other assets
    
    
    5,312
    
    
    
    7,228
    
    
    
    
    
    
    
    1,100
    
    
    
    
    
    
    
    13,640Equity in subsidiaries
    
    
    14,391
    
    
    
    6,296
    
    
    
    
    
    
    
    
    
    
    
    (20,687
    )
    
    
    Total assets
    
    $
    104,499
    
    
    $
    2,140,261
    
    
    $
    21,668
    
    
    $
    137,826
    
    
    $
    (23,677
    )
    
    $
    2,380,577LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    2,839
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,839Accounts payable
    
    
    1,540
    
    
    
    16,518
    
    
    
    61
    
    
    
    1,256
    
    
    
    
    
    
    
    19,375Accrued expenses and other current liabilities
    
    
    15,197
    
    
    
    48,244
    
    
    
    358
    
    
    
    3,023
    
    
    
    
    
    
    
    66,822Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    2,990
    
    
    
    
    
    
    
    (2,990
    )
    
    
    Liabilities associated with assets held for sale
    
    
    
    
    
    
    942
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    942Total current liabilities
    
    
    19,576
    
    
    
    65,704
    
    
    
    3,409
    
    
    
    4,279
    
    
    
    (2,990
    )
    
    
    89,978Long-term debt, less current maturities
    
    
    344,020
    
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    374,020Intercompany payables, net
    
    
    (925,515
    )
    
    
    913,149
    
    
    
    1,632
    
    
    
    10,734
    
    
    
    
    
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    227,306
    
    
    
    
    
    
    
    47,394
    
    
    
    
    
    
    
    274,700Deferred preneed cemetery revenue
    
    
    
    
    
    
    263,473
    
    
    
    1,592
    
    
    
    30,924
    
    
    
    
    
    
    
    295,989Non-controlling interest in funeral and cemetery trusts
    
    
    
    
    
    
    656,900
    
    
    
    707
    
    
    
    
    
    
    
    
    
    
    
    657,607Other long-term liabilities
    
    
    10,386
    
    
    
    2,024
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,410Negative equity in subsidiaries
    
    
    209,139
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (209,139
    )
    
    
    Total liabilities
    
    
    (342,394
    )
    
    
    2,128,556
    
    
    
    7,340
    
    
    
    123,331
    
    
    
    (212,129
    )
    
    
    1,704,704Non-controlling interest in perpetual care trusts
    
    
    
    
    
    
    220,560
    
    
    
    8,136
    
    
    
    
    
    
    
    
    
    
    
    228,696Non-controlling interest in perpetual care trust associated with assets held for sale
    
    
    
    
    
    
    284
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    284Common stock
    
    
    104,963
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    104,963Other
    
    
    341,933
    
    
    
    (209,241
    )
    
    
    5,868
    
    
    
    14,446
    
    
    
    188,927
    
    
    
    341,933Accumulated other comprehensive loss
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    3
    
    
    
    (3
    )Total shareholders equity
    
    
    446,893
    
    
    
    (209,139
    )
    
    
    6,192
    
    
    
    14,495
    
    
    
    188,452
    
    
    
    446,893Total liabilities and shareholders equity
    
    $
    104,499
    
    
    $
    2,140,261
    
    
    $
    21,668
    
    
    $
    137,826
    
    
    $
    (23,677
    )
    
    $
    2,380,577
 32




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Nine Months Ended July 31, 2007Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating activities
    
    $
    (13,518
    )
    
    $
    58,627
    
    
    $
    (250
    )
    
    $
    9,940
    
    
    $
    
    
    
    $
    54,799Cash flows from investing activities:Proceeds from sale of assets, net
    
    
    
    
    
    
    1,645
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,645Purchases of subsidiaries, net of cash acquired
    
    
    
    
    
    
    (6,134
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,134
    )Insurance proceeds related to hurricane damaged properties
    
    
    
    
    
    
    1,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,400Additions to property and equipment
    
    
    (5,436
    )
    
    
    (16,651
    )
    
    
    (69
    )
    
    
    (964
    )
    
    
    
    
    
    
    (23,120
    )Other
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    (148
    )
    
    
    
    
    
    
    (92
    )Net cash used in investing activities
    
    
    (5,436
    )
    
    
    (19,684
    )
    
    
    (69
    )
    
    
    (1,112
    )
    
    
    
    
    
    
    (26,301
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000Repayments of long-term debt
    
    
    (146,461
    )
    
    
    
    
    
    
    
    
    
    
    (30,000
    )
    
    
    
    
    
    
    (176,461
    )Intercompany receivables (payables)
    
    
    11,629
    
    
    
    (33,786
    )
    
    
    300
    
    
    
    21,857
    
    
    
    
    
    
    
    Issuance of common stock
    
    
    2,521
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,521Purchase of call options
    
    
    (60,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60,000
    )Debt issue costs
    
    
    (5,572
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,572
    )Proceeds from sale of common stock warrants
    
    
    43,850
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,850Purchase and retirement of common stock
    
    
    (64,201
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,201
    )Dividends
    
    
    (7,724
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,724
    )Excess tax benefits from share-based payment arrangements
    
    
    108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108Net cash provided by (used in) financing activities
    
    
    24,150
    
    
    
    (33,786
    )
    
    
    300
    
    
    
    (8,143
    )
    
    
    
    
    
    
    (17,479
    )Net increase (decrease) in cash
    
    
    5,196
    
    
    
    5,157
    
    
    
    (19
    )
    
    
    685
    
    
    
    
    
    
    
    11,019Cash and cash equivalents, beginning of period
    
    
    39,120
    
    
    
    3,254
    
    
    
    37
    
    
    
    1,459
    
    
    
    
    
    
    
    43,870Cash and cash equivalents, end of period
    
    $
    44,316
    
    
    $
    8,411
    
    
    $
    18
    
    
    $
    2,144
    
    
    $
    
    
    
    $
    54,889
 33




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Nine Months Ended July 31, 2006Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    17,581
    
    
    $
    47,390
    
    
    $
    216
    
    
    $
    12,913
    
    
    $
    
    
    
    $
    78,100Cash flows from investing activities:Proceeds from sale of assets, net
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    733
    
    
    
    
    
    
    
    761Insurance proceeds related to hurricane damaged properties
    
    
    
    
    
    
    5,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,300Additions to property and equipment
    
    
    (2,797
    )
    
    
    (15,802
    )
    
    
    (10
    )
    
    
    (571
    )
    
    
    
    
    
    
    (19,180
    )Other
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    (35
    )
    
    
    
    
    
    
    23Net cash provided by (used in) investing activities
    
    
    (2,797
    )
    
    
    (10,416
    )
    
    
    (10
    )
    
    
    127
    
    
    
    
    
    
    
    (13,096
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (32,474
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,474
    )Intercompany receivables (payables)
    
    
    46,865
    
    
    
    (34,314
    )
    
    
    (199
    )
    
    
    (12,352
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    187
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187Purchase and retirement of common stock
    
    
    (21,046
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,046
    )Dividends
    
    
    (8,049
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,049
    )Other
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62Net cash used in financing activities
    
    
    (14,455
    )
    
    
    (34,314
    )
    
    
    (199
    )
    
    
    (12,352
    )
    
    
    
    
    
    
    (61,320
    )Net increase in cash
    
    
    329
    
    
    
    2,660
    
    
    
    7
    
    
    
    688
    
    
    
    
    
    
    
    3,684Cash and cash equivalents, beginning of period
    
    
    38,675
    
    
    
    874
    
    
    
    
    
    
    
    1,056
    
    
    
    
    
    
    
    40,605Cash and cash equivalents, end of period
    
    $
    39,004
    
    
    $
    3,534
    
    
    $
    7
    
    
    $
    1,744
    
    
    $
    
    
    
    $
    44,289
 (12) Discontinued Operations and Acquisitions
   34




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12) Discontinued Operations and Acquisitions(Continued)
 October 31, 2006AssetsReceivables, net of allowances
    
    $
    30Inventories and other current assets
    
    
    31Net property and equipment
    
    
    999Preneed funeral receivables and trust investments
    
    
    782Preneed cemetery receivables and trust investments
    
    
    92Other assets
    
    
    416Cemetery property
    
    
    159Cemetery perpetual care trust investments
    
    
    284Assets held for sale
    
    $
    2,793LiabilitiesDeferred preneed funeral revenue
    
    $
    14Deferred preneed cemetery revenue
    
    
    86Non-controlling interest in funeral and cemetery trusts
    
    
    842Liabilities associated with assets held for sale
    
    $
    942Non-controlling interest in perpetual care trusts associated with assets held for sale
    
    $
    284
 Three Months Ended
    
    
    Nine Months EndedJuly 31,
    
    
    July 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenue:Funeral
    
    $
    1
    
    
    $
    154
    
    
    $
    120
    
    
    $
    549Cemetery
    
    
    5
    
    
    
    82
    
    
    
    99
    
    
    
    1866
    
    
    
    236
    
    
    
    219
    
    
    
    735Gross profit:Funeral
    
    
    (14
    )
    
    
    (96
    )
    
    
    (46
    )
    
    
    (202
    )Cemetery
    
    
    (14
    )
    
    
    6
    
    
    
    25
    
    
    
    (17
    )(28
    )
    
    
    (90
    )
    
    
    (21
    )
    
    
    (219
    )Gains on dispositions and impairment (losses), net
    
    
    (187
    )
    
    
    
    
    
    
    (543
    )
    
    
    403Earnings (loss) from discontinued operations before income taxes
    
    $
    (215
    )
    
    $
    (90
    )
    
    $
    (564
    )
    
    $
    184
 Acquisitions
  35




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (13) Separation
Charges
  (14) Consolidated Comprehensive Income
  Three Months Ended
    
    
    Nine Months EndedJuly 31,
    
    
    July 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net earnings
    
    $
    8,123
    
    
    $
    7,334
    
    
    $
    33,678
    
    
    $
    27,170Other comprehensive income (loss):Unrealized appreciation (depreciation) of investments, net of deferred tax (expense) benefit of $2, ($2) and $3, respectively
    
    
    
    
    
    
    (3
    )
    
    
    3
    
    
    
    (5
    )(Increase) reduction in net unrealized losses associated with available-for-sale securities of the trusts
    
    
    (23,628
    )
    
    
    (14,868
    )
    
    
    33,692
    
    
    
    7,463Reclassification of the net unrealized losses activity attributable to the non-controlling interest holders
    
    
    23,628
    
    
    
    14,868
    
    
    
    (33,692
    )
    
    
    (7,463
    )Total other comprehensive income (loss)
    
    
    
    
    
    
    (3
    )
    
    
    3
    
    
    
    (5
    )Total comprehensive income
    
    $
    8,123
    
    
    $
    7,331
    
    
    $
    33,681
    
    
    $
    27,165
 (15) Hurricane Related Charges
  36




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (15) Hurricane Related Charges(Continued)
 
 (16) Long-term Debt
 July 31, 2007
    
    
    October 31, 2006Long-term debt:3.125% senior convertible notes due 2014
    
    $
    125,000
    
    
    $
    3.375% senior convertible notes due 2016
    
    
    125,000
    
    
    
    Senior secured credit facility:Revolving credit facility
    
    
    
    
    
    
    Term Loan B
    
    
    
    
    
    
    175,9046.25% senior notes due 2013
    
    
    200,000
    
    
    
    200,000Other, principally seller financing of acquired operations or assumption upon acquisition, weighted average interest rates of 3.9% and 3.5% as of July 31, 2007 and October 31, 2006, respectively, partially secured by assets of subsidiaries, with maturities through 2022
    
    
    398
    
    
    
    955Total long-term debt
    
    
    450,398
    
    
    
    376,859Less current maturities
    
    
    275
    
    
    
    2,839$
    450,123
    
    
    $
    374,020
   37




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (16)
    
    Long-term Debt(Continued)
        38




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (16)
    
    Long-term Debt(Continued)
        39




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (16)
    
    Long-term Debt(Continued)
  (17) Income Taxes
    40




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
         41




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##### Table of Contents



Critical Accounting Policies
  Results of Operations
   42




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##### Table of Contents



Three Months Ended July 31, 2007 Compared to Three Months Ended July 31, 2006Continuing Operations
 Funeral Operations
 Three Months Ended July 31,Increase2007
    
    
    2006
    
    
    (Decrease)(In millions)Funeral Revenue:Eastern Division
    
    $
    27.8
    
    
    $
    27.6
    
    
    $
    .2Western Division
    
    
    35.0
    
    
    
    36.7
    
    
    
    (1.7
    )Corporate Trust Management (1)
    
    
    4.6
    
    
    
    4.4
    
    
    
    .2Total Funeral Revenue
    
    $
    67.4
    
    
    $
    68.7
    
    
    $
    (1.3
    )Funeral Costs:Eastern Division
    
    $
    24.7
    
    
    $
    25.5
    
    
    $
    (.8
    )Western Division
    
    
    28.1
    
    
    
    29.8
    
    
    
    (1.7
    )Corporate Trust Management (1)
    
    
    .2
    
    
    
    .1
    
    
    
    .1Total Funeral Costs
    
    $
    53.0
    
    
    $
    55.4
    
    
    $
    (2.4
    )Funeral Gross Profit:Eastern Division
    
    $
    3.1
    
    
    $
    2.1
    
    
    $
    1.0Western Division
    
    
    6.9
    
    
    
    6.9
    
    
    
    Corporate Trust Management (1)
    
    
    4.4
    
    
    
    4.3
    
    
    
    .1Total Funeral Gross Profit
    
    $
    14.4
    
    
    $
    13.3
    
    
    $
    1.1
 Same-Store Analysis
 Change in Average
    
    Change in Same-Store
    
    Cremation RateRevenue Per Call
    
    Funeral Services
    
    2007
    
    2006Eastern Division
    
    
    (.8
    %)
    
    
    .4
    %
    
    
    36.0
    %
    
    
    32.9
    %Western Division
    
    
    5.3
    %
    
    
    (1.2
    %)
    
    
    42.5
    %
    
    
    43.0
    %Total
    
    
    2.4
    % (1)
    
    
    (.5
    %)
    
    
    39.7
    %
    
    
    38.7
    %
 
 (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 contract for those preneed
contracts delivered during the relevant periods. See Notes 3 and 6 to the condensed
consolidated financial statements included herein for information regarding the cost basis and
market value of the trust assets and current performance of the trusts (i.e., current realized
gains and losses, interest income and dividends). Trust management fees included in funeral
revenue for the three months ended July 31, 2007 and 2006 were $1.5 million and $1.3 million,
respectively. As corporate trust management is considered a separate operating segment, trust
earnings are included in the total average revenue per call presented, not in the Eastern or
Western divisions average revenue per call. Funeral trust earnings for both the three months
ended July 31, 2007 and 2006 was $3.1 million. Consolidated Operations  Funeral
  43




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##### Table of Contents



Segment Discussion  Funeral
   Cemetery Operations
 Three Months Ended July 31,Increase2007
    
    
    2006
    
    
    (Decrease)(In millions)Cemetery Revenue:Eastern Division
    
    $
    34.4
    
    
    $
    35.8
    
    
    $
    (1.4
    )Western Division
    
    
    24.0
    
    
    
    22.8
    
    
    
    1.2Corporate Trust Management (1)
    
    
    2.5
    
    
    
    2.0
    
    
    
    .5Total Cemetery Revenue
    
    $
    60.9
    
    
    $
    60.6
    
    
    $
    .3Cemetery Costs:Eastern Division
    
    $
    29.7
    
    
    $
    30.2
    
    
    $
    (.5
    )Western Division
    
    
    18.9
    
    
    
    18.1
    
    
    
    .8Corporate Trust Management (1)
    
    
    .1
    
    
    
    .1
    
    
    
    Total Cemetery Costs
    
    $
    48.7
    
    
    $
    48.4
    
    
    $
    .3Cemetery Gross Profit:Eastern Division
    
    $
    4.7
    
    
    $
    5.6
    
    
    $
    (.9
    )Western Division
    
    
    5.1
    
    
    
    4.7
    
    
    
    .4Corporate Trust Management (1)
    
    
    2.4
    
    
    
    1.9
    
    
    
    .5Total Cemetery Gross Profit
    
    $
    12.2
    
    
    $
    12.2
    
    
    $
    
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and service trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are 44




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##### Table of Contents



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 contract for those preneed
contracts delivered during the relevant periods. See Notes 4 and 6 to the condensed
consolidated financial statements included herein for information regarding the cost basis and
market value of the trust assets and current performance of the trusts (i.e., current realized
gains and losses, interest income and dividends). Trust management fees included in cemetery
revenue for the three months ended July 31, 2007 and 2006 were $1.4 million and $1.2 million,
respectively, and cemetery trust earnings for the three months ended July 31, 2007 and 2006
were $1.1 million and $0.8 million, respectively. Perpetual care trust earnings are included
in the revenues and gross profit of the related geographic
segment. Consolidated Operations  Cemetery
    Segment Discussion  Cemetery
   45




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##### Table of Contents



Discontinued Operations
  Other
       Preneed Sales into and Deliveries out of the Backlog
   46




---



##### Table of Contents



Nine Months Ended July 31, 2007 Compared to Nine Months Ended July 31, 2006Continuing Operations
 Funeral Operations
 Nine Months Ended July 31,2007
    
    
    2006
    
    

Increase(Decrease)(In millions)Funeral Revenue:Eastern Division
    
    $
    89.5
    
    
    $
    87.7
    
    
    $
    1.8Western Division
    
    
    110.5
    
    
    
    110.6
    
    
    
    (.1
    )Corporate Trust Management (1)
    
    
    13.9
    
    
    
    13.7
    
    
    
    .2Total Funeral Revenue
    
    $
    213.9
    
    
    $
    212.0
    
    
    $
    1.9Funeral Costs:Eastern Division
    
    $
    74.2
    
    
    $
    74.1
    
    
    $
    .1Western Division
    
    
    87.1
    
    
    
    88.0
    
    
    
    (.9
    )Corporate Trust Management (1)
    
    
    .6
    
    
    
    .4
    
    
    
    .2Total Funeral Costs
    
    $
    161.9
    
    
    $
    162.5
    
    
    $
    (.6
    )Funeral Gross Profit:Eastern Division
    
    $
    15.3
    
    
    $
    13.6
    
    
    $
    1.7Western Division
    
    
    23.4
    
    
    
    22.6
    
    
    
    .8Corporate Trust Management (1)
    
    
    13.3
    
    
    
    13.3
    
    
    
    Total Funeral Gross Profit
    
    $
    52.0
    
    
    $
    49.5
    
    
    $
    2.5
 Same-Store Analysis
 Change in Average
    
    Change in Same-Store
    
    Cremation RateRevenue Per Call
    
    Funeral Services
    
    2007
    
    2006Eastern Division
    
    
    3.3
    %
    
    
    (1.7
    %)
    
    
    35.0
    %
    
    
    33.0
    %Western Division
    
    
    4.9
    %
    
    
    (3.3
    %)
    
    
    42.3
    %
    
    
    42.8
    %Total
    
    
    4.2
    % (1)
    
    
    (2.6
    %)
    
    
    39.1
    %
    
    
    38.6
    %
 
 (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 contract for those preneed
contracts delivered during the relevant periods. See Notes 3 and 6 to the condensed
consolidated financial statements included herein for information regarding the cost basis and
market value of the trust assets and current performance of the trusts (i.e., current realized
gains and losses, interest income and dividends). Trust management fees included in funeral
revenue for the nine months ended July 31, 2007 and 2006 were $4.4 million and $4.1 million,
respectively. As corporate trust management is considered a separate operating segment, trust
earnings are included in the total average revenue per call presented, not in the Eastern or
Western divisions average revenue per call. Funeral trust earnings for the nine months ended
July 31, 2007 and 2006 were $9.5 million and $9.6 million, respectively. Consolidated Operations  Funeral
  47




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##### Table of Contents



Segment Discussion  Funeral
   Cemetery Operations
 Nine Months Ended July 31,Increase2007
    
    
    2006
    
    
    (Decrease)(In millions)Cemetery Revenue:Eastern Division
    
    $
    108.5
    
    
    $
    102.7
    
    
    $
    5.8Western Division
    
    
    69.0
    
    
    
    64.0
    
    
    
    5.0Corporate Trust Management (1)
    
    
    7.2
    
    
    
    7.3
    
    
    
    (.1
    )Total Cemetery Revenue
    
    $
    184.7
    
    
    $
    174.0
    
    
    $
    10.7Cemetery Costs:Eastern Division
    
    $
    91.0
    
    
    $
    85.7
    
    
    $
    5.3Western Division
    
    
    55.0
    
    
    
    50.9
    
    
    
    4.1Corporate Trust Management (1)
    
    
    .4
    
    
    
    .4
    
    
    
    Total Cemetery Costs
    
    $
    146.4
    
    
    $
    137.0
    
    
    $
    9.4Cemetery Gross Profit:Eastern Division
    
    $
    17.5
    
    
    $
    17.0
    
    
    $
    .5Western Division
    
    
    14.0
    
    
    
    13.1
    
    
    
    .9Corporate Trust Management (1)
    
    
    6.8
    
    
    
    6.9
    
    
    
    (.1
    )Total Cemetery Gross Profit
    
    $
    38.3
    
    
    $
    37.0
    
    
    $
    1.3
 48




---



##### Table of Contents



(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 contract for those preneed
contracts delivered during the relevant periods. See Notes 4 and 6 to the condensed
consolidated financial statements included herein for information regarding the cost basis and
market value of the trust assets and current performance of the trusts (i.e., current realized
gains and losses, interest income and dividends). Trust management fees included in cemetery
revenue for the nine months ended July 31, 2007 and 2006 were $4.0 million and $3.6 million,
respectively, and cemetery trust earnings for the nine months ended July 31, 2007 and 2006
were $3.2 million and $3.7 million, respectively. Perpetual care trust earnings are included
in the revenues and gross profit of the related geographic segment. Consolidated Operations  Cemetery
    Segment Discussion  Cemetery
  49




---



##### Table of Contents



Discontinued Operations
  Other
           50




---



##### Table of Contents



Preneed Sales into and Deliveries out of the Backlog
   Liquidity and Capital Resources
 Cash Flow
   51




---



##### 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)
    
    $
    450.4
    
    
    $
    .3
    
    
    $
    
    
    
    $
    
    
    
    $
    450.1Interest on long-term debt (2)
    
    
    140.5
    
    
    
    21.1
    
    
    
    41.3
    
    
    
    41.2
    
    
    
    36.9Operating lease obligations (3)
    
    
    28.6
    
    
    
    1.1
    
    
    
    6.9
    
    
    
    3.5
    
    
    
    17.1Non-competition and other agreements (4)
    
    
    3.2
    
    
    
    .5
    
    
    
    2.2
    
    
    
    .4
    
    
    
    .1$
    622.7
    
    
    $
    23.0
    
    
    $
    50.4
    
    
    $
    45.1
    
    
    $
    504.2
 
 (1)
    
    See below for a breakdown of our future scheduled principal payments and maturities
of our long-term debt by type as of July 31, 2007.(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 12 years, except for six leases that expire between 2032 and 2039. Our
future minimum lease payments as of July 31, 2007 are $1.1 million, $3.6 million, $3.3
million, $2.5 million, $1.0 million, and $17.1 million for the years ending October 31, 2007,
2008, 2009, 2010, 2011 and later years, respectively.(4)
    
    We have entered into non-competition agreements with prior owners and key employees
of acquired subsidiaries that expire through 2012. This category also includes separation pay
related to former executive officers.  52




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##### Table of Contents



Other,PrincipallySellerRevolving
    
    
    
    
    
    
    Senior
    
    
    
    
    
    
    FinancingFiscal Year Ending
    
    Credit
    
    
    Term
    
    
    Convertible
    
    
    Senior
    
    
    of AcquiredOctober 31,
    
    Facility
    
    
    Loan B
    
    
    Notes
    
    
    Notes
    
    
    Operations
    
    
    Total2007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    .1
    
    
    $
    .12008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .2
    
    
    
    .22009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    
    
    
    
    
    
    
    
    250.0
    
    
    
    200.0
    
    
    
    .1
    
    
    
    450.1Total long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    250.0
    
    
    $
    200.0
    
    
    $
    .4
    
    
    $
    450.4
   Off-Balance Sheet Arrangements
  (1)
    
    the $30.8 million bond we are required to maintain to guarantee our obligations
relating to funds we withdrew in fiscal year 2001 from our preneed funeral trusts in
Florida, which is discussed above and in Note 19 to the consolidated financial
statements in our 2006 Form 10-K; and(2)
    
    the insurance-funded preneed funeral contracts, which will be funded by life
insurance or annuity contracts issued by third-party insurers, are not reflected in our
consolidated balance sheets, and are discussed in Note 2(i) to the consolidated
financial statements in our 2006 Form 10-K.
 Ratio of Earnings to Fixed Charges
  Nine Months Ended
    
    Years Ended October 31,July 31, 2007
    
    2006
    
    2005
    
    2004
    
    2003
    
    20023.24(1)
    
    
    2.83
    (2)
    
    
    1.36
    (3)(7)
    
    
    1.98
    (4)
    
    
    1.08
    (5)
    
    
    1.27
    (6)(7)
 
 (1)
    
    Pretax earnings for the nine months ended July 31, 2007 include a charge of $2.3
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.(2)
    
    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 ($0.3) million.(3)
    
    Pretax earnings for fiscal year 2005 include a charge of $9.4 million for expenses related to Hurricane Katrina, a 53




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##### Table of Contents



charge of $1.5 million for separation charges related to the July 2005 restructuring of our divisions, $1.2 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.(4)
    
    Pretax earnings for fiscal year 2004 include separation charges of $3.4 million for severance and other costs related to workforce reductions announced in December 2003 and separation pay to a former executive officer and ($0.2) million in gains on dispositions, net of impairment losses.(5)
    
    Pretax earnings for fiscal year 2003 include a charge of $11.3 million for the loss on early extinguishment of debt in connection with redemption of the ROARS, a noncash charge of $9.6 million for long-lived asset impairment and a charge of $2.5 million for separation payments to former executive officers.(6)
    
    Pretax earnings for fiscal year 2002 include a noncash charge of $18.5 million in connection with the write-down of assets held for sale.(7)
    
    Excludes the cumulative effect of change in accounting principles.  Recent Accounting Standards
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   Interest
   54




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##### Table of Contents



Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
   
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   55




---



##### Table of Contents



Item 1A. Risk Factors
    Servicing our debt will require a significant amount of cash and our ability to pay or refinance
the debt depends on many factors, some of which are beyond our control.
  We may be unable to repurchase our 6.25 percent senior notes and our senior convertible notes when
required by the holders, or to pay the cash portion of the conversion value upon conversion of our
senior convertible notes.
  The call options we purchased and the warrants we sold contemporaneously with the sale of our
senior convertible notes may affect the trading price of our Class A common stock and the value of
the senior convertible notes.
  56




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##### Table of Contents



Exercise of the outstanding warrants could dilute the ownership interests of our existing
stockholders.
  The accounting method for our senior convertible notes is subject to change. Proposed new rules,
if adopted, would substantially increase our reported interest expense relating to the senior
convertible notes.
     Increased costs may have a negative impact on earnings and cash flows.
  57




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##### 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 purchased
    
    
    approximate dollaras part of
    
    
    value of shares thatTotal number
    
    
    Average price
    
    
    publicly-
    
    
    may yet be purchasedof shares
    
    
    paid per
    
    
    announced plans
    
    
    under the plans orPeriod
    
    purchased
    
    
    share
    
    
    or programs
    
    
    programsMay 1, 2007 through May 31, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    June 1, 2007 through June 30, 2007
    
    
    7,698,000
    
    
    $
    8.34
    
    
    
    
    
    
    $
    July 1, 2007 through July 31, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Total
    
    
    7,698,000
    
    
    $
    8.34
    
    
    
    
    
    
    $
    
 
 Item 6. Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of April 20, 2006 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended April 30, 2006)3.2
    
    By-laws of the Company, as amended and restated as of April 20, 2006 (incorporated by reference to Exhibit 3.2 of the Companys Quarterly Report on Form 10-Q for the quarter ended April 30, 2006)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
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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 Purchases (incorporated by reference to Exhibit 4.3
to the Companys Current Report on Form 8-K filed June 27, 2007)10.1
    
    Employment Agreement dated February 20, 2007 between the Company and Thomas J. Crawford (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed February 21, 2007)10.2
    
    Employment Agreement dated May 14, 2007 between the Company and Thomas M. Kitchen (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed May 17, 2007)10.3
    
    Amendment No. 1 to Employment Agreement dated February 20, 2007, effective May 14, 2007, between the Company and Thomas J. Crawford (incorporated by reference to Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the quarter ended April 30, 2007)10.4
    
    Purchase Agreement dated June 21, 2007 by and among Stewart Enterprises, Inc., the guarantors listed on Schedule A thereto and the Initial Purchases (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed June 27, 2007)10.5
    
    Confirmation of OTC Convertible Note Hedge dated as of June 21, 2007 by and between Stewart Enterprises, Inc. and Merrill Lynch International (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed June 27, 2007)10.6
    
    Confirmation of OTC Convertible Note Hedge dated as of June 21, 2007 by and between Stewart Enterprises, Inc. and Merrill Lynch International (incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed June 27, 2007)10.7
    
    Confirmation of OTC Warrant Transaction dated as of June 21, 2007 by and between Stewart Enterprises, Inc. and Merrill Lynch Financial Markets (incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K filed June 27, 2007)
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10.8
    
    Confirmation of OTC Warrant Transaction dated as of June 21, 2007 by and between Stewart Enterprises, Inc. and Merrill Lynch Financial Markets (incorporated by reference to Exhibit 10.5 to the Companys Current Report on Form 8-K filed June 27, 2007)31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford, President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.September 7, 2007
    
    /s/ THOMAS M. KITCHEN

Thomas M. KitchenSenior Executive Vice President andChief Financial OfficerSeptember 7, 2007
    
    /s/ ANGELA M. LACOURAngela M. LacourVice PresidentCorporate ControllerChief Accounting Officer
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##### Table of Contents



Exhibit Index
 31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
 62