##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended April 30, 2009
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 
 Commission File Number: 1-15449
 
 STEWART ENTERPRISES, INC.
  LOUISIANA
(State or other jurisdiction of incorporation or organization)
    
    72-0693290
(I.R.S. Employer Identification No.)1333 South Clearview ParkwayJefferson, Louisiana
    
    70121(Address of principal executive offices)
    
    (Zip Code)
 
 Registrants telephone number, including area code: (504) 729-1400
 
 þ o
 o o
  Large accelerated filer þAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 INDEX
 PagePart I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings 
Three Months Ended April 30, 2009 and 2008
    
    
    3Condensed Consolidated Statements of Earnings 
Six Months Ended April 30, 2009 and 2008
    
    
    4Condensed Consolidated Balance Sheets 
April 30, 2009 and October 31, 2008
    
    
    5Condensed Consolidated Statement of Shareholders Equity 
Six Months Ended April 30, 2009
    
    
    7Condensed Consolidated Statements of Cash Flows 
Six Months Ended April 30, 2009 and 2008
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    42Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    56Item 4. Controls and Procedures
    
    
    56Part II. Other InformationItem 1. Legal Proceedings
    
    
    57Item 1A. Risk Factors
    
    
    57Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    57Item 4. Submission of Matters to a Vote of Security Holders
    
    
    58Item 5. Other Information
    
    
    58Item 6. Exhibits
    
    
    58Signatures
    
    
    61EX-31.1EX-31.2EX-32.1
  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 April 30,2009
    
    
    2008Revenues:Funeral
    
    $
    71,240
    
    
    $
    76,855Cemetery
    
    
    55,378
    
    
    
    59,964126,618
    
    
    
    136,819Costs and expenses:Funeral
    
    
    52,715
    
    
    
    54,289Cemetery
    
    
    48,308
    
    
    
    46,896101,023
    
    
    
    101,185Gross profit
    
    
    25,595
    
    
    
    35,634Corporate general and administrative expenses
    
    
    (7,006
    )
    
    
    (7,803
    )Hurricane related charges, net
    
    
    (205
    )
    
    
    (169
    )Separation charges
    
    
    (275
    )
    
    
    Gains on dispositions and impairment (losses), net
    
    
    (35
    )
    
    
    (19
    )Other operating income, net
    
    
    304
    
    
    
    104Operating earnings
    
    
    18,378
    
    
    
    27,747Interest expense
    
    
    (5,879
    )
    
    
    (6,093
    )Gain on early extinguishment of debt
    
    
    8,671
    
    
    
    Investment and other income, net
    
    
    32
    
    
    
    357Earnings before income taxes
    
    
    21,202
    
    
    
    22,011Income taxes
    
    
    8,000
    
    
    
    8,071Net earnings
    
    $
    13,202
    
    
    $
    13,940Net earnings per common share:Basic
    
    $
    .14
    
    
    $
    .15Diluted
    
    $
    .14
    
    
    $
    .15Weighted average common shares outstanding (in thousands):Basic
    
    
    91,888
    
    
    
    94,525Diluted
    
    
    91,921
    
    
    
    94,635Dividends 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)
 Six Months Ended April 30,2009
    
    
    2008Revenues:Funeral
    
    $
    142,990
    
    
    $
    150,304Cemetery
    
    
    102,958
    
    
    
    116,788245,948
    
    
    
    267,092Costs and expenses:Funeral
    
    
    106,210
    
    
    
    109,736Cemetery
    
    
    91,060
    
    
    
    94,652197,270
    
    
    
    204,388Gross profit
    
    
    48,678
    
    
    
    62,704Corporate general and administrative expenses
    
    
    (14,512
    )
    
    
    (16,038
    )Hurricane related charges, net
    
    
    (520
    )
    
    
    (10
    )Separation charges
    
    
    (275
    )
    
    
    Gains on dispositions and impairment (losses), net
    
    
    (98
    )
    
    
    128Other operating income, net
    
    
    563
    
    
    
    346Operating earnings
    
    
    33,836
    
    
    
    47,130Interest expense
    
    
    (11,789
    )
    
    
    (11,981
    )Gain on early extinguishment of debt
    
    
    8,671
    
    
    
    Investment and other income, net
    
    
    73
    
    
    
    1,077Earnings before income taxes
    
    
    30,791
    
    
    
    36,226Income taxes
    
    
    11,873
    
    
    
    13,401Net earnings
    
    $
    18,918
    
    
    $
    22,825Net earnings per common share:Basic
    
    $
    .21
    
    
    $
    .24Diluted
    
    $
    .21
    
    
    $
    .24Weighted average common shares outstanding (in thousands):Basic
    
    
    91,856
    
    
    
    95,667Diluted
    
    
    91,871
    
    
    
    95,838Dividends declared per common share
    
    $
    .05
    
    
    $
    .05
  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)
 April 30, 2009
    
    
    October 31, 2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    71,783
    
    
    $
    72,574Marketable securities
    
    
    150
    
    
    
    55Receivables, net of allowances
    
    
    54,956
    
    
    
    59,129Inventories
    
    
    36,517
    
    
    
    35,870Prepaid expenses
    
    
    10,232
    
    
    
    7,317Deferred income taxes, net
    
    
    8,942
    
    
    
    8,798Total current assets
    
    
    182,580
    
    
    
    183,743Receivables due beyond one year, net of allowances
    
    
    65,787
    
    
    
    70,671Preneed funeral receivables and trust investments
    
    
    344,005
    
    
    
    368,412Preneed cemetery receivables and trust investments
    
    
    174,322
    
    
    
    182,141Goodwill
    
    
    247,236
    
    
    
    247,236Cemetery property, at cost
    
    
    384,121
    
    
    
    375,832Property and equipment, at cost:Land
    
    
    42,343
    
    
    
    42,343Buildings
    
    
    324,202
    
    
    
    319,839Equipment and other
    
    
    183,140
    
    
    
    178,589549,685
    
    
    
    540,771Less accumulated depreciation
    
    
    248,567
    
    
    
    236,243Net property and equipment
    
    
    301,118
    
    
    
    304,528Deferred income taxes, net
    
    
    174,107
    
    
    
    179,515Cemetery perpetual care trust investments
    
    
    172,544
    
    
    
    173,090Non-current assets held for sale
    
    
    2,873
    
    
    
    2,873Other assets
    
    
    14,653
    
    
    
    16,474Total assets
    
    $
    2,063,346
    
    
    $
    2,104,515
  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)
 April 30, 2009
    
    
    October 31, 2008LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    4
    
    
    $
    20Accounts payable
    
    
    23,705
    
    
    
    27,652Accrued payroll and other benefits
    
    
    12,078
    
    
    
    14,133Accrued insurance
    
    
    20,410
    
    
    
    21,287Accrued interest
    
    
    5,032
    
    
    
    5,864Estimated obligation to fund cemetery perpetual care trust
    
    
    14,725
    
    
    
    13,281Other current liabilities
    
    
    12,179
    
    
    
    16,198Income taxes payable
    
    
    5,044
    
    
    
    2,061Total current liabilities
    
    
    93,177
    
    
    
    100,496Long-term debt, less current maturities
    
    
    427,447
    
    
    
    450,095Deferred preneed funeral revenue
    
    
    244,440
    
    
    
    245,182Deferred preneed cemetery revenue
    
    
    275,711
    
    
    
    275,835Deferred preneed funeral and cemetery receipts held in trust
    
    
    448,222
    
    
    
    475,420Perpetual care trusts corpus
    
    
    171,129
    
    
    
    171,371Other long-term liabilities
    
    
    22,397
    
    
    
    20,479Total liabilities
    
    
    1,682,523
    
    
    
    1,738,878Commitments and contingenciesShareholders equity:Preferred stock, $1.00 par value, 5,000,000 shares authorized;
no shares issued
    
    
    
    
    
    
    Common stock, $1.00 stated value:Class A authorized 200,000,000 shares; issued and
outstanding 89,121,557 and 88,693,127 shares at April
30, 2009 and October 31, 2008, respectively
    
    
    89,122
    
    
    
    88,693Class B authorized 5,000,000 shares; issued and
outstanding 3,555,020 shares at April 30, 2009 and
October 31, 2008; 10 votes per share convertible into
an equal number of Class A shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    532,744
    
    
    
    536,902Accumulated deficit
    
    
    (244,632
    )
    
    
    (263,550
    )Accumulated other comprehensive income:Unrealized appreciation of investments
    
    
    34
    
    
    
    37Total accumulated other comprehensive income
    
    
    34
    
    
    
    37Total shareholders equity
    
    
    380,823
    
    
    
    365,637Total liabilities and shareholders equity
    
    $
    2,063,346
    
    
    $
    2,104,515
  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)
 Additional
    
    
    
    
    
    
    Unrealized
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Accumulated
    
    
    Appreciation
    
    
    ShareholdersStock(1)
    
    
    Capital
    
    
    Deficit
    
    
    of Investments
    
    
    EquityBalance October 31, 2008
    
    $
    92,248
    
    
    $
    536,902
    
    
    $
    (263,550
    )
    
    $
    37
    
    
    $
    365,637Comprehensive income (loss):Net earnings
    
    
    
    
    
    
    
    
    
    
    18,918
    
    
    
    
    
    
    
    18,918Other comprehensive loss:Unrealized depreciation of
investments, net of
deferred tax benefit of $2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Total other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Total comprehensive income
(loss)
    
    
    
    
    
    
    
    
    
    
    18,918
    
    
    
    (3
    )
    
    
    18,915Restricted stock activity
    
    
    281
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    294Issuance of common stock
    
    
    148
    
    
    
    306
    
    
    
    
    
    
    
    
    
    
    
    454Stock option expense
    
    
    
    
    
    
    609
    
    
    
    
    
    
    
    
    
    
    
    609Tax benefit associated with
stock activity
    
    
    
    
    
    
    (88
    )
    
    
    
    
    
    
    
    
    
    
    (88
    )Retirement of call options,
net of tax expense of $441
    
    
    
    
    
    
    820
    
    
    
    
    
    
    
    
    
    
    
    820Retirement of common stock
warrants
    
    
    
    
    
    
    (1,182
    )
    
    
    
    
    
    
    
    
    
    
    (1,182
    )Dividends ($.05 per share)
    
    
    
    
    
    
    (4,636
    )
    
    
    
    
    
    
    
    
    
    
    (4,636
    )Balance April 30, 2009
    
    $
    92,677
    
    
    $
    532,744
    
    
    $
    (244,632
    )
    
    $
    34
    
    
    $
    380,823
 
 (1)
    
    Amount includes 89,122 and 88,693 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of April 30, 2009 and October 31, 2008, 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)
 Six Months Ended April 30,2009
    
    
    2008Cash flows from operating activities:Net earnings
    
    $
    18,918
    
    
    $
    22,825Adjustments to reconcile net earnings to net cash provided by operating activities:(Gains) on dispositions and impairment losses, net
    
    
    98
    
    
    
    (128
    )Gain on early extinguishment of debt
    
    
    (8,671
    )
    
    
    Depreciation and amortization
    
    
    14,806
    
    
    
    13,985Provision for doubtful accounts
    
    
    4,344
    
    
    
    3,638Share-based compensation
    
    
    1,259
    
    
    
    1,851Excess tax benefits from share-based payment arrangements
    
    
    
    
    
    
    (165
    )Provision for deferred income taxes
    
    
    4,764
    
    
    
    2,594Estimated obligation to fund cemetery perpetual care trust
    
    
    3,200
    
    
    
    Other
    
    
    157
    
    
    
    217Changes in assets and liabilities:(Increase) decrease in receivables
    
    
    5,175
    
    
    
    (5,706
    )Increase in prepaid expenses
    
    
    (2,915
    )
    
    
    (3,933
    )Decrease in inventories and cemetery property
    
    
    (515
    )
    
    
    (4,368
    )Decrease in accounts payable and accrued expenses
    
    
    (10,382
    )
    
    
    (1,644
    )Net effect of preneed funeral production and maturities:Decrease in preneed funeral receivables and trust investments
    
    
    15,895
    
    
    
    6,654Decrease in deferred preneed funeral revenue
    
    
    (743
    )
    
    
    (5,070
    )Decrease in deferred preneed funeral receipts held in trust
    
    
    (14,018
    )
    
    
    (4,814
    )Net effect of preneed cemetery production and deliveries:Decrease in preneed cemetery receivables and trust investments
    
    
    7,584
    
    
    
    3,101Decrease in deferred preneed cemetery revenue
    
    
    (7,595
    )
    
    
    (244
    )Increase (decrease) in deferred preneed cemetery receipts held in trust
    
    
    (4,433
    )
    
    
    453Increase (decrease) in other
    
    
    2,156
    
    
    
    (849
    )Net cash provided by operating activities
    
    
    29,084
    
    
    
    28,397Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    
    
    
    
    10,219Purchases of marketable securities
    
    
    (99
    )
    
    
    (19,897
    )Proceeds from sale of assets
    
    
    494
    
    
    
    338Purchase of subsidiaries and other investments, net of cash acquired
    
    
    (1,623
    )
    
    
    (1,378
    )Additions to property and equipment
    
    
    (10,729
    )
    
    
    (13,385
    )Other
    
    
    28
    
    
    
    21Net cash used in investing activities
    
    
    (11,929
    )
    
    
    (24,082
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (13,538
    )
    
    
    (150
    )Issuance of common stock
    
    
    149
    
    
    
    1,458Retirement of call options
    
    
    1,261
    
    
    
    Purchase and retirement of common stock
    
    
    
    
    
    
    (37,320
    )Retirement of common stock warrants
    
    
    (1,182
    )
    
    
    Dividends
    
    
    (4,636
    )
    
    
    (4,761
    )Excess tax benefits from share-based payment arrangements
    
    
    
    
    
    
    165Net cash used in financing activities
    
    
    (17,946
    )
    
    
    (40,608
    )Net decrease in cash
    
    
    (791
    )
    
    
    (36,293
    )Cash and cash equivalents, beginning of period
    
    
    72,574
    
    
    
    71,545Cash and cash equivalents, end of period
    
    $
    71,783
    
    
    $
    35,252Supplemental cash flow information:Cash paid during the period for:Income taxes, net
    
    $
    3,374
    
    
    $
    10,697Interest
    
    $
    11,798
    
    
    $
    11,437Non-cash investing and financing activities:Issuance of common stock to executive officers and directors
    
    $
    305
    
    
    $
    922Issuance of restricted stock, net of forfeitures
    
    $
    52
    
    
    $
    236
  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)
    Number ofShares
    
    Exercise PriceGrant Type
    
    Granted
    
    per Share
    
    Vesting Period
    
    Vesting ConditionStock options
    
    
    586,750
    
    
    $
    2.65
    
    
    Equal one-fourth
portions over 4
years
    
    Service conditionStock options
    
    
    390,000
    
    
    $
    3.09
    
    
    Equal one-fourth
portions over 4
years
    
    Service conditionRestricted stock
    
    
    102,000
    
    
    $
    2.65
    
    
    Equal one-third
portions over 3
years
    
    Market conditionRestricted stock
    
    
    195,000
    
    
    $
    3.09
    
    
    Equal one-third
portions over 3
years
    
    Market conditionRestricted stock
    
    
    56,000
    
    
    $
    3.09
    
    
    Equal one-third
portions over 3
years
    
    Service condition
  (f)
    
    Goodwill
  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)
 (g)
    
    Reclassifications
   
 (2)
    
    New Accounting Principles
  
    
    Level 1inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets;
    
    Level 2inputs to the valuation methodology include quoted prices for similar assets or
liabilities in active markets, and inputs that are observable for the asset or liability,
either directly or indirectly, for substantially the full term of the financial instrument;
quoted prices for identical or similar assets or liabilities in markets that are not
active; inputs other than quoted prices that are observable; inputs that are derived
principally from or corroborated by observable market data by correlation or other means;
and
    
    Level 3inputs to the valuation methodology are unobservable and significant to the
fair value measurement.
   11




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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)
 (2)
    
    New Accounting Principles(Continued)
     12




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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)
 (2)
    
    New Accounting Principles(Continued)
 Other, not yet adopted
      13




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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)
 (2)
    
    New Accounting Principles(Continued)
     (3)
    
    Preneed Funeral Activities
  Preneed Funeral Receivables and Trust Investments
  14




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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)
 April 30,
    
    
    October 31,2009
    
    
    2008Trust assets
    
    $
    313,749
    
    
    $
    336,782Receivables from customers
    
    
    42,279
    
    
    
    44,796356,028
    
    
    
    381,578Allowance for cancellations
    
    
    (12,023
    )
    
    
    (13,166
    )Preneed funeral receivables and trust investments
    
    $
    344,005
    
    
    $
    368,412
  April 30, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    36,598
    
    
    $
    
    
    
    $
    
    
    
    $
    36,598U.S. Government, agencies and
municipalities
    
    
    9,184
    
    
    
    327
    
    
    
    (1
    )
    
    
    9,510Corporate bonds
    
    
    55,575
    
    
    
    789
    
    
    
    (7,416
    )
    
    
    48,948Preferred stocks
    
    
    63,191
    
    
    
    8
    
    
    
    (21,593
    )
    
    
    41,606Common stocks
    
    
    265,975
    
    
    
    693
    
    
    
    (130,410
    )
    
    
    136,258Mutual funds
    
    
    35,150
    
    
    
    8
    
    
    
    (12,181
    )
    
    
    22,977Insurance contracts and other long-term investments
    
    
    19,332
    
    
    
    105
    
    
    
    (2,614
    )
    
    
    16,823Trust investments
    
    $
    485,005
    
    
    $
    1,930
    
    
    $
    (174,215
    )
    
    
    312,720Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64.5
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,029Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    313,749
  April 30, 2009Due in one year or less
    
    $
    7,131Due in one to five years
    
    
    29,305Due in five to ten years
    
    
    21,993Thereafter
    
    
    29$
    58,458
   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)
 (3)
    
    Preneed Funeral Activities(Continued)
    April 30, 2009SignificantQuoted Market
    
    Other
    
    SignificantPrices in Active
    
    Observable
    
    UnobservableMarkets
    
    Inputs
    
    Inputs
    
    Fair Market(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    ValueTrust investments
    
    $
    204,057
    
    
    $
    100,064
    
    
    $
    8,599
    
    
    $
    312,720
  Fair market value, November 1, 2008
    
    $
    11,299Total unrealized losses included in other comprehensive income (1)
    
    
    (2,554
    )Purchases, sales, contributions, and distributions, net
    
    
    (146
    )Fair market value, April 30, 2009
    
    $
    8,599
 
 (1)
    
    All gains (losses) recognized in other comprehensive income for funeral trust
investments are attributable to the Companys preneed customers and are offset by a
corresponding increase (decrease) in deferred preneed funeral receipts held in trust.  Three Months Ended April 30,
    
    Six Months Ended April 30,2009
    
    2008
    
    2009
    
    2008Purchases
    
    $
    937
    
    
    $
    2,470
    
    
    $
    1,578
    
    
    $
    8,856Sales
    
    
    4,512
    
    
    
    3,154
    
    
    
    9,128
    
    
    
    12,774Realized gains from sales of investments
    
    
    484
    
    
    
    545
    
    
    
    992
    
    
    
    1,438Realized losses from sales of
investments and other
    
    
    (392
    ) (1)
    
    
    (98
    )
    
    
    (8,893
    ) (2)
    
    
    (311
    )Deposits
    
    
    6,655
    
    
    
    7,589
    
    
    
    13,013
    
    
    
    15,982Withdrawals
    
    
    10,386
    
    
    
    12,209
    
    
    
    21,438
    
    
    
    24,137
 
 (1)
    
    Includes $292 in losses from the sale of investments and $100 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined during the quarter ended April 30, 2009 it did not
have the intent to hold until they recover in value. 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)
 (3)
    
    Preneed Funeral Activities(Continued)
 
 (2)
    
    Includes $487 in losses from the sale of investments and $8,406 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined during the six months ended April 30, 2009 it did not
have the intent to hold until they recover in value.  (4)
    
    Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  April 30,
    
    
    October 31,2009
    
    
    2008Trust assets
    
    $
    144,252
    
    
    $
    148,533Receivables from customers
    
    
    36,720
    
    
    
    39,868180,972
    
    
    
    188,401Allowance for cancellations
    
    
    (6,650
    )
    
    
    (6,260
    )Preneed cemetery receivables and trust investments
    
    $
    174,322
    
    
    $
    182,141
  April 30, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    19,544
    
    
    $
    
    
    
    $
    
    
    
    $
    19,544U.S. Government, agencies and
municipalities
    
    
    11,261
    
    
    
    842
    
    
    
    (1
    )
    
    
    12,102Corporate bonds
    
    
    12,188
    
    
    
    244
    
    
    
    (912
    )
    
    
    11,520Preferred stocks
    
    
    23,643
    
    
    
    
    
    
    
    (8,437
    )
    
    
    15,206Common stocks
    
    
    136,522
    
    
    
    209
    
    
    
    (68,400
    )
    
    
    68,331Mutual funds
    
    
    30,310
    
    
    
    
    
    
    
    (13,694
    )
    
    
    16,616Other long-term investments
    
    
    518
    
    
    
    15
    
    
    
    
    
    
    
    533Trust investments
    
    $
    233,986
    
    
    $
    1,310
    
    
    $
    (91,444
    )
    
    
    143,852Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61.5
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    144,252
 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)
 (4)
    
    Preneed Cemetery Merchandise and Service Activities(Continued)
  April 30, 2009Due in one year or less
    
    $
    5,690Due in one to five years
    
    
    11,361Due in five to ten years
    
    
    6,381Thereafter
    
    
    190$
    23,622
     April 30, 2009SignificantQuoted Market
    
    Other
    
    SignificantPrices in Active
    
    Observable
    
    UnobservableMarkets
    
    Inputs
    
    Inputs
    
    Fair Market(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    ValueTrust investments
    
    $
    104,968
    
    
    $
    38,884
    
    
    $
    
    
    
    $
    143,852
  Three Months Ended April 30,
    
    Six Months Ended April 30,2009
    
    2008
    
    2009
    
    2008Purchases
    
    $
    2,273
    
    
    $
    3,720
    
    
    $
    3,426
    
    
    $
    6,631Sales
    
    
    2,042
    
    
    
    4,118
    
    
    
    4,498
    
    
    
    6,658Realized gains from sales of investments
    
    
    274
    
    
    
    485
    
    
    
    378
    
    
    
    838Realized losses from sales of
investments and other
    
    
    (1,286
    ) (1)
    
    
    (167
    )
    
    
    (5,750
    ) (2)
    
    
    (196
    )Deposits
    
    
    4,289
    
    
    
    4,192
    
    
    
    8,322
    
    
    
    8,396Withdrawals
    
    
    4,614
    
    
    
    6,044
    
    
    
    8,382
    
    
    
    10,556
 
 (1)
    
    Includes $1,231 in losses from the sale of investments and $55 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined during the quarter ended April 30, 2009 it did not
have the intent to hold until they recover in value. 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)
 (4)
    
    Preneed Cemetery Merchandise and Service Activities(Continued)
 (2)
    
    Includes $2,474 in losses from the sale of investments and $3,276 in losses
related to certain investments that were rendered worthless or practically worthless and to
certain investments that the Company determined during the six months ended April 30, 2009 it
did not have the intent to hold until they recover in value.  (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts
   April 30, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    14,513
    
    
    $
    
    
    
    $
    
    
    
    $
    14,513U.S. Government, agencies and
municipalities
    
    
    7,406
    
    
    
    465
    
    
    
    (83
    )
    
    
    7,788Corporate bonds
    
    
    47,495
    
    
    
    835
    
    
    
    (4,490
    )
    
    
    43,840Preferred stocks
    
    
    66,142
    
    
    
    
    
    
    
    (29,512
    )
    
    
    36,630Common stocks
    
    
    105,121
    
    
    
    2,390
    
    
    
    (51,456
    )
    
    
    56,055Mutual funds
    
    
    15,274
    
    
    
    219
    
    
    
    (2,990
    )
    
    
    12,503Other long-term investments
    
    
    563
    
    
    
    1
    
    
    
    (177
    )
    
    
    387Trust investments
    
    $
    256,514
    
    
    $
    3,910
    
    
    $
    (88,708
    )
    
    
    171,716Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66.9
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    828Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    172,544
  April 30, 2009Due in one year or less
    
    $
    2,903Due in one to five years
    
    
    31,006Due in five to ten years
    
    
    17,239Thereafter
    
    
    480$
    51,628
 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)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
     April 30, 2009Quoted Market
    
    
    Significant
Other
    
    
    SignificantPrices in Active
    
    
    Observable
    
    
    UnobservableMarkets
    
    
    Inputs
    
    
    Inputs
    
    
    Fair market(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    valueTrust investments
    
    $
    83,172
    
    
    $
    88,257
    
    
    $
    287
    
    
    $
    171,716
  Fair market value, November 1, 2008
    
    $
    611Total unrealized losses included in other comprehensive income (1)
    
    
    (177
    )Transfers out of Level 3 category
    
    
    (147
    )Fair market value, April 30, 2009
    
    $
    287
 
 (1)
    
    All gains (losses) recognized in other comprehensive income for cemetery perpetual
care trust investments are attributable to the Companys customers and are offset by a
corresponding increase (decrease) in perpetual care trusts corpus.  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)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
   Three Months Ended April 30,
    
    
    Six Months Ended April 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Purchases
    
    $
    7,540
    
    
    $
    16,647
    
    
    $
    7,869
    
    
    $
    30,264Sales
    
    
    47
    
    
    
    12,935
    
    
    
    1,853
    
    
    
    25,058Realized gains from sales of investments
    
    
    175
    
    
    
    946
    
    
    
    534
    
    
    
    2,198Realized losses from sales of
investments and other
    
    
    (3,113
    ) (1)
    
    
    (7
    )
    
    
    (3,209
    ) (3)
    
    
    (7
    )Deposits
    
    
    1,767
    (2)
    
    
    1,988
    
    
    
    4,221
    (2)
    
    
    3,961Withdrawals
    
    
    1,368
    
    
    
    2,187
    
    
    
    2,954
    
    
    
    5,001
 
 (1)
    
    Includes $3,112 in losses related to certain investments that were rendered
worthless or practically worthless during the quarter ended April 30, 2009.(2)
    
    Includes $0 and $734 that the Company contributed to the cemetery perpetual care
trusts as part of its funding obligation during the three and six months ended April 30, 2009,
respectively.(3)
    
    Includes $3,196 in losses related to certain investments that were rendered
worthless or practically worthless during the six months ended April 30, 2009.   (6)
    
    Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care
Trusts Corpus
  Deferred Receipts Held in TrustPreneed
    
    
    PreneedFuneral
    
    
    Cemetery
    
    
    TotalTrust assets at market value
    
    $
    313,749
    
    
    $
    144,252
    
    
    $
    458,001Less:Pending withdrawals
    
    
    (8,538
    )
    
    
    (5,110
    )
    
    
    (13,648
    )Pending deposits
    
    
    2,247
    
    
    
    1,622
    
    
    
    3,869Deferred receipts held in trust
    
    $
    307,458
    
    
    $
    140,764
    
    
    $
    448,222
 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)
 (6)
    
    Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care Trusts
Corpus(Continued)
  Perpetual CareTrusts CorpusTrust assets at market value
    
    $
    172,544Less:Pending withdrawals
    
    
    (2,139
    )Pending deposits
    
    
    724Perpetual care trusts corpus
    
    $
    171,129
 Investment and other income, net
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Realized gains from sales of investments
    
    $
    933
    
    
    $
    1,976
    
    
    $
    1,904
    
    
    $
    4,474Realized losses from sales of investments and
other
    
    
    (4,791
    )
    
    
    (272
    )
    
    
    (17,852
    )
    
    
    (514
    )Interest income, dividend and other ordinary
income
    
    
    6,452
    
    
    
    7,321
    
    
    
    13,189
    
    
    
    15,416Trust expenses and income taxes
    
    
    (1,963
    )
    
    
    (3,070
    )
    
    
    (4,097
    )
    
    
    (5,776
    )Net trust investment income (loss)
    
    
    631
    
    
    
    5,955
    
    
    
    (6,856
    )
    
    
    13,600Investment income (loss) of deferred
preneed funeral and cemetery receipts
held in trust
    
    
    (1,660
    )
    
    
    (3,091
    )
    
    
    7,613
    
    
    
    (7,688
    )Investment income (loss) of perpetual
care trusts corpus
    
    
    1,029
    
    
    
    (2,864
    )
    
    
    (757
    )
    
    
    (5,912
    )Total deferred preneed funeral and cemetery
receipts held in trust and perpetual care
trusts corpus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    32
    
    
    
    357
    
    
    
    73
    
    
    
    1,077Total investment and other income, net
    
    $
    32
    
    
    $
    357
    
    
    $
    73
    
    
    $
    1,077
 
 (1)
    
    Investment and other income, net consists of interest income primarily on the
Companys cash, cash equivalents and marketable securities not held in trust. (7)
    
    Commitments and Contingencies
 Litigation
 Henrietta Torres and Teresa Fiore, on behalf of themselves and all others similarly situated
and the General Public v. Stewart Enterprises, Inc., et al
 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)
 (7)
    
    Commitments and Contingencies(Continued)
    Funeral Consumers Alliance, Inc., et al. v. Service Corporation International, Alderwoods
Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville Casket Co.
      Pioneer Valley Casket Co., Inc., et al. v. Service Corporation International, Alderwoods
Group, Inc.,
Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville Casket Co.,
 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)
 (7)
    
    Commitments and Contingencies(Continued)
     In Re: State Attorney General Civil Investigative Demands
 Other Litigation
  Other Commitments and Contingencies
   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)
 (7)
    
    Commitments and Contingencies(Continued)
  (8)
    
    Reconciliation of Basic and Diluted Per Share Data
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended April 30, 2009Net earnings
    
    $
    13,202Basic earnings per common share:Net earnings available to common shareholders
    
    $
    13,202
    
    
    
    91,888
    
    
    $
    .14Effect of dilutive securities:Stock options assumed exercised and restricted stock
    
    
    
    
    
    
    33Diluted earnings per common share:Net earnings available to common shareholders plus
stock options assumed exercised and restricted
stock
    
    $
    13,202
    
    
    
    91,921
    
    
    $
    .14
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended April 30, 2008Net earnings
    
    $
    13,940Basic earnings per common share:Net earnings available to common shareholders
    
    $
    13,940
    
    
    
    94,525
    
    
    $
    .15Effect of dilutive securities:Stock options assumed exercised and restricted stock
    
    
    
    
    
    
    110Diluted earnings per common share:Net earnings available to common shareholders plus
stock options assumed exercised and restricted
stock
    
    $
    13,940
    
    
    
    94,635
    
    
    $
    .15
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataSix Months Ended April 30, 2009Net earnings
    
    $
    18,918Basic earnings per common share:Net earnings available to common shareholders
    
    $
    18,918
    
    
    
    91,856
    
    
    $
    .21Effect of dilutive securities:Stock options assumed exercised and restricted stock
    
    
    
    
    
    
    15Diluted earnings per common share:Net earnings available to common shareholders plus
stock options assumed exercised and restricted
stock
    
    $
    18,918
    
    
    
    91,871
    
    
    $
    .21
 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)
 (8)
    
    Reconciliation of Basic and Diluted Per Share Data(Continued)
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataSix Months Ended April 30, 2008Net earnings
    
    $
    22,825Basic earnings per common share:Net earnings available to common shareholders
    
    $
    22,825
    
    
    
    95,667
    
    
    $
    .24Effect of dilutive securities:Stock options assumed exercised and restricted stock
    
    
    
    
    
    
    171Diluted earnings per common share:Net earnings available to common shareholders plus
stock options assumed exercised and restricted
stock
    
    $
    22,825
    
    
    
    95,838
    
    
    $
    .24
      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)
 (8)
    
    Reconciliation of Basic and Diluted Per Share Data(Continued)
 
 (9)
    
    Segment Data
   Total Revenue
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2009
    
    
    April 30, 2008
    
    
    April 30, 2009
    
    
    April 30, 2008Funeral
    
    $
    67,075
    
    
    $
    71,886
    
    
    $
    135,221
    
    
    $
    140,799Cemetery(1)
    
    
    53,600
    
    
    
    57,558
    
    
    
    99,290
    
    
    
    112,089Corporate Trust Management(2)
    
    
    5,943
    
    
    
    7,375
    
    
    
    11,437
    
    
    
    14,204Total
    
    $
    126,618
    
    
    $
    136,819
    
    
    $
    245,948
    
    
    $
    267,092
 Total Gross Profit
    
    
    Total Gross ProfitThree Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2009
    
    
    April 30, 2008
    
    
    April 30, 2009
    
    
    April 30, 2008Funeral
    
    $
    14,559
    
    
    $
    17,800
    
    
    $
    29,401
    
    
    $
    31,503Cemetery(1)
    
    
    5,525
    
    
    
    10,903
    
    
    
    8,712
    
    
    
    17,953Corporate Trust Management(2)
    
    
    5,511
    
    
    
    6,931
    
    
    
    10,565
    
    
    
    13,248Total
    
    $
    25,595
    
    
    $
    35,634
    
    
    $
    48,678
    
    
    $
    62,704
 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)
 (9)
    
    Segment Data(Continued)
 Net Total Preneed Merchandise
    
    
    Net Total Preneed Merchandiseand Service Sales(3)
    
    

and Service Sales(3)Three Months
Ended
    
    
    Three Months
Ended
    
    
    Six Months
Ended
    
    
    Six Months
EndedApril 30, 2009
    
    
    April 30, 2008
    
    
    April 30, 2009
    
    
    April 30, 2008Funeral
    
    $
    24,727
    
    
    $
    25,046
    
    
    $
    43,222
    
    
    $
    46,959Cemetery(1)
    
    
    11,921
    
    
    
    14,335
    
    
    
    22,700
    
    
    
    26,325Total
    
    $
    36,648
    
    
    $
    39,381
    
    
    $
    65,922
    
    
    $
    73,284
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of the
cemetery segment and amounted to $2,079 and $2,814 for the three months ended April 30, 2009
and 2008, respectively, and $3,801 and $5,406 for the six months ended April 30, 2009 and
2008, respectively.(2)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and services trust earnings recognized with respect to preneed contracts
delivered during the period. Trust management fees are established by the Company at rates
consistent with industry norms based on the fair market value of the assets managed and are
paid by the trusts to the Companys subsidiary, Investors Trust, Inc. The trust earnings
represent earnings realized over the life of the preneed contracts delivered during the
relevant periods. Trust management fees included in funeral revenue for the three months
ended April 30, 2009 and 2008 were $885 and $1,315, respectively, and funeral trust earnings
for the three months ended April 30, 2009 and 2008 were $3,280 and $3,654, respectively.
Trust management fees included in cemetery revenue for the three months ended April 30, 2009
and 2008 were $912 and $1,291, respectively, and cemetery trust earnings for the three months
ended April 30, 2009 and 2008 were $866 and $1,115, respectively. Trust management fees
included in funeral revenue for the six months ended April 30, 2009 and 2008 were $1,823 and
$2,693, respectively, and funeral trust earnings for the six months ended April 30, 2009 and
2008 were $5,946 and $6,812, respectively. Trust management fees included in cemetery revenue
for the six months ended April 30, 2009 and 2008 were $1,863 and $2,590, respectively, and
cemetery trust earnings for the six months ended April 30, 2009 and 2008 were $1,805 and
$2,109, respectively.(3)
    
    Preneed sales amounts represent total preneed funeral trust and insurance sales and
cemetery service and merchandise trust sales generated in the applicable period, net of
cancellations.  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Gross profit for reportable segments
    
    $
    25,595
    
    
    $
    35,634
    
    
    $
    48,678
    
    
    $
    62,704Corporate general and administrative expenses
    
    
    (7,006
    )
    
    
    (7,803
    )
    
    
    (14,512
    )
    
    
    (16,038
    )Hurricane related charges, net
    
    
    (205
    )
    
    
    (169
    )
    
    
    (520
    )
    
    
    (10
    )Separation charges
    
    
    (275
    )
    
    
    
    
    
    
    (275
    )
    
    
    Gains on dispositions and impairment
(losses), net
    
    
    (35
    )
    
    
    (19
    )
    
    
    (98
    )
    
    
    128Other operating income, net
    
    
    304
    
    
    
    104
    
    
    
    563
    
    
    
    346Interest expense
    
    
    (5,879
    )
    
    
    (6,093
    )
    
    
    (11,789
    )
    
    
    (11,981
    )Gain on early extinguishment of debt
    
    
    8,671
    
    
    
    
    
    
    
    8,671
    
    
    
    Investment and other income, net
    
    
    32
    
    
    
    357
    
    
    
    73
    
    
    
    1,077Earnings before income taxes
    
    $
    21,202
    
    
    $
    22,011
    
    
    $
    30,791
    
    
    $
    36,226
 28




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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 April 30,
    
    
    Six Months Ended April 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Service revenueFuneral
    
    $
    45,494
    
    
    $
    47,965
    
    
    $
    90,807
    
    
    $
    93,408Cemetery
    
    
    15,009
    
    
    
    17,207
    
    
    
    30,110
    
    
    
    32,86560,503
    
    
    
    65,172
    
    
    
    120,917
    
    
    
    126,273Merchandise revenueFuneral
    
    
    24,349
    
    
    
    26,939
    
    
    
    49,259
    
    
    
    52,927Cemetery
    
    
    37,114
    
    
    
    38,868
    
    
    
    66,141
    
    
    
    76,07461,463
    
    
    
    65,807
    
    
    
    115,400
    
    
    
    129,001Other revenueFuneral
    
    
    1,397
    
    
    
    1,951
    
    
    
    2,924
    
    
    
    3,969Cemetery
    
    
    3,255
    
    
    
    3,889
    
    
    
    6,707
    
    
    
    7,8494,652
    
    
    
    5,840
    
    
    
    9,631
    
    
    
    11,818Total revenue
    
    $
    126,618
    
    
    $
    136,819
    
    
    $
    245,948
    
    
    $
    267,092Service costsFuneral
    
    $
    14,702
    
    
    $
    15,252
    
    
    $
    29,371
    
    
    $
    30,581Cemetery
    
    
    9,618
    
    
    
    10,413
    
    
    
    19,374
    
    
    
    20,52724,320
    
    
    
    25,665
    
    
    
    48,745
    
    
    
    51,108Merchandise costsFuneral
    
    
    14,584
    
    
    
    15,899
    
    
    
    29,590
    
    
    
    31,973Cemetery
    
    
    25,690
    
    
    
    22,292
    
    
    
    44,940
    
    
    
    46,20340,274
    
    
    
    38,191
    
    
    
    74,530
    
    
    
    78,176Facility expensesFuneral
    
    
    23,429
    
    
    
    23,138
    
    
    
    47,249
    
    
    
    47,182Cemetery
    
    
    13,000
    
    
    
    14,191
    
    
    
    26,746
    
    
    
    27,92236,429
    
    
    
    37,329
    
    
    
    73,995
    
    
    
    75,104Total costs
    
    $
    101,023
    
    
    $
    101,185
    
    
    $
    197,270
    
    
    $
    204,388
  29




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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
  Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended April 30, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    66,393
    
    
    $
    501
    
    
    $
    4,346
    
    
    $
    
    
    
    $
    71,240Cemetery
    
    
    
    
    
    
    49,863
    
    
    
    753
    
    
    
    4,762
    
    
    
    
    
    
    
    55,378
    
    
    
    116,256
    
    
    
    1,254
    
    
    
    9,108
    
    
    
    
    
    
    
    126,618Costs and expenses:Funeral
    
    
    
    
    
    
    49,458
    
    
    
    275
    
    
    
    2,982
    
    
    
    
    
    
    
    52,715Cemetery
    
    
    
    
    
    
    44,132
    
    
    
    596
    
    
    
    3,580
    
    
    
    
    
    
    
    48,308
    
    
    
    93,590
    
    
    
    871
    
    
    
    6,562
    
    
    
    
    
    
    
    101,023Gross profit
    
    
    
    
    
    
    22,666
    
    
    
    383
    
    
    
    2,546
    
    
    
    
    
    
    
    25,595Corporate general and administrative
expenses
    
    
    (7,006
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,006
    )Hurricane related recoveries (charges), net
    
    
    (350
    )
    
    
    145
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (205
    )Separation charges
    
    
    (55
    )
    
    
    (220
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (275
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    (35
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35
    )Other operating income, net
    
    
    21
    
    
    
    243
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    304Operating earnings (loss)
    
    
    (7,390
    )
    
    
    22,799
    
    
    
    383
    
    
    
    2,586
    
    
    
    
    
    
    
    18,378Interest income (expense)
    
    
    752
    
    
    
    (6,109
    )
    
    
    (26
    )
    
    
    (496
    )
    
    
    
    
    
    
    (5,879
    )Gain on early extinguishment of debt
    
    
    8,671
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,671Investment and other income, net
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32Equity in subsidiaries
    
    
    13,136
    
    
    
    288
    
    
    
    
    
    
    
    
    
    
    
    (13,424
    )
    
    
    Earnings before income taxes
    
    
    15,201
    
    
    
    16,978
    
    
    
    357
    
    
    
    2,090
    
    
    
    (13,424
    )
    
    
    21,202Income tax expense
    
    
    1,999
    
    
    
    5,567
    
    
    
    97
    
    
    
    337
    
    
    
    
    
    
    
    8,000Net earnings
    
    
    13,202
    
    
    
    11,411
    
    
    
    260
    
    
    
    1,753
    
    
    
    (13,424
    )
    
    
    13,202Other comprehensive loss, net
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    6
    
    
    
    (6
    )Comprehensive income
    
    $
    13,196
    
    
    $
    11,411
    
    
    $
    260
    
    
    $
    1,747
    
    
    $
    (13,418
    )
    
    $
    13,196
 30




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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 April 30, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    71,050
    
    
    $
    535
    
    
    $
    5,270
    
    
    $
    
    
    
    $
    76,855Cemetery
    
    
    
    
    
    
    54,087
    
    
    
    896
    
    
    
    4,981
    
    
    
    
    
    
    
    59,964
    
    
    
    125,137
    
    
    
    1,431
    
    
    
    10,251
    
    
    
    
    
    
    
    136,819Costs and expenses:Funeral
    
    
    
    
    
    
    50,549
    
    
    
    325
    
    
    
    3,415
    
    
    
    
    
    
    
    54,289Cemetery
    
    
    
    
    
    
    42,444
    
    
    
    671
    
    
    
    3,781
    
    
    
    
    
    
    
    46,896
    
    
    
    92,993
    
    
    
    996
    
    
    
    7,196
    
    
    
    
    
    
    
    101,185Gross profit
    
    
    
    
    
    
    32,144
    
    
    
    435
    
    
    
    3,055
    
    
    
    
    
    
    
    35,634Corporate general and administrative
expenses
    
    
    (7,803
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,803
    )Hurricane related recoveries (charges), net
    
    
    (377
    )
    
    
    37
    
    
    
    171
    
    
    
    
    
    
    
    
    
    
    
    (169
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )Other operating income, net
    
    
    36
    
    
    
    9
    
    
    
    1
    
    
    
    58
    
    
    
    
    
    
    
    104Operating earnings (loss)
    
    
    (8,144
    )
    
    
    32,171
    
    
    
    607
    
    
    
    3,113
    
    
    
    
    
    
    
    27,747Interest expense
    
    
    (1,033
    )
    
    
    (4,528
    )
    
    
    (44
    )
    
    
    (488
    )
    
    
    
    
    
    
    (6,093
    )Investment and other income, net
    
    
    349
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    357Equity in subsidiaries
    
    
    21,479
    
    
    
    294
    
    
    
    
    
    
    
    
    
    
    
    (21,773
    )
    
    
    Earnings before income taxes
    
    
    12,651
    
    
    
    27,945
    
    
    
    563
    
    
    
    2,625
    
    
    
    (21,773
    )
    
    
    22,011Income tax expense (benefit)
    
    
    (1,289
    )
    
    
    8,494
    
    
    
    121
    
    
    
    745
    
    
    
    
    
    
    
    8,071Net earnings
    
    
    13,940
    
    
    
    19,451
    
    
    
    442
    
    
    
    1,880
    
    
    
    (21,773
    )
    
    
    13,940Other comprehensive loss, net
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    6
    
    
    
    (27
    )Comprehensive income
    
    $
    13,913
    
    
    $
    19,451
    
    
    $
    442
    
    
    $
    1,874
    
    
    $
    (21,767
    )
    
    $
    13,913
 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 Statements of Earnings and Other Comprehensive Income
 Six Months Ended April 30, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    133,264
    
    
    $
    900
    
    
    $
    8,826
    
    
    $
    
    
    
    $
    142,990Cemetery
    
    
    
    
    
    
    92,888
    
    
    
    1,414
    
    
    
    8,656
    
    
    
    
    
    
    
    102,958
    
    
    
    226,152
    
    
    
    2,314
    
    
    
    17,482
    
    
    
    
    
    
    
    245,948Costs and expenses:Funeral
    
    
    
    
    
    
    99,458
    
    
    
    566
    
    
    
    6,186
    
    
    
    
    
    
    
    106,210Cemetery
    
    
    
    
    
    
    82,943
    
    
    
    1,232
    
    
    
    6,885
    
    
    
    
    
    
    
    91,060
    
    
    
    182,401
    
    
    
    1,798
    
    
    
    13,071
    
    
    
    
    
    
    
    197,270Gross profit
    
    
    
    
    
    
    43,751
    
    
    
    516
    
    
    
    4,411
    
    
    
    
    
    
    
    48,678Corporate general and administrative
expenses
    
    
    (14,512
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,512
    )Hurricane related recoveries (charges), net
    
    
    (626
    )
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (520
    )Separation charges
    
    
    (55
    )
    
    
    (220
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (275
    )Gains on dispositions and impairment
(losses), net
    
    
    (8
    )
    
    
    (90
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98
    )Other operating income, net
    
    
    19
    
    
    
    487
    
    
    
    1
    
    
    
    56
    
    
    
    
    
    
    
    563Operating earnings (loss)
    
    
    (15,182
    )
    
    
    44,034
    
    
    
    517
    
    
    
    4,467
    
    
    
    
    
    
    
    33,836Interest income (expense)
    
    
    1,571
    
    
    
    (12,274
    )
    
    
    (62
    )
    
    
    (1,024
    )
    
    
    
    
    
    
    (11,789
    )Gain on early extinguishment of debt
    
    
    8,671
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,671Investment and other income, net
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73Equity in subsidiaries
    
    
    24,307
    
    
    
    423
    
    
    
    
    
    
    
    
    
    
    
    (24,730
    )
    
    
    Earnings before income taxes
    
    
    19,440
    
    
    
    32,183
    
    
    
    455
    
    
    
    3,443
    
    
    
    (24,730
    )
    
    
    30,791Income tax expense
    
    
    522
    
    
    
    10,403
    
    
    
    116
    
    
    
    832
    
    
    
    
    
    
    
    11,873Net earnings
    
    
    18,918
    
    
    
    21,780
    
    
    
    339
    
    
    
    2,611
    
    
    
    (24,730
    )
    
    
    18,918Other comprehensive loss, net
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    3
    
    
    
    (3
    )Comprehensive income
    
    $
    18,915
    
    
    $
    21,780
    
    
    $
    339
    
    
    $
    2,608
    
    
    $
    (24,727
    )
    
    $
    18,915
 32




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Six Months Ended April 30, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    139,097
    
    
    $
    1,029
    
    
    $
    10,178
    
    
    $
    
    
    
    $
    150,304Cemetery
    
    
    
    
    
    
    105,159
    
    
    
    1,723
    
    
    
    9,906
    
    
    
    
    
    
    
    116,788
    
    
    
    244,256
    
    
    
    2,752
    
    
    
    20,084
    
    
    
    
    
    
    
    267,092Costs and expenses:Funeral
    
    
    
    
    
    
    102,322
    
    
    
    633
    
    
    
    6,781
    
    
    
    
    
    
    
    109,736Cemetery
    
    
    
    
    
    
    85,339
    
    
    
    1,457
    
    
    
    7,856
    
    
    
    
    
    
    
    94,652
    
    
    
    187,661
    
    
    
    2,090
    
    
    
    14,637
    
    
    
    
    
    
    
    204,388Gross profit
    
    
    
    
    
    
    56,595
    
    
    
    662
    
    
    
    5,447
    
    
    
    
    
    
    
    62,704Corporate general and administrative
expenses
    
    
    (16,038
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,038
    )Hurricane related recoveries (charges), net
    
    
    (377
    )
    
    
    37
    
    
    
    330
    
    
    
    
    
    
    
    
    
    
    
    (10
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128Other operating income, net
    
    
    57
    
    
    
    168
    
    
    
    1
    
    
    
    120
    
    
    
    
    
    
    
    346Operating earnings (loss)
    
    
    (16,358
    )
    
    
    56,928
    
    
    
    993
    
    
    
    5,567
    
    
    
    
    
    
    
    47,130Interest expense
    
    
    (1,733
    )
    
    
    (9,047
    )
    
    
    (73
    )
    
    
    (1,128
    )
    
    
    
    
    
    
    (11,981
    )Investment and other income, net
    
    
    1,051
    
    
    
    21
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    1,077Equity in subsidiaries
    
    
    37,805
    
    
    
    492
    
    
    
    
    
    
    
    
    
    
    
    (38,297
    )
    
    
    Earnings before income taxes
    
    
    20,765
    
    
    
    48,394
    
    
    
    920
    
    
    
    4,444
    
    
    
    (38,297
    )
    
    
    36,226Income tax expense (benefit)
    
    
    (2,060
    )
    
    
    14,044
    
    
    
    204
    
    
    
    1,213
    
    
    
    
    
    
    
    13,401Net earnings
    
    
    22,825
    
    
    
    34,350
    
    
    
    716
    
    
    
    3,231
    
    
    
    (38,297
    )
    
    
    22,825Other comprehensive income, net
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    (21
    )
    
    
    43Comprehensive income
    
    $
    22,868
    
    
    $
    34,350
    
    
    $
    716
    
    
    $
    3,252
    
    
    $
    (38,318
    )
    
    $
    22,868
 33




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 April 30, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Parent
    
    
    Subsidiaries-Tier 1
    
    
    Subsidiaries-Tier 2
    
    
    GuarantorSubsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    62,363
    
    
    $
    7,763
    
    
    $
    39
    
    
    $
    1,618
    
    
    $
    
    
    
    $
    71,783Marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    150Receivables, net of allowances
    
    
    2,001
    
    
    
    48,207
    
    
    
    336
    
    
    
    4,412
    
    
    
    
    
    
    
    54,956Inventories
    
    
    327
    
    
    
    33,787
    
    
    
    313
    
    
    
    2,090
    
    
    
    
    
    
    
    36,517Prepaid expenses
    
    
    1,304
    
    
    
    7,402
    
    
    
    69
    
    
    
    1,457
    
    
    
    
    
    
    
    10,232Deferred income taxes, net
    
    
    1,380
    
    
    
    6,077
    
    
    
    31
    
    
    
    1,454
    
    
    
    
    
    
    
    8,942Total current assets
    
    
    67,375
    
    
    
    103,236
    
    
    
    788
    
    
    
    11,181
    
    
    
    
    
    
    
    182,580Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    50,407
    
    
    
    442
    
    
    
    14,938
    
    
    
    
    
    
    
    65,787Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    334,761
    
    
    
    
    
    
    
    9,244
    
    
    
    
    
    
    
    344,005Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    166,440
    
    
    
    1,075
    
    
    
    6,807
    
    
    
    
    
    
    
    174,322Goodwill
    
    
    
    
    
    
    227,401
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,236Cemetery property, at cost
    
    
    
    
    
    
    346,971
    
    
    
    11,407
    
    
    
    25,743
    
    
    
    
    
    
    
    384,121Property and equipment, at cost
    
    
    52,566
    
    
    
    456,673
    
    
    
    2,100
    
    
    
    38,346
    
    
    
    
    
    
    
    549,685Less accumulated depreciation
    
    
    33,238
    
    
    
    199,630
    
    
    
    907
    
    
    
    14,792
    
    
    
    
    
    
    
    248,567Net property and equipment
    
    
    19,328
    
    
    
    257,043
    
    
    
    1,193
    
    
    
    23,554
    
    
    
    
    
    
    
    301,118Deferred income taxes, net
    
    
    20,095
    
    
    
    147,858
    
    
    
    
    
    
    
    9,318
    
    
    
    (3,164
    )
    
    
    174,107Cemetery perpetual care trust investments
    
    
    
    
    
    
    162,441
    
    
    
    6,927
    
    
    
    3,176
    
    
    
    
    
    
    
    172,544Non-current assets held for sale
    
    
    
    
    
    
    2,873
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,873Other assets
    
    
    8,092
    
    
    
    5,495
    
    
    
    6
    
    
    
    1,060
    
    
    
    
    
    
    
    14,653Intercompany receivables
    
    
    818,218
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (818,218
    )
    
    
    Equity in subsidiaries
    
    
    30,606
    
    
    
    7,797
    
    
    
    
    
    
    
    
    
    
    
    (38,403
    )
    
    
    Total assets
    
    $
    963,714
    
    
    $
    1,812,723
    
    
    $
    21,886
    
    
    $
    124,808
    
    
    $
    (859,785
    )
    
    $
    2,063,346LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    4
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4Accounts payable
    
    
    2,738
    
    
    
    19,608
    
    
    
    119
    
    
    
    1,240
    
    
    
    
    
    
    
    23,705Accrued expenses and other current
liabilities
    
    
    16,018
    
    
    
    51,211
    
    
    
    3
    
    
    
    2,236
    
    
    
    
    
    
    
    69,468Total current liabilities
    
    
    18,760
    
    
    
    70,819
    
    
    
    122
    
    
    
    3,476
    
    
    
    
    
    
    
    93,177Long-term debt, less current maturities
    
    
    427,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    427,447Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    3,164
    
    
    
    
    
    
    
    (3,164
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    805,803
    
    
    
    3,652
    
    
    
    8,763
    
    
    
    (818,218
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    198,145
    
    
    
    
    
    
    
    46,295
    
    
    
    
    
    
    
    244,440Deferred preneed cemetery revenue
    
    
    
    
    
    
    247,940
    
    
    
    302
    
    
    
    27,469
    
    
    
    
    
    
    
    275,711Deferred preneed funeral and cemetery
receipts held in trust
    
    
    
    
    
    
    443,399
    
    
    
    925
    
    
    
    3,898
    
    
    
    
    
    
    
    448,222Perpetual care trusts corpus
    
    
    
    
    
    
    161,033
    
    
    
    6,919
    
    
    
    3,177
    
    
    
    
    
    
    
    171,129Other long-term liabilities
    
    
    18,027
    
    
    
    4,241
    
    
    
    
    
    
    
    129
    
    
    
    
    
    
    
    22,397Negative equity in subsidiaries
    
    
    118,657
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (118,657
    )
    
    
    Total liabilities
    
    
    582,891
    
    
    
    1,931,380
    
    
    
    15,084
    
    
    
    93,207
    
    
    
    (940,039
    )
    
    
    1,682,523Common stock
    
    
    92,677
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    92,677Other
    
    
    288,112
    
    
    
    (118,759
    )
    
    
    6,478
    
    
    
    31,515
    
    
    
    80,766
    
    
    
    288,112Accumulated other comprehensive income
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    (34
    )
    
    
    34Total shareholders equity
    
    
    380,823
    
    
    
    (118,657
    )
    
    
    6,802
    
    
    
    31,601
    
    
    
    80,254
    
    
    
    380,823Total liabilities and shareholders equity
    
    $
    963,714
    
    
    $
    1,812,723
    
    
    $
    21,886
    
    
    $
    124,808
    
    
    $
    (859,785
    )
    
    $
    2,063,346
 34




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 October 31, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Parent
    
    
    Subsidiaries-Tier 1
    
    
    Subsidiaries-Tier 2
    
    
    GuarantorSubsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    65,593
    
    
    $
    4,332
    
    
    $
    22
    
    
    $
    2,627
    
    
    $
    
    
    
    $
    72,574Marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    55Receivables, net of allowances
    
    
    2,987
    
    
    
    51,137
    
    
    
    546
    
    
    
    4,459
    
    
    
    
    
    
    
    59,129Inventories
    
    
    300
    
    
    
    32,821
    
    
    
    361
    
    
    
    2,388
    
    
    
    
    
    
    
    35,870Prepaid expenses
    
    
    1,282
    
    
    
    4,618
    
    
    
    37
    
    
    
    1,380
    
    
    
    
    
    
    
    7,317Deferred income taxes, net
    
    
    1,395
    
    
    
    6,117
    
    
    
    55
    
    
    
    1,231
    
    
    
    
    
    
    
    8,798Total current assets
    
    
    71,557
    
    
    
    99,025
    
    
    
    1,021
    
    
    
    12,140
    
    
    
    
    
    
    
    183,743Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    54,326
    
    
    
    404
    
    
    
    15,941
    
    
    
    
    
    
    
    70,671Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    358,891
    
    
    
    
    
    
    
    9,521
    
    
    
    
    
    
    
    368,412Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    173,484
    
    
    
    1,047
    
    
    
    7,610
    
    
    
    
    
    
    
    182,141Goodwill
    
    
    
    
    
    
    227,401
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,236Cemetery property, at cost
    
    
    
    
    
    
    338,793
    
    
    
    11,424
    
    
    
    25,615
    
    
    
    
    
    
    
    375,832Property and equipment, at cost
    
    
    49,583
    
    
    
    451,147
    
    
    
    1,932
    
    
    
    38,109
    
    
    
    
    
    
    
    540,771Less accumulated depreciation
    
    
    30,479
    
    
    
    190,822
    
    
    
    824
    
    
    
    14,118
    
    
    
    
    
    
    
    236,243Net property and equipment
    
    
    19,104
    
    
    
    260,325
    
    
    
    1,108
    
    
    
    23,991
    
    
    
    
    
    
    
    304,528Deferred income taxes, net
    
    
    25,853
    
    
    
    148,403
    
    
    
    
    
    
    
    8,527
    
    
    
    (3,268
    )
    
    
    179,515Cemetery perpetual care trust investments
    
    
    
    
    
    
    162,789
    
    
    
    7,137
    
    
    
    3,164
    
    
    
    
    
    
    
    173,090Non-current assets held for sale
    
    
    
    
    
    
    2,873
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,873Other assets
    
    
    9,451
    
    
    
    5,937
    
    
    
    16
    
    
    
    1,070
    
    
    
    
    
    
    
    16,474Intercompany receivables
    
    
    837,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (837,282
    )
    
    
    Equity in subsidiaries
    
    
    28,082
    
    
    
    7,374
    
    
    
    
    
    
    
    
    
    
    
    (35,456
    )
    
    
    Total assets
    
    $
    991,329
    
    
    $
    1,839,621
    
    
    $
    22,205
    
    
    $
    127,366
    
    
    $
    (876,006
    )
    
    $
    2,104,515LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    20
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    20Accounts payable
    
    
    2,530
    
    
    
    23,237
    
    
    
    167
    
    
    
    1,718
    
    
    
    
    
    
    
    27,652Accrued expenses and other current
liabilities
    
    
    15,496
    
    
    
    54,683
    
    
    
    13
    
    
    
    2,632
    
    
    
    
    
    
    
    72,824Total current liabilities
    
    
    18,046
    
    
    
    77,920
    
    
    
    180
    
    
    
    4,350
    
    
    
    
    
    
    
    100,496Long-term debt, less current maturities
    
    
    450,095
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,095Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    3,268
    
    
    
    
    
    
    
    (3,268
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    819,691
    
    
    
    3,939
    
    
    
    13,652
    
    
    
    (837,282
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    199,867
    
    
    
    
    
    
    
    45,315
    
    
    
    
    
    
    
    245,182Deferred preneed cemetery revenue
    
    
    
    
    
    
    248,098
    
    
    
    324
    
    
    
    27,413
    
    
    
    
    
    
    
    275,835Deferred preneed funeral and cemetery
receipts held in trust
    
    
    
    
    
    
    470,167
    
    
    
    899
    
    
    
    4,354
    
    
    
    
    
    
    
    475,420Perpetual care trusts corpus
    
    
    
    
    
    
    161,074
    
    
    
    7,132
    
    
    
    3,165
    
    
    
    
    
    
    
    171,371Other long-term liabilities
    
    
    17,114
    
    
    
    3,241
    
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    20,479Negative equity in subsidiaries
    
    
    140,437
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140,437
    )
    
    
    Total liabilities
    
    
    625,692
    
    
    
    1,980,058
    
    
    
    15,742
    
    
    
    98,373
    
    
    
    (980,987
    )
    
    
    1,738,878Common stock
    
    
    92,248
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    92,248Other
    
    
    273,352
    
    
    
    (140,539
    )
    
    
    6,139
    
    
    
    28,904
    
    
    
    105,496
    
    
    
    273,352Accumulated other comprehensive income
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    (37
    )
    
    
    37Total shareholders equity
    
    
    365,637
    
    
    
    (140,437
    )
    
    
    6,463
    
    
    
    28,993
    
    
    
    104,981
    
    
    
    365,637Total liabilities and shareholders equity
    
    $
    991,329
    
    
    $
    1,839,621
    
    
    $
    22,205
    
    
    $
    127,366
    
    
    $
    (876,006
    )
    
    $
    2,104,515
 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)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended April 30, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Parent
    
    
    Subsidiaries-Tier 1
    
    
    Subsidiaries-Tier 2
    
    
    GuarantorSubsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (1,044
    )
    
    $
    25,339
    
    
    $
    434
    
    
    $
    4,355
    
    
    $
    
    
    
    $
    29,084Cash flows from investing activities:Purchases of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99
    )
    
    
    
    
    
    
    (99
    )Proceeds from sale of assets
    
    
    292
    
    
    
    202
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    494Purchase of subsidiaries and other
investments, net of cash acquired
    
    
    
    
    
    
    (1,623
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,623
    )Additions to property and equipment
    
    
    (3,596
    )
    
    
    (6,627
    )
    
    
    (130
    )
    
    
    (376
    )
    
    
    
    
    
    
    (10,729
    )Other
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Net cash used in investing activities
    
    
    (3,304
    )
    
    
    (8,020
    )
    
    
    (130
    )
    
    
    (475
    )
    
    
    
    
    
    
    (11,929
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (13,538
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,538
    )Intercompany receivables (payables)
    
    
    19,064
    
    
    
    (13,888
    )
    
    
    (287
    )
    
    
    (4,889
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149Retirement of call options
    
    
    1,261
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,261Retirement of common stock warrants
    
    
    (1,182
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,182
    )Dividends
    
    
    (4,636
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,636
    )Net cash provided by (used in)
financing activities
    
    
    1,118
    
    
    
    (13,888
    )
    
    
    (287
    )
    
    
    (4,889
    )
    
    
    
    
    
    
    (17,946
    )Net increase (decrease) in cash
    
    
    (3,230
    )
    
    
    3,431
    
    
    
    17
    
    
    
    (1,009
    )
    
    
    
    
    
    
    (791
    )Cash and cash equivalents, beginning of
period
    
    
    65,593
    
    
    
    4,332
    
    
    
    22
    
    
    
    2,627
    
    
    
    
    
    
    
    72,574Cash and cash equivalents, end of period
    
    $
    62,363
    
    
    $
    7,763
    
    
    $
    39
    
    
    $
    1,618
    
    
    $
    
    
    
    $
    71,783
 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)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended April 30, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Parent
    
    
    Subsidiaries-Tier 1
    
    
    Subsidiaries-Tier 2
    
    
    GuarantorSubsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating
activities
    
    $
    (8,124
    )
    
    $
    30,484
    
    
    $
    748
    
    
    $
    5,289
    
    
    $
    
    
    
    $
    28,397Cash flows from investing activities:Proceeds from sales of marketable
securities
    
    
    9,969
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    10,219Purchases of marketable securities
    
    
    (19,894
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (19,897
    )Proceeds from sale of assets
    
    
    
    
    
    
    338
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    338Purchase of subsidiaries and other
investments, net of cash acquired
    
    
    (1,378
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,378
    )Additions to property and equipment
    
    
    (3,668
    )
    
    
    (8,808
    )
    
    
    (416
    )
    
    
    (493
    )
    
    
    
    
    
    
    (13,385
    )Other
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Net cash used in investing activities
    
    
    (14,971
    )
    
    
    (8,449
    )
    
    
    (416
    )
    
    
    (246
    )
    
    
    
    
    
    
    (24,082
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (150
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )Intercompany receivables (payables)
    
    
    27,022
    
    
    
    (22,216
    )
    
    
    (328
    )
    
    
    (4,478
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    1,458
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,458Purchase and retirement of common stock
    
    
    (37,320
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,320
    )Dividends
    
    
    (4,761
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,761
    )Excess tax benefits from share-based
payment arrangements
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165Net cash used in financing activities
    
    
    (13,586
    )
    
    
    (22,216
    )
    
    
    (328
    )
    
    
    (4,478
    )
    
    
    
    
    
    
    (40,608
    )Net increase (decrease) in cash
    
    
    (36,681
    )
    
    
    (181
    )
    
    
    4
    
    
    
    565
    
    
    
    
    
    
    
    (36,293
    )Cash and cash equivalents, beginning of
period
    
    
    63,202
    
    
    
    6,685
    
    
    
    36
    
    
    
    1,622
    
    
    
    
    
    
    
    71,545Cash and cash equivalents, end of period
    
    $
    26,521
    
    
    $
    6,504
    
    
    $
    40
    
    
    $
    2,187
    
    
    $
    
    
    
    $
    35,252
 37




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Acquisitions
  (13)
    
    Consolidated Comprehensive Income
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net earnings
    
    $
    13,202
    
    
    $
    13,940
    
    
    $
    18,918
    
    
    $
    22,825Other comprehensive income (loss):Unrealized appreciation (depreciation)
of investments, net of deferred tax
(expense) benefit of $4, $17, $2 and
($26), respectively
    
    
    (6
    )
    
    
    (27
    )
    
    
    (3
    )
    
    
    43(Increase) reduction in net unrealized
losses associated with
available-for-sale securities of the
trusts
    
    
    23,346
    
    
    
    (6,833
    )
    
    
    (12,569
    )
    
    
    (72,303
    )Reclassification of the net unrealized
(increases) losses activity
attributable to the deferred preneed
funeral and cemetery receipts held in
trust and perpetual care trusts
corpus
    
    
    (23,346
    )
    
    
    6,833
    
    
    
    12,569
    
    
    
    72,303Total other comprehensive income (loss)
    
    
    (6
    )
    
    
    (27
    )
    
    
    (3
    )
    
    
    43Total comprehensive income
    
    $
    13,196
    
    
    $
    13,913
    
    
    $
    18,915
    
    
    $
    22,868
 (14)
    
    Hurricane Related Charges
   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)
 (14)
    
    Hurricane Related Charges(Continued)
  (15)
    
    Separation Charges
   (16)
    
    Long-term Debt
 April 30, 2009
    
    
    October 31, 2008Long-term debt:3.125% senior convertible notes due 2014
    
    $
    121,000
    
    
    $
    125,0003.375% senior convertible notes due 2016
    
    
    106,355
    
    
    
    125,000Senior secured credit facility:Revolving credit facility
    
    
    
    
    
    
    6.25% senior notes due 2013
    
    
    200,000
    
    
    
    200,000Other, principally seller financing of
acquired operations or assumption upon
acquisition, weighted average interest
rates of 8.0% and 7.7% as of April 30,
2009 and October 31, 2008,
respectively, partially secured by
assets of subsidiaries, with maturities
through 2022
    
    
    96
    
    
    
    115Total long-term debt
    
    
    427,451
    
    
    
    450,115Less current maturities
    
    
    4
    
    
    
    20$
    427,447
    
    
    $
    450,095
 Senior Convertible Notes
  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)
 Senior Secured Credit Facility
    
    
    Maintenance on a rolling four quarter basis of a maximum consolidated senior secured
leverage ratio (total funded senior secured debt divided by EBITDA (as defined))  Maximum
1.25x;
    
    Maintenance on a rolling four quarter basis of a minimum consolidated interest coverage
ratio (EBITDAR (as defined) divided by interest expense paid in cash plus rent expense) 
Minimum 2.50x through January 31, 2010 and 2.60x thereafter and
    
    Maintenance at all times of a minimum cash balance of the greater of $20,000 and the
then outstanding amount of all letters of credit obligations.
  
    
    Maintenance on a rolling four quarter basis of a maximum consolidated leverage ratio
(funded debt (net of domestic cash, cash equivalents and marketable securities) divided by
EBITDA (as defined))  Maximum 5.0x through January 31, 2010, 4.75x from February 1, 2010
through January 31, 2011 and 4.50x thereafter.
  40




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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)
    
    Significant Risks and Uncertainties
  (18)
    
    Subsequent Events
    41




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
 General
  Financial Summary
  42




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##### Table of Contents



43




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##### Table of Contents



44




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##### Table of Contents



Funeral and CemeteryMerchandise and
    
    Cemetery PerpetualServices Trusts
    
    Care TrustsFor the quarter ended April 30, 2009
    
    
    5.0
    %
    
    
    4.8
    %For the six months ended April 30, 2009
    
    
    (2.1
    )%
    
    
    (0.6
    )%For the last three years ended April 30, 2009
    
    
    (7.2
    )%
    
    
    (5.6
    )%For the last five years ended April 30, 2009
    
    
    (1.8
    )%
    
    
    (1.5
    )%
  Critical Accounting Policies
  Results of Operations
  45




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##### Table of Contents



Three Months Ended April 30, 2009 Compared to Three Months Ended April 30, 2008
 Funeral Operations
 Three Months Ended April 30,2009
    
    
    2008
    
    
    Decrease(In millions)Funeral Revenue:Funeral Home Locations
    
    $
    67.0
    
    
    $
    71.8
    
    
    $
    (4.8
    )Corporate Trust Management (1)
    
    
    4.2
    
    
    
    5.0
    
    
    
    (.8
    )Total Funeral Revenue
    
    $
    71.2
    
    
    $
    76.8
    
    
    $
    (5.6
    )Funeral Costs:Funeral Home Locations
    
    $
    52.5
    
    
    $
    54.0
    
    
    $
    (1.5
    )Corporate Trust Management (1)
    
    
    .2
    
    
    
    .3
    
    
    
    (.1
    )Total Funeral Costs
    
    $
    52.7
    
    
    $
    54.3
    
    
    $
    (1.6
    )Funeral Gross Profit:Funeral Home Locations
    
    $
    14.5
    
    
    $
    17.8
    
    
    $
    (3.3
    )Corporate Trust Management (1)
    
    
    4.0
    
    
    
    4.7
    
    
    
    (.7
    )Total Funeral Gross Profit
    
    $
    18.5
    
    
    $
    22.5
    
    
    $
    (4.0
    )
 Same-Store Analysis for the Three Months Ended April 30, 2009 and 2008
 Change in Average Revenue
    
    Change in Same-Store
    
    Same-Store Cremation RatePer Funeral Service
    
    Funeral Services
    
    2009
    
    20082.4% (1)
    
    (9.6)%
    
    41.4%
    
    39.9%
 
 (1)
    
    Corporate trust management consists of the trust management fees and funeral
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
earnings realized by the trusts over the life of the preneed contracts and allocated to those
products and services delivered during the relevant periods. See Notes 3 and 6 to the
condensed consolidated financial statements included herein for information regarding the cost
basis and market value of the trust assets and current performance of the trusts (i.e.,
current realized gains and losses, interest income and dividends). Trust management fees
included in funeral revenue for the three months ended April 30, 2009 and 2008 were $0.9
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
funeral service presented. Funeral trust earnings recognized with respect to preneed
contracts delivered included in funeral revenue for the three months ended April 30, 2009 and
2008 were $3.3 million and $3.7 million, respectively.  46




---



##### Table of Contents



Cemetery Operations
 Three Months Ended April 30,Increase2009
    
    
    2008
    
    
    (Decrease)(In millions)Cemetery Revenue:Cemetery Locations
    
    $
    53.6
    
    
    $
    57.6
    
    
    $
    (4.0
    )Corporate Trust Management (1)
    
    
    1.8
    
    
    
    2.4
    
    
    
    (.6
    )Total Cemetery Revenue
    
    $
    55.4
    
    
    $
    60.0
    
    
    $
    (4.6
    )Cemetery Costs:Cemetery Locations
    
    $
    48.1
    
    
    $
    46.7
    
    
    $
    1.4Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Cemetery Costs
    
    $
    48.3
    
    
    $
    46.9
    
    
    $
    1.4Cemetery Gross Profit:Cemetery Locations
    
    $
    5.5
    
    
    $
    10.9
    
    
    $
    (5.4
    )Corporate Trust Management (1)
    
    
    1.6
    
    
    
    2.2
    
    
    
    (.6
    )Total Cemetery Gross Profit
    
    $
    7.1
    
    
    $
    13.1
    
    
    $
    (6.0
    )
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
earnings realized by the trusts over the life of the preneed contracts and allocated to those
products and services delivered during the relevant periods. See Notes 4 and 6 to the
condensed consolidated financial statements included herein for information regarding the cost
basis and market value of the trust assets and current performance of the trusts (i.e.,
current realized gains and losses, interest income and dividends). Trust management fees
included in cemetery revenue for the three months ended April 30, 2009 and 2008 were $0.9
million and $1.3 million, respectively, and cemetery trust earnings recognized with respect to
preneed contracts delivered included in cemetery revenue for the three months ended April 30,
2009 and 2008 were $0.9 million and $1.1 million, respectively. Perpetual care trust earnings
are included in the revenues and gross profit of the cemetery segment. See Notes 5 and 6 to
the condensed consolidated financial statements included herein for information regarding the
cemetery perpetual care trusts.   47




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##### Table of Contents



Other
        Preneed Sales into the Backlog
   48




---



##### Table of Contents



Six Months Ended April 30, 2009 Compared to Six Months Ended April 30, 2008
 Funeral Operations
 Six Months Ended April 30,2009
    
    
    2008
    
    
    Decrease(In millions)Funeral Revenue:Funeral Home Locations
    
    $
    135.2
    
    
    $
    140.8
    
    
    $
    (5.6
    )Corporate Trust Management (1)
    
    
    7.8
    
    
    
    9.5
    
    
    
    (1.7
    )Total Funeral Revenue
    
    $
    143.0
    
    
    $
    150.3
    
    
    $
    (7.3
    )Funeral Costs:Funeral Home Locations
    
    $
    105.8
    
    
    $
    109.3
    
    
    $
    (3.5
    )Corporate Trust Management (1)
    
    
    .4
    
    
    
    .4
    
    
    
    Total Funeral Costs
    
    $
    106.2
    
    
    $
    109.7
    
    
    $
    (3.5
    )Funeral Gross Profit:Funeral Home Locations
    
    $
    29.4
    
    
    $
    31.5
    
    
    $
    (2.1
    )Corporate Trust Management (1)
    
    
    7.4
    
    
    
    9.1
    
    
    
    (1.7
    )Total Funeral Gross Profit
    
    $
    36.8
    
    
    $
    40.6
    
    
    $
    (3.8
    )
 Same-Store Analysis for the Six Months Ended April 30, 2008 and 2008
 Change in AverageRevenue Per Funeral
    
    Change in Same-Store
    
    Same-Store Cremation RateService
    
    Funeral Services
    
    2009
    
    20084.2% (1)
    
    
    (8.0
    )%
    
    
    40.9
    %
    
    
    40.1
    %
 
 (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 based on the fair market value of assets managed and are paid by the trusts to
our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of earnings
realized by the trusts over the life of the preneed contracts and allocated to those products
and services delivered during the relevant periods. See Notes 3 and 6 to the condensed
consolidated financial statements included herein for information regarding the cost basis and
market value of the trust assets and current performance of the trusts (i.e., current realized
gains and losses, interest income and dividends). Trust management fees included in funeral
revenue for the six months ended April 30, 2009 and 2008 were $1.8 million and $2.7 million,
respectively. As corporate trust management is considered a separate operating segment, trust
earnings are included in the total average revenue per funeral service presented above.
Funeral trust earnings recognized with respect to preneed contracts delivered included in
funeral revenue for the six months ended April 30, 2009 and 2008 were $6.0 million and $6.8
million, respectively. Consolidated OperationsFuneral
  49




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##### Table of Contents



Cemetery Operations
 Six Months Ended April 30,2009
    
    
    2008
    
    
    Decrease(In millions)Cemetery Revenue:Cemetery Locations
    
    $
    99.3
    
    
    $
    112.1
    
    
    $
    (12.8
    )Corporate Trust Management (1)
    
    
    3.7
    
    
    
    4.7
    
    
    
    (1.0
    )Total Cemetery Revenue
    
    $
    103.0
    
    
    $
    116.8
    
    
    $
    (13.8
    )Cemetery Costs:Cemetery Locations
    
    $
    90.6
    
    
    $
    94.2
    
    
    $
    (3.6
    )Corporate Trust Management (1)
    
    
    .5
    
    
    
    .5
    
    
    
    Total Cemetery Costs
    
    $
    91.1
    
    
    $
    94.7
    
    
    $
    (3.6
    )Cemetery Gross Profit:Cemetery Locations
    
    $
    8.7
    
    
    $
    17.9
    
    
    $
    (9.2
    )Corporate Trust Management (1)
    
    
    3.2
    
    
    
    4.2
    
    
    
    (1.0
    )Total Cemetery Gross Profit
    
    $
    11.9
    
    
    $
    22.1
    
    
    $
    (10.2
    )
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and service trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
earnings realized by the trusts over the life of the preneed contracts and allocated to those
products and services delivered during the relevant periods. See Notes 4 and 6 to the
condensed consolidated financial statements included herein for information regarding the cost
basis and market value of the trust assets and current performance of the trusts (i.e.,
current realized gains and losses, interest income and dividends). Trust management fees
included in cemetery revenue for the six months ended April 30, 2009 and 2008 were $1.9
million and $2.6 million, respectively, and cemetery trust earnings recognized with respect to
preneed contracts delivered included in cemetery revenue for the six months ended April 30,
2009 and 2008 were $1.8 million and $2.1 million, respectively. Perpetual care trust earnings
are included in the revenues and gross profit of the cemetery segment. See Notes 5 and 6 to
the condensed consolidated financial statements included herein for information regarding the
cemetery perpetual care trusts. Consolidated OperationsCemetery
   50




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Other
        51




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##### Table of Contents



Preneed Sales into the Backlog
   Liquidity and Capital Resources
 General
  52




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##### Table of Contents



Cash Flow
  53




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##### 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)
    
    $
    427.5
    
    
    $
    
    
    
    $
    
    
    
    $
    200.0
    
    
    $
    227.5Interest on long-term debt (2)
    
    
    97.8
    
    
    
    19.9
    
    
    
    39.8
    
    
    
    27.2
    
    
    
    10.9Operating and capital lease obligations (3)
    
    
    28.3
    
    
    
    2.3
    
    
    
    6.0
    
    
    
    3.5
    
    
    
    16.5Non-competition and other agreements (4)
    
    
    1.9
    
    
    
    .4
    
    
    
    .8
    
    
    
    .2
    
    
    
    .5$
    555.5
    
    
    $
    22.6
    
    
    $
    46.6
    
    
    $
    230.9
    
    
    $
    255.4
 
 (1)
    
    See below for a breakdown of our future scheduled principal payments and maturities
of our long-term debt by type as of June 3, 2009.(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 14 years, except for seven leases that expire between 2032 and 2039. Our
future minimum lease payments as of April 30, 2009 are $2.3 million, $3.5 million, $2.5
million, $2.0 million, $1.5 million and $16.5 million for the years ending October 31, 2009,
2010, 2011, 2012, 2013 and later years, respectively.(4)
    
    This category includes payments pursuant to non-competition agreements with prior
owners and key employees of acquired businesses and separation pay related to former executive
officers. 54




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##### Table of Contents



Expiration by PeriodContingent Obligations
    
    Total
    
    
    Less than1 year
    
    
    1  3 years
    
    
    3  5 years
    
    
    More than5 yearsCemetery perpetual
care trust funding
obligations
(1)
    
    $
    14.7
    
    
    $
    14.7
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term obligations
related to uncertain
tax positions
(2)
    
    
    5.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.2$
    19.9
    
    
    $
    14.7
    
    
    $
    
    
    
    $
    
    
    
    $
    5.2
 
 (1)
    
    In those states where we have withdrawn realized net capital gains in the past from
our cemetery perpetual care trusts, regulators may seek replenishment of the realized net
capital losses either by requiring a cash deposit to the trust or by prohibiting or
restricting withdrawals of future earnings until they cover the loss. The estimated probable
funding obligation in the cemetery perpetual care trusts in these states was $14.7 million as
of April 30, 2009. As of April 30, 2009, we had unrealized losses of $66.0 million in the
trusts in these states. Because all of these trusts currently have assets with a fair market
value less than the aggregate amounts required to be contributed to the trust, any additional
realized net capital losses in these trusts may result in a corresponding funding liability
and increase in cemetery costs. In those states where realized net capital gains have not
been withdrawn, we believe it is reasonably possible that additional funding obligations may
exist with an estimated amount of approximately $3.5 million.(2)
    
    We adopted the provisions of FASB Interpretation No. 48, Accounting for Income
Taxes  an Interpretation of FASB Statement No. 109 (FIN 48), on November 1, 2007. In
accordance with the provisions of FIN 48, as of April 30, 2009, we have recorded $5.2 million
of unrecognized tax benefits and related interest and penalties. Due to the uncertainty
regarding the timing and completion of audits and possible outcomes, it is not possible to
estimate the range of increase and decrease and the timing thereof of any potential cash
payments.  Senior
    
    
    
    
    
    
    
    
    
    
    Other,PrincipallySecured
    
    
    
    
    
    
    
    
    
    
    SellerRevolving
    
    
    Senior
    
    
    
    
    
    
    FinancingCredit
    
    
    Convertible
    
    
    Senior
    
    
    of AcquiredFiscal Years Ending October 31,
    
    Facility
    
    
    Notes
    
    
    Notes
    
    
    Operations
    
    
    Total2009
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2013
    
    
    
    
    
    
    
    
    
    
    200.0
    
    
    
    
    
    
    
    200.0Thereafter
    
    
    
    
    
    
    209.9
    
    
    
    
    
    
    
    .1
    
    
    
    210.0Total long-term debt
    
    $
    
    
    
    $
    209.9
    
    
    $
    200.0
    
    
    $
    .1
    
    
    $
    410.0
  55




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##### Table of Contents



Off-Balance Sheet Arrangements
  (1)
    
    the $28.9 million bond we are required to maintain to guarantee our obligations
relating to funds we withdrew in fiscal year 2001 from our preneed funeral trusts in
Florida, which is discussed above and in Note 20 to the consolidated financial
statements in our 2008 Form 10-K; and(2)
    
    the insurance-funded preneed funeral contracts, which will be funded by life
insurance or annuity contracts issued by third-party insurers, are not reflected in our
condensed consolidated balance sheets, and are discussed in Note 2(i) to the
consolidated financial statements in our 2008 Form 10-K.
 Recent Accounting Standards
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  56




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 1A. Risk Factors
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (c)
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  57




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  Nominee
    
    Number of Votes For
    
    Number of Votes WithheldThomas J. Crawford
    
    
    104,512,063
    
    
    
    12,132,973Thomas M. Kitchen
    
    
    100,918,744
    
    
    
    15,726,292Alden J. McDonald, Jr.
    
    
    100,989,465
    
    
    
    15,655,571James W. McFarland
    
    
    99,751,506
    
    
    
    16,893,530Ronald H. Patron
    
    
    100,285,240
    
    
    
    16,359,796Michael O. Read
    
    
    99,769,755
    
    
    
    16,875,281Ashton J. Ryan, Jr.
    
    
    101,001,113
    
    
    
    15,643,923Frank B. Stewart, Jr.
    
    
    97,969,999
    
    
    
    18,675,037
  
 Item 5. Other Information
 (a)
    
    During the quarter ended April 30, 2009, the Compensation Committee of the Board of Directors
made certain salary level and bonus opportunity reductions for certain executive officers.
The salary levels and fiscal 2009 bonus opportunities for each of the current executive
officers whose compensation was required to be disclosed in the Companys most recent proxy
statement are as follows:
 Maximum BonusName and Position
    
    Salary
    
    OpportunityThomas J. Crawford 
President and Chief Executive Officer
    
    $
    600,000
    
    
    
    160
    %Thomas M. Kitchen 
Senior Executive Vice President and 
Chief Financial Officer
    
    $
    400,000
    
    
    
    140
    %G. Kenneth Stephens, Jr. 
Senior Vice President of Sales
    
    $
    350,000
    
    
    
    100
    %Lawrence B. Hawkins 
Executive Vice President and
President, 
Investors Trust, Inc.
    
    $
    400,000
    
    
    
    100
    %
 
 Item 6. Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
April 3, 2008 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended April 30, 2008)3.2
    
    By-laws of the Company, as amended and restated as of September 8, 2008 (incorporated by
reference to Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended
July 31, 2008)4.1
    
    See Exhibits 3.1 and 3.2 for provisions of the Companys Amended and Restated Articles of
Incorporation, as amended, and By-laws, as amended, defining the rights of holders of Class A
and Class B common stock
 58




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##### Table of Contents



4.2
    
    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
    
    Second Amended and Restated Credit Agreement dated June 2, 2009 by and among the Company,
Empresas Stewart-Cementerios and Empresas Stewart-Funerarias, as Borrowers, Bank of America,
N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer and The
Other Lenders party hereto (incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K filed June 3, 2009)4.6
    
    Indenture dated as of February 11, 2005 by and among Stewart Enterprises, Inc., the
Guarantors thereunder and U.S. Bank National Association, as Trustee, with respect to the 6.25
percent Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K filed February 14, 2005)4.7
    
    Form of 6.25 percent Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed February 14, 2005)4.8
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.125 percent Senior
Convertible Notes due 2014 (including Form of 3.125 percent Senior Convertible Notes due 2014)
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed
June 27, 2007)4.9
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.375 percent Senior
Convertible Notes due 2016 (including Form of 3.375 percent Senior Convertible Notes due 2016)
(incorporated by reference to Exhibit 4.2 to the Companys Current Report on Form 8-K filed
June 27, 2007)4.10
    
    Registration Rights Agreement dated June 27, 2007 by and among Stewart Enterprises, Inc., the
guarantors named therein and the Initial Purchasers (incorporated by reference to Exhibit 4.3
to the Companys Current Report on Form 8-K filed June 27, 2007)10.1
    
    Amendment No. 1 to the Amended and Restated Stewart Enterprises, Inc. Supplemental Retirement
and Deferred Compensation Plan effective December 17, 2008 (incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended January 31,
2009)10.2
    
    Amended and Restated Stewart Enterprises, Inc. Executive Officer Annual Incentive Plan
(incorporated by reference to Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for
the quarter ended January 31, 2009)10.3
    
    Amendment No. 1 to the Amended and Restated Stewart Enterprises, Inc. Supplemental Executive
Retirement Plan effective January 26, 2009 (incorporated by reference to Exhibit 10.3 to the
Companys Quarterly Report on Form 10-Q for the quarter ended January 31, 2009)
 59




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##### Table of Contents



10.4
    
    Retirement Agreement by and between the Company and Brent F. Heffron dated March 13, 2009
(incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed
March 17, 2009)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
 60




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.June 9, 2009
    /s/ THOMAS M. KITCHENThomas M. KitchenSenior Executive Vice President and
Chief Financial OfficerJune 9, 2009
    /s/ ANGELA M. LACOURAngela M. LacourVice President

Corporate Controller

Chief Accounting Officer 61




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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