##### 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 January 31, 2011
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 
 Commission File Number: 1-15449
 
 STEWART ENTERPRISES, INC.
  LOUISIANA
(State or other jurisdiction of incorporation or organization)
    
    72-0693290
(I.R.S. Employer Identification No.)1333 South Clearview Parkway 
Jefferson, Louisiana
(Address of principal executive offices)
    
    70121
(Zip Code)
 (504) 729-1400
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 INDEX
 PagePart I. Financial Information PageItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings 
Three Months Ended January 31, 2011 and 2010
    
    
    3Condensed Consolidated Balance Sheets 
January 31, 2011 and October 31, 2010
    
    
    4Condensed Consolidated Statement of Shareholders Equity 
Three Months Ended January 31, 2011
    
    
    6Condensed Consolidated Statements of Cash Flows 
Three Months Ended January 31, 2011 and 2010
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    39Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    48Item 4. Controls and Procedures
    
    
    49Part II. Other InformationItem 1. Legal Proceedings
    
    
    49Item 1A. Risk Factors
    
    
    49Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    50Item 5. Other Information
    
    
    50Item 6. Exhibits
    
    
    50Signatures
    
    
    52EX-10.1EX-10.2EX-10.3EX-10.4EX-12EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended January 31,2011
    
    
    2010Revenues:Funeral
    
    $
    73,866
    
    
    $
    71,720Cemetery
    
    
    55,398
    
    
    
    52,292129,264
    
    
    
    124,012Costs and expenses:Funeral
    
    
    53,478
    
    
    
    52,449Cemetery
    
    
    47,431
    
    
    
    46,320100,909
    
    
    
    98,769Gross profit
    
    
    28,355
    
    
    
    25,243Corporate general and administrative expenses
    
    
    (6,639
    )
    
    
    (6,670
    )Hurricane related charges, net
    
    
    (50
    )
    
    
    Other operating income, net
    
    
    233
    
    
    
    179Operating earnings
    
    
    21,899
    
    
    
    18,752Interest expense
    
    
    (5,736
    )
    
    
    (6,456
    )Gain on early extinguishment of debt
    
    
    
    
    
    
    17Investment and other income, net
    
    
    24
    
    
    
    24Earnings from continuing operations before income taxes
    
    
    16,187
    
    
    
    12,337Income taxes
    
    
    8,143
    
    
    
    4,876Earnings from continuing operations
    
    
    8,044
    
    
    
    7,461Discontinued operations:Earnings from discontinued operations before income taxes
    
    
    
    
    
    
    42Income taxes
    
    
    
    
    
    
    16Earnings from discontinued operations
    
    
    
    
    
    
    26Net earnings
    
    $
    8,044
    
    
    $
    7,487Basic earnings per common share:Earnings from continuing operations
    
    $
    .09
    
    
    $
    .08Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .09
    
    
    $
    .08Diluted earnings per common share:Earnings from continuing operations
    
    $
    .09
    
    
    $
    .08Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings
    
    $
    .09
    
    
    $
    .08Weighted average common shares outstanding (in thousands):Basic
    
    
    90,867
    
    
    
    92,053Diluted
    
    
    91,177
    
    
    
    92,234Dividends declared per common share
    
    $
    .03
    
    
    $
    .03
  3




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
(Dollars in thousands, except per share amounts)
 January 31, 2011
    
    
    October 31, 2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    64,437
    
    
    $
    56,060Certificates of deposit and marketable securities
    
    
    
    
    
    
    10,000Receivables, net of allowances
    
    
    50,865
    
    
    
    51,170Inventories
    
    
    35,619
    
    
    
    35,715Prepaid expenses
    
    
    9,594
    
    
    
    5,480Deferred income taxes, net
    
    
    27,222
    
    
    
    28,312Total current assets
    
    
    187,737
    
    
    
    186,737Receivables due beyond one year, net of allowances
    
    
    65,467
    
    
    
    67,458Preneed funeral receivables and trust investments
    
    
    423,740
    
    
    
    414,918Preneed cemetery receivables and trust investments
    
    
    217,031
    
    
    
    209,750Goodwill
    
    
    247,038
    
    
    
    247,038Cemetery property, at cost
    
    
    387,008
    
    
    
    386,094Property and equipment, at cost:Land
    
    
    43,726
    
    
    
    43,518Buildings
    
    
    340,104
    
    
    
    338,264Equipment and other
    
    
    192,463
    
    
    
    191,428576,293
    
    
    
    573,210Less accumulated depreciation
    
    
    289,388
    
    
    
    283,637Net property and equipment
    
    
    286,905
    
    
    
    289,573Deferred income taxes, net
    
    
    94,018
    
    
    
    98,025Cemetery perpetual care trust investments
    
    
    234,630
    
    
    
    231,008Non-current assets held for sale
    
    
    360
    
    
    
    360Other assets
    
    
    11,554
    
    
    
    11,905Total assets
    
    $
    2,155,488
    
    
    $
    2,142,866
  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)
 January 31, 2011
    
    
    October 31, 2010LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5
    
    
    $
    5Accounts payable and accrued expenses
    
    
    20,514
    
    
    
    24,797Accrued payroll and other benefits
    
    
    13,217
    
    
    
    14,313Accrued insurance
    
    
    20,365
    
    
    
    20,912Accrued interest
    
    
    6,142
    
    
    
    4,197Estimated obligation to fund cemetery perpetual care trust
    
    
    13,116
    
    
    
    13,253Other current liabilities
    
    
    9,028
    
    
    
    12,138Income taxes payable
    
    
    3,243
    
    
    
    2,533Total current liabilities
    
    
    85,630
    
    
    
    92,148Long-term debt, less current maturities
    
    
    314,951
    
    
    
    314,027Deferred income taxes, net
    
    
    5,063
    
    
    
    4,950Deferred preneed funeral revenue
    
    
    242,269
    
    
    
    243,520Deferred preneed cemetery revenue
    
    
    256,768
    
    
    
    258,044Deferred preneed funeral and cemetery receipts held in trust
    
    
    572,956
    
    
    
    555,152Perpetual care trusts corpus
    
    
    233,394
    
    
    
    229,518Other long-term liabilities
    
    
    20,341
    
    
    
    20,023Total liabilities
    
    
    1,731,372
    
    
    
    1,717,382Commitments and contingenciesShareholders equity:Preferred stock, $1.00 par value, 5,000,000 shares authorized;
no shares issued
    
    
    
    
    
    
    Common stock, $1.00 stated value:Class A authorized 200,000,000 shares; issued and
outstanding 87,843,636 and 88,739,140 shares at January
31, 2011 and October 31, 2010, respectively
    
    
    87,844
    
    
    
    88,739Class B authorized 5,000,000 shares; issued and
outstanding 3,555,020 shares at January 31, 2011 and
October 31, 2010; 10 votes per share convertible into
an equal number of Class A shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    538,805
    
    
    
    547,319Accumulated deficit
    
    
    (206,103
    )
    
    
    (214,147
    )Accumulated other comprehensive income:Unrealized appreciation of investments
    
    
    15
    
    
    
    18Total accumulated other comprehensive income
    
    
    15
    
    
    
    18Total shareholders equity
    
    
    424,116
    
    
    
    425,484Total liabilities and shareholders equity
    
    $
    2,155,488
    
    
    $
    2,142,866
  5




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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, 2010
    
    $
    92,294
    
    
    $
    547,319
    
    
    $
    (214,147
    )
    
    $
    18
    
    
    $
    425,484Comprehensive income (loss):Net earnings
    
    
    
    
    
    
    
    
    
    
    8,044
    
    
    
    
    
    
    
    8,044Other 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)
    
    
    
    
    
    
    
    
    
    
    8,044
    
    
    
    (3
    )
    
    
    8,041Restricted stock activity
    
    
    286
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    312Issuance of common stock
    
    
    96
    
    
    
    438
    
    
    
    
    
    
    
    
    
    
    
    534Stock options exercised
    
    
    70
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    263Stock option expense
    
    
    
    
    
    
    311
    
    
    
    
    
    
    
    
    
    
    
    311Tax benefit associated with
stock activity
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    28Purchase and retirement of
common stock
    
    
    (1,347
    )
    
    
    (6,761
    )
    
    
    
    
    
    
    
    
    
    
    (8,108
    )Dividends ($.03 per share)
    
    
    
    
    
    
    (2,749
    )
    
    
    
    
    
    
    
    
    
    
    (2,749
    )Balance January 31, 2011
    
    $
    91,399
    
    
    $
    538,805
    
    
    $
    (206,103
    )
    
    $
    15
    
    
    $
    424,116
 
 (1)
    
    Amount includes 87,844 and 88,739 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of January 31, 2011 and October 31, 2010,
respectively, and includes 3,555 shares (in thousands) of Class B common stock.  6




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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)
 Three Months Ended January 31,2011
    
    
    2010Cash flows from operating activities:Net earnings
    
    $
    8,044
    
    
    $
    7,487Adjustments to reconcile net earnings to net cash provided by operating activities:Gain on early extinguishment of debt
    
    
    
    
    
    
    (17
    )Depreciation and amortization
    
    
    6,872
    
    
    
    6,587Non-cash interest and amortization of discount on senior convertible notes
    
    
    1,350
    
    
    
    1,521Provision for doubtful accounts
    
    
    1,301
    
    
    
    1,674Share-based compensation
    
    
    1,132
    
    
    
    962Excess tax benefits from share-based payment arrangements
    
    
    (51
    )
    
    
    (20
    )Provision for deferred income taxes
    
    
    7,152
    
    
    
    3,569Estimated obligation to fund cemetery perpetual care trust
    
    
    73
    
    
    
    Other
    
    
    (3
    )
    
    
    20Changes in assets and liabilities:Increase in receivables
    
    
    (860
    )
    
    
    (1,648
    )Increase in prepaid expenses
    
    
    (4,115
    )
    
    
    (4,825
    )(Increase) decrease in inventories and cemetery property
    
    
    227
    
    
    
    (3
    )Decrease in accounts payable and accrued expenses
    
    
    (5,203
    )
    
    
    (7,204
    )Net effect of preneed funeral production and maturities:Decrease in preneed funeral receivables and trust investments
    
    
    562
    
    
    
    3,031Decrease in deferred preneed funeral revenue
    
    
    (1,435
    )
    
    
    (2,240
    )Increase (decrease) in deferred preneed funeral receipts held in trust
    
    
    199
    
    
    
    (3,324
    )Net effect of preneed cemetery production and deliveries:(Increase) decrease in preneed cemetery receivables and trust investments
    
    
    (1,220
    )
    
    
    781Decrease in deferred preneed cemetery revenue
    
    
    (1,278
    )
    
    
    (3,575
    )Increase (decrease) in deferred preneed cemetery receipts held in trust
    
    
    2,330
    
    
    
    (173
    )Increase in other
    
    
    157
    
    
    
    170Net cash provided by operating activities
    
    
    15,234
    
    
    
    2,773Cash flows from investing activities:Proceeds from sales of certificates of deposit
    
    
    10,000
    
    
    
    Purchases of certificates of deposit and marketable securities
    
    
    (6
    )
    
    
    (5,000
    )Purchase of subsidiaries and other investments, net of cash acquired
    
    
    (1,809
    )
    
    
    Additions to property and equipment
    
    
    (4,604
    )
    
    
    (4,297
    )Other
    
    
    28
    
    
    
    39Net cash provided by (used in) investing activities
    
    
    3,609
    
    
    
    (9,258
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (1
    )
    
    
    (846
    )Retirement of common stock warrants
    
    
    
    
    
    
    (107
    )Issuance of common stock
    
    
    341
    
    
    
    115Retirement of call options
    
    
    
    
    
    
    107Purchase and retirement of common stock
    
    
    (8,108
    )
    
    
    Debt refinancing costs
    
    
    
    
    
    
    (38
    )Dividends
    
    
    (2,749
    )
    
    
    (2,794
    )Excess tax benefits from share-based payment arrangements
    
    
    51
    
    
    
    20Net cash used in financing activities
    
    
    (10,466
    )
    
    
    (3,543
    )Net increase (decrease) in cash
    
    
    8,377
    
    
    
    (10,028
    )Cash and cash equivalents, beginning of period
    
    
    56,060
    
    
    
    62,808Cash and cash equivalents, end of period
    
    $
    64,437
    
    
    $
    52,780Supplemental cash flow information:Cash paid (received) during the period for:Income taxes, net
    
    $
    89
    
    
    $
    (44
    )Interest
    
    $
    2,482
    
    
    $
    3,191Non-cash investing and financing activities:Issuance of common stock to executive officers and directors
    
    $
    456
    
    
    $
    414Issuance of restricted stock, net of forfeitures
    
    $
    424
    
    
    $
    1,024
  7




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis of Presentation
 The Company
  Principles of Consolidation
  Interim Disclosures
    Use of Estimates
  Share-Based Compensation
  8




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis of Presentation(Continued)
    WeightedNumber of Shares
    
    
    AverageGrant Type
    
    Granted
    
    
    Price per Share
    
    
    Vesting Period
    
    
    Vesting ConditionStock options
    
    
    1,326,000
    
    
    $
    6.23
    
    
    Equal one-fourth portions over 4 years
    
    Service conditionRestricted stock
    
    
    515,500
    
    
    $
    6.24
    
    
    Equal one-third portions over 3 years
    
    Market condition
  Receivables and Allowance for Doubtful Accounts
  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)
  Receivables as of January 31, 2011Ending Balance CollectivelyEvaluated for ImpairmentCurrent receivables  at-need funeral
    
    $
    10,495Current receivables  other
    
    
    45,973Receivables, due beyond one year  other
    
    
    73,728Preneed funeral receivables
    
    
    42,367Preneed cemetery receivables
    
    
    30,570Total
    
    $
    203,133Total current receivables
    
    
    56,468Total noncurrent receivables
    
    
    146,665Total
    
    $
    203,133Allowance for Doubtful Accounts andCancellations as of January 31, 2011Ending Balance CollectivelyEvaluated for ImpairmentCurrent receivables  at-need funeral and other
    
    $
    (5,603
    )Receivables, due beyond one year  other
    
    
    (8,261
    )Preneed funeral receivables
    
    
    (11,720
    )Preneed cemetery receivables
    
    
    (4,419
    )Total
    
    $
    (30,003
    )Total current receivables
    
    
    (5,603
    )Total noncurrent receivables
    
    
    (24,400
    )Total
    
    $
    (30,003
    )
  Age Analysis of Past DueReceivables as of January 31, 2011Greater than31 to 60 Days
    
    
    61 to 90 Days
    
    
    90 Days Past1 to 30 Days
    
    
    Past Due
    
    
    Past Due
    
    
    Due
    
    
    TotalReceivables  at-need funeral
    
    $
    6,783
    
    
    $
    727
    
    
    $
    442
    
    
    $
    2,543
    
    
    $
    10,495Receivables  other
    
    
    95,245
    
    
    
    5,020
    
    
    
    2,490
    
    
    
    16,946
    
    
    
    119,701Preneed funeral receivables
    
    
    28,483
    
    
    
    1,029
    
    
    
    583
    
    
    
    12,272
    
    
    
    42,367Preneed cemetery receivables
    
    
    23,882
    
    
    
    1,090
    
    
    
    697
    
    
    
    4,901
    
    
    
    30,570
 Reclassifications
  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)
 (2) New Accounting Principles
    (3) Preneed Funeral Activities
  Preneed Funeral Receivables and Trust Investments
  January 31,
    
    
    October 31,2011
    
    
    2010Trust assets
    
    $
    393,093
    
    
    $
    383,792Receivables from customers
    
    
    42,367
    
    
    
    42,879435,460
    
    
    
    426,671Allowance for cancellations
    
    
    (11,720
    )
    
    
    (11,753
    )Preneed funeral receivables and trust investments
    
    $
    423,740
    
    
    $
    414,918
 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)
 (3) Preneed Funeral Activities(Continued)
  January 31, 2011Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    16,804
    
    
    $
    
    
    
    $
    
    
    
    $
    16,804U.S. Government, agencies and
municipalities
    
    
    1,992
    
    
    
    44
    
    
    
    (14
    )
    
    
    2,022Corporate bonds
    
    
    30,003
    
    
    
    1,436
    
    
    
    (1
    )
    
    
    31,438Preferred stocks
    
    
    56,092
    
    
    
    368
    
    
    
    (2,691
    )
    
    
    53,769Common stocks
    
    
    234,960
    
    
    
    2,337
    
    
    
    (82,625
    )
    
    
    154,672Mutual funds:Equity
    
    
    26,205
    
    
    
    1,169
    
    
    
    (1,513
    )
    
    
    25,861Fixed income
    
    
    62,479
    
    
    
    901
    
    
    
    (846
    )
    
    
    62,534Commodity
    
    
    23,634
    
    
    
    1,149
    
    
    
    
    
    
    
    24,783Real estate investment trusts
    
    
    5,783
    
    
    
    179
    
    
    
    
    
    
    
    5,962Insurance contracts and other
long-term investments
    
    
    14,080
    
    
    
    73
    
    
    
    (98
    )
    
    
    14,055Trust investments
    
    $
    472,032
    
    
    $
    7,656
    
    
    $
    (87,788
    )
    
    $
    391,900Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83.0
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,193Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    393,093
  October 31, 2010Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    26,118
    
    
    $
    
    
    
    $
    
    
    
    $
    26,118U.S. Government, agencies and
municipalities
    
    
    2,224
    
    
    
    84
    
    
    
    (1
    )
    
    
    2,307Corporate bonds
    
    
    44,077
    
    
    
    2,887
    
    
    
    (1
    )
    
    
    46,963Preferred stocks
    
    
    56,297
    
    
    
    356
    
    
    
    (2,220
    )
    
    
    54,433Common stocks
    
    
    234,946
    
    
    
    925
    
    
    
    (91,593
    )
    
    
    144,278Mutual funds:Equity
    
    
    27,154
    
    
    
    185
    
    
    
    (2,936
    )
    
    
    24,403Fixed income
    
    
    53,444
    
    
    
    1,718
    
    
    
    (767
    )
    
    
    54,395Commodity
    
    
    13,572
    
    
    
    1,968
    
    
    
    
    
    
    
    15,540Insurance contracts and other
long-term investments
    
    
    14,171
    
    
    
    146
    
    
    
    (98
    )
    
    
    14,219Trust investments
    
    $
    472,003
    
    
    $
    8,269
    
    
    $
    (97,616
    )
    
    $
    382,656Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81.1
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,136Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    383,792
 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)
 (3) Preneed Funeral Activities(Continued)
  January 31, 2011Due in one year or less
    
    $
    5,577Due in one to five years
    
    
    19,974Due in five to ten years
    
    
    7,890Thereafter
    
    
    19$
    33,460
      SignificantQuoted Market
    
    
    Other
    
    
    SignificantPrices in Active
    
    
    Observable
    
    
    UnobservableMarkets
    
    
    Inputs
    
    
    Inputs
    
    
    Fair Market(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueTrust investmentsJanuary 31, 2011
    
    $
    298,288
    
    
    $
    87,229
    
    
    $
    6,383
    
    
    $
    391,900Trust investmentsOctober 31, 2010
    
    $
    272,173
    
    
    $
    103,703
    
    
    $
    6,780
    
    
    $
    382,656
 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)
 (3) Preneed Funeral Activities(Continued)
  Three Months Ended January 31,2011
    
    
    2010Fair market value, beginning balance
    
    $
    6,780
    
    
    $
    8,662Distributions and other, net
    
    
    (397
    )
    
    
    73Fair market value, ending balance
    
    $
    6,383
    
    
    $
    8,735
  Three Months Ended January 31,2011
    
    
    2010Purchases
    
    $
    44,289
    
    
    $
    849Sales
    
    
    37,757
    
    
    
    4,349Realized gains from sales of investments
    
    
    2,818
    
    
    
    628Realized losses from sales of investments and other
    
    
    (99
    )
    
    
    (516
    )Interest income, dividends and other ordinary income
    
    
    3,336
    
    
    
    2,346Deposits
    
    
    5,356
    
    
    
    8,015Withdrawals
    
    
    10,385
    
    
    
    11,977
 14




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
  January 31, 2011Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    556
    
    
    $
    (13
    )
    
    $
    21
    
    
    $
    (1
    )
    
    $
    577
    
    
    $
    (14
    )Corporate bonds
    
    
    1,382
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    1,382
    
    
    
    (1
    )Preferred stocks
    
    
    949
    
    
    
    (1
    )
    
    
    32,926
    
    
    
    (2,690
    )
    
    
    33,875
    
    
    
    (2,691
    )Common stocks
    
    
    15
    
    
    
    (111
    )
    
    
    136,655
    
    
    
    (82,514
    )
    
    
    136,670
    
    
    
    (82,625
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    13,592
    
    
    
    (1,513
    )
    
    
    13,592
    
    
    
    (1,513
    )Fixed income
    
    
    5,231
    
    
    
    (20
    )
    
    
    4,464
    
    
    
    (826
    )
    
    
    9,695
    
    
    
    (846
    )Insurance contracts
and other long-term
investments
    
    
    30
    
    
    
    (98
    )
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    (98
    )Total
    
    $
    8,163
    
    
    $
    (244
    )
    
    $
    187,658
    
    
    $
    (87,544
    )
    
    $
    195,821
    
    
    $
    (87,788
    )
 October 31, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S.
Government,
agencies and
municipalities
    
    $
    
    
    
    $
    
    
    
    $
    21
    
    
    $
    (1
    )
    
    $
    21
    
    
    $
    (1
    )Corporate bonds
    
    
    896
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    896
    
    
    
    (1
    )Preferred stocks
    
    
    49
    
    
    
    (1
    )
    
    
    35,205
    
    
    
    (2,219
    )
    
    
    35,254
    
    
    
    (2,220
    )Common stocks
    
    
    (17
    )
    
    
    (136
    )
    
    
    136,483
    
    
    
    (91,457
    )
    
    
    136,466
    
    
    
    (91,593
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    20,298
    
    
    
    (2,936
    )
    
    
    20,298
    
    
    
    (2,936
    )Fixed income
    
    
    3,575
    
    
    
    (3
    )
    
    
    4,550
    
    
    
    (764
    )
    
    
    8,125
    
    
    
    (767
    )Insurance contracts
and other long-term
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98
    )
    
    
    
    
    
    
    (98
    )Total
    
    $
    4,503
    
    
    $
    (141
    )
    
    $
    196,557
    
    
    $
    (97,475
    )
    
    $
    201,060
    
    
    $
    (97,616
    )
   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)
   (4) Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  January 31,
    
    
    October 31,2011
    
    
    2010Trust assets
    
    $
    190,880
    
    
    $
    182,789Receivables from customers
    
    
    30,570
    
    
    
    31,656221,450
    
    
    
    214,445Allowance for cancellations
    
    
    (4,419
    )
    
    
    (4,695
    )Preneed cemetery receivables and trust investments
    
    $
    217,031
    
    
    $
    209,750
  January 31, 2011Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    9,119
    
    
    $
    
    
    
    $
    
    
    
    $
    9,119U.S. Government, agencies and
municipalities
    
    
    854
    
    
    
    26
    
    
    
    (3
    )
    
    
    877Corporate bonds
    
    
    3,980
    
    
    
    331
    
    
    
    (1
    )
    
    
    4,310Preferred stocks
    
    
    20,094
    
    
    
    141
    
    
    
    (1,299
    )
    
    
    18,936Common stocks
    
    
    120,753
    
    
    
    2,203
    
    
    
    (40,633
    )
    
    
    82,323Mutual funds:Equity
    
    
    29,306
    
    
    
    251
    
    
    
    (5,453
    )
    
    
    24,104Fixed income
    
    
    29,865
    
    
    
    423
    
    
    
    (16
    )
    
    
    30,272Commodity
    
    
    14,100
    
    
    
    623
    
    
    
    
    
    
    
    14,723Real estate investment trusts
    
    
    4,894
    
    
    
    151
    
    
    
    
    
    
    
    5,045Other long-term investments
    
    
    612
    
    
    
    
    
    
    
    
    
    
    
    612Trust investments
    
    $
    233,577
    
    
    $
    4,149
    
    
    $
    (47,405
    )
    
    $
    190,321Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81.5
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    559Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    190,880
 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)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
  October 31, 2010Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    12,719
    
    
    $
    
    
    
    $
    
    
    
    $
    12,719U.S. Government, agencies and
municipalities
    
    
    5,655
    
    
    
    667
    
    
    
    (2
    )
    
    
    6,320Corporate bonds
    
    
    11,790
    
    
    
    950
    
    
    
    (13
    )
    
    
    12,727Preferred stocks
    
    
    20,132
    
    
    
    139
    
    
    
    (1,182
    )
    
    
    19,089Common stocks
    
    
    122,529
    
    
    
    1,223
    
    
    
    (45,792
    )
    
    
    77,960Mutual funds:Equity
    
    
    30,291
    
    
    
    50
    
    
    
    (6,978
    )
    
    
    23,363Fixed income
    
    
    21,405
    
    
    
    660
    
    
    
    (6
    )
    
    
    22,059Commodity
    
    
    6,521
    
    
    
    966
    
    
    
    
    
    
    
    7,487Other long-term investments
    
    
    592
    
    
    
    3
    
    
    
    
    
    
    
    595Trust investments
    
    $
    231,634
    
    
    $
    4,658
    
    
    $
    (53,973
    )
    
    $
    182,319Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78.7
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    470Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    182,789
  January 31, 2011Due in one year or less
    
    $
    1,513Due in one to five years
    
    
    2,305Due in five to ten years
    
    
    1,268Thereafter
    
    
    101$
    5,187
   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)
    Quoted MarketPrices in Active
    
    
    Significant Other
    
    
    SignificantMarkets
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    Fair Market(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueTrust investmentsJanuary 31, 2011
    
    $
    166,054
    
    
    $
    24,267
    
    
    $
    
    
    
    $
    190,321Trust investmentsOctober 31, 2010
    
    $
    144,048
    
    
    $
    38,271
    
    
    $
    
    
    
    $
    182,319
  Three Months Ended January 31,2011
    
    
    2010Purchases
    
    $
    31,872
    
    
    $
    2,046Sales
    
    
    28,384
    
    
    
    2,320Realized gains from sales of investments
    
    
    2,251
    
    
    
    423Realized losses from sales of investments and other
    
    
    (340
    )
    
    
    (881
    )Interest income, dividends and other ordinary income
    
    
    1,798
    
    
    
    1,152Deposits
    
    
    3,701
    
    
    
    5,693Withdrawals
    
    
    4,607
    
    
    
    4,404
 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)
  January 31, 2011Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government
agencies and
municipalities
    
    $
    111
    
    
    $
    (2
    )
    
    $
    16
    
    
    $
    (1
    )
    
    $
    127
    
    
    $
    (3
    )Corporate bonds
    
    
    819
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    819
    
    
    
    (1
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    13,989
    
    
    
    (1,299
    )
    
    
    13,989
    
    
    
    (1,299
    )Common stocks
    
    
    1,609
    
    
    
    (121
    )
    
    
    61,944
    
    
    
    (40,512
    )
    
    
    63,553
    
    
    
    (40,633
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    20,848
    
    
    
    (5,453
    )
    
    
    20,848
    
    
    
    (5,453
    )Fixed income
    
    
    4,279
    
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    4,279
    
    
    
    (16
    )Total
    
    $
    6,818
    
    
    $
    (140
    )
    
    $
    96,797
    
    
    $
    (47,265
    )
    
    $
    103,615
    
    
    $
    (47,405
    )
 October 31, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S.
Government,
agencies and
municipalities
    
    $
    517
    
    
    $
    (2
    )
    
    $
    
    
    
    $
    
    
    
    $
    517
    
    
    $
    (2
    )Corporate bonds
    
    
    627
    
    
    
    (6
    )
    
    
    493
    
    
    
    (7
    )
    
    
    1,120
    
    
    
    (13
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    15,206
    
    
    
    (1,182
    )
    
    
    15,206
    
    
    
    (1,182
    )Common stocks
    
    
    1,957
    
    
    
    (139
    )
    
    
    66,544
    
    
    
    (45,653
    )
    
    
    68,501
    
    
    
    (45,792
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    22,582
    
    
    
    (6,978
    )
    
    
    22,582
    
    
    
    (6,978
    )Fixed income
    
    
    2,677
    
    
    
    (3
    )
    
    
    16
    
    
    
    (3
    )
    
    
    2,693
    
    
    
    (6
    )Total
    
    $
    5,778
    
    
    $
    (150
    )
    
    $
    104,841
    
    
    $
    (53,823
    )
    
    $
    110,619
    
    
    $
    (53,973
    )
   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)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
   (5) Cemetery Interment Rights and Perpetual Care Trusts
   January 31, 2011Cost Basis
    
    
    Unrealized  Gains
    
    
    Unrealized  Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    10,722
    
    
    $
    
    
    
    $
    
    
    
    $
    10,722U.S. Government, agencies and
municipalities
    
    
    6,271
    
    
    
    166
    
    
    
    (136
    )
    
    
    6,301Corporate bonds
    
    
    33,061
    
    
    
    997
    
    
    
    (891
    )
    
    
    33,167Preferred stocks
    
    
    49,493
    
    
    
    167
    
    
    
    (6,938
    )
    
    
    42,722Common stocks
    
    
    90,270
    
    
    
    1,255
    
    
    
    (32,303
    )
    
    
    59,222Mutual funds:Equity
    
    
    8,592
    
    
    
    218
    
    
    
    (470
    )
    
    
    8,340Fixed income
    
    
    74,445
    
    
    
    589
    
    
    
    (1,806
    )
    
    
    73,228Other long-term investments
    
    
    285
    
    
    
    
    
    
    
    (79
    )
    
    
    206Trust investments
    
    $
    273,139
    
    
    $
    3,392
    
    
    $
    (42,623
    )
    
    $
    233,908Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85.6
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    722Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    234,630
 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)
  October 31, 2010Cost Basis
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    32,403
    
    
    $
    
    
    
    $
    
    
    
    $
    32,403U.S. Government, agencies and
municipalities
    
    
    8,006
    
    
    
    196
    
    
    
    (54
    )
    
    
    8,148Corporate bonds
    
    
    31,086
    
    
    
    1,334
    
    
    
    (825
    )
    
    
    31,595Preferred stocks
    
    
    56,807
    
    
    
    257
    
    
    
    (6,376
    )
    
    
    50,688Common stocks
    
    
    90,284
    
    
    
    1,042
    
    
    
    (36,496
    )
    
    
    54,830Mutual funds:Equity
    
    
    5,783
    
    
    
    49
    
    
    
    (662
    )
    
    
    5,170Fixed income
    
    
    46,646
    
    
    
    878
    
    
    
    (304
    )
    
    
    47,220Other long-term investments
    
    
    401
    
    
    
    2
    
    
    
    (79
    )
    
    
    324Trust investments
    
    $
    271,416
    
    
    $
    3,758
    
    
    $
    (44,796
    )
    
    $
    230,378Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84.9
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    630Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    231,008
  January 31, 2011Due in one year or less
    
    $
    6,715Due in one to five years
    
    
    17,846Due in five to ten years
    
    
    10,429Thereafter
    
    
    4,478$
    39,468
   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)
 (5) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
    Quoted MarketPrices in Active
    
    
    Significant Other
    
    
    SignificantMarkets
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    Fair Market(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueTrust investmentsJanuary 31, 2011
    
    $
    151,612
    
    
    $
    82,190
    
    
    $
    106
    
    
    $
    233,908Trust investmentsOctober 31, 2010
    
    $
    139,774
    
    
    $
    90,431
    
    
    $
    173
    
    
    $
    230,378
  Three Months Ended January 31,2011
    
    
    2010Fair market value, beginning balance
    
    $
    173
    
    
    $
    226Other
    
    
    (67
    )
    
    
    (58
    )Fair market value, ending balance
    
    $
    106
    
    
    $
    168
  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)
 (5) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  Three Months EndedJanuary 31,2011
    
    
    2010Purchases
    
    $
    40,955
    
    
    $
    16,172Sales
    
    
    17,865
    
    
    
    28,885Realized gains from sales of investments
    
    
    516
    
    
    
    2,025Realized losses from sales of investments and other
    
    
    (164
    )
    
    
    (550
    )Interest income, dividends and other ordinary income
    
    
    2,905
    
    
    
    2,161Deposits
    
    
    1,530
    
    
    
    1,838Withdrawals
    
    
    2,221
    
    
    
    888
   January 31, 2011Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    3,119
    
    
    $
    (82
    )
    
    $
    88
    
    
    $
    (54
    )
    
    $
    3,207
    
    
    $
    (136
    )Corporate bonds
    
    
    8,499
    
    
    
    (147
    )
    
    
    1,419
    
    
    
    (744
    )
    
    
    9,918
    
    
    
    (891
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    32,195
    
    
    
    (6,938
    )
    
    
    32,195
    
    
    
    (6,938
    )Common stocks
    
    
    3
    
    
    
    (47
    )
    
    
    55,196
    
    
    
    (32,256
    )
    
    
    55,199
    
    
    
    (32,303
    )Mutual funds:Equity
    
    
    2,806
    
    
    
    (22
    )
    
    
    2,441
    
    
    
    (448
    )
    
    
    5,247
    
    
    
    (470
    )Fixed income
    
    
    31,056
    
    
    
    (1,531
    )
    
    
    965
    
    
    
    (275
    )
    
    
    32,021
    
    
    
    (1,806
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    (79
    )
    
    
    88
    
    
    
    (79
    )Total
    
    $
    45,483
    
    
    $
    (1,829
    )
    
    $
    92,392
    
    
    $
    (40,794
    )
    
    $
    137,875
    
    
    $
    (42,623
    )
 October 31, 2010Less than 12 Months
    
    
    12 Months or Greater
    
    
    TotalMarket
    
    
    Unrealized
    
    
    Market
    
    
    Unrealized
    
    
    Market
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government,
agencies and
municipalities
    
    $
    269
    
    
    $
    (1
    )
    
    $
    105
    
    
    $
    (53
    )
    
    $
    374
    
    
    $
    (54
    )Corporate bonds
    
    
    2,786
    
    
    
    (15
    )
    
    
    682
    
    
    
    (810
    )
    
    
    3,468
    
    
    
    (825
    )Preferred stocks
    
    
    
    
    
    
    
    
    
    
    32,747
    
    
    
    (6,376
    )
    
    
    32,747
    
    
    
    (6,376
    )Common stocks
    
    
    717
    
    
    
    (161
    )
    
    
    51,334
    
    
    
    (36,335
    )
    
    
    52,051
    
    
    
    (36,496
    )Mutual funds:Equity
    
    
    
    
    
    
    
    
    
    
    4,674
    
    
    
    (662
    )
    
    
    4,674
    
    
    
    (662
    )Fixed income
    
    
    14,850
    
    
    
    (15
    )
    
    
    1,076
    
    
    
    (289
    )
    
    
    15,926
    
    
    
    (304
    )Other long-term investments
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    (79
    )
    
    
    88
    
    
    
    (79
    )Total
    
    $
    18,622
    
    
    $
    (192
    )
    
    $
    90,706
    
    
    $
    (44,604
    )
    
    $
    109,328
    
    
    $
    (44,796
    )
  23




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
   (6) Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care Trusts
Corpus
  Deferred Receipts Held in TrustPreneed
    
    
    PreneedFuneral
    
    
    Cemetery
    
    
    TotalTrust assets at market value
    
    $
    393,093
    
    
    $
    190,880
    
    
    $
    583,973Less:Pending withdrawals
    
    
    (8,802
    )
    
    
    (4,796
    )
    
    
    (13,598
    )Pending deposits
    
    
    1,563
    
    
    
    1,018
    
    
    
    2,581Deferred receipts held in trust
    
    $
    385,854
    
    
    $
    187,102
    
    
    $
    572,956
  Perpetual CareTrusts CorpusTrust assets at market value
    
    $
    234,630Less:Pending withdrawals
    
    
    (1,552
    )Pending deposits
    
    
    316Perpetual care trusts corpus
    
    $
    233,394
 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)
 (6) Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care Trusts
Corpus(Continued)
 Investment and other income, net
  Three Months Ended January 31,2011
    
    
    2010Realized gains from sales of investments
    
    $
    5,585
    
    
    $
    3,076Realized losses from sales of investments and other
    
    
    (603
    )
    
    
    (1,947
    )Interest income, dividends and other ordinary income
    
    
    8,039
    
    
    
    5,659Trust expenses and income taxes
    
    
    (2,496
    )
    
    
    (2,538
    )Net trust investment income
    
    
    10,525
    
    
    
    4,250Reclassification to deferred preneed funeral and
cemetery receipts held in trust
    
    
    (8,098
    )
    
    
    (1,350
    )Reclassification to perpetual care trusts corpus
    
    
    (2,427
    )
    
    
    (2,900
    )Total deferred preneed funeral and cemetery receipts
held in trust and perpetual care trusts corpus
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    24
    
    
    
    24Total investment and other income, net
    
    $
    24
    
    
    $
    24
 
 (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
   Other Commitments and Contingencies
  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)
 (7) Commitments and Contingencies(Continued)
   (8) Reconciliation of Basic and Diluted Per Share Data
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended January 31, 2011Earnings from continuing operations
    
    $
    8,044Allocation of earnings to nonvested restricted stock
    
    
    (85
    )Basic earnings per common share:Earnings from continuing operations available to
common shareholders
    
    $
    7,959
    
    
    
    90,867
    
    
    $
    .09Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    310Diluted earnings per common share:Earnings from continuing operations available to
common shareholders plus stock options assumed
exercised
    
    $
    7,959
    
    
    
    91,177
    
    
    $
    .09
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended January 31, 2010Earnings from continuing operations
    
    $
    7,461Allocation of earnings to nonvested restricted stock
    
    
    (83
    )Basic earnings per common share:Earnings from continuing operations available to
common shareholders
    
    $
    7,378
    
    
    
    92,053
    
    
    $
    .08Effect of dilutive securities:Stock options assumed exercised
    
    
    
    
    
    
    181Diluted earnings per common share:Earnings from continuing operations available to
common shareholders plus stock options assumed
exercised
    
    $
    7,378
    
    
    
    92,234
    
    
    $
    .08
  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 RevenueThree Months
    
    
    Three MonthsEnded
    
    
    EndedJanuary 31, 2011
    
    
    January 31, 2010Funeral
    
    $
    69,772
    
    
    $
    67,642Cemetery(1)
    
    
    53,364
    
    
    
    50,507Corporate Trust Management(2)
    
    
    6,128
    
    
    
    5,863Total
    
    $
    129,264
    
    
    $
    124,012
 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)
 Total Gross ProfitThree Months
    
    
    Three MonthsEnded
    
    
    EndedJanuary 31, 2011
    
    
    January 31, 2010Funeral
    
    $
    16,516
    
    
    $
    15,422Cemetery(1)
    
    
    6,145
    
    
    
    4,410Corporate Trust Management(2)
    
    
    5,694
    
    
    
    5,411Total
    
    $
    28,355
    
    
    $
    25,243Net Total Preneed Merchandise andService Sales(3)Three Months
    
    
    Three MonthsEnded
    
    
    EndedJanuary 31, 2011
    
    
    January 31, 2010Funeral
    
    $
    19,446
    
    
    $
    18,952Cemetery
    
    
    10,998
    
    
    
    10,204Total
    
    $
    30,444
    
    
    $
    29,156
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of the
cemetery segment and amounted to $2,310 and $2,473 for the three months ended January 31, 2011
and 2010, respectively.(2)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and services trust earnings recognized with respect to preneed contracts
delivered during the period. Trust management fees are established by the Company at rates
consistent with industry norms based on the fair market value of the assets managed and are
paid by the trusts to the Companys subsidiary, Investors Trust, Inc. The trust earnings
represent the amount of distributable earnings as stipulated by the Companys respective trust
agreements that are generated by the trusts over the life of the preneed contracts and
allocated to those products and services delivered during the relevant periods. Trust
management fees included in funeral revenue for the three months ended January 31, 2011 and
2010 were $1,190 and $1,115, respectively, and funeral trust earnings recognized with respect
to preneed contracts delivered included in funeral revenue for the three months ended January
31, 2011 and 2010 were $2,905 and $2,963, respectively. Trust management fees included in
cemetery revenue for the three months ended January 31, 2011 and 2010 were $1,300 and $1,189,
respectively, and cemetery trust earnings recognized with respect to preneed contracts
delivered included in cemetery revenue for the three months ended January 31, 2011 and 2010
were $733 and $596, 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. 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)
 (9) Segment Data(Continued)
  Three Months Ended January 31,2011
    
    
    2010Gross profit for reportable segments
    
    $
    28,355
    
    
    $
    25,243Corporate general and administrative expenses
    
    
    (6,639
    )
    
    
    (6,670
    )Hurricane related charges, net
    
    
    (50
    )
    
    
    Other operating income, net
    
    
    233
    
    
    
    179Interest expense
    
    
    (5,736
    )
    
    
    (6,456
    )Gain on early extinguishment of debt
    
    
    
    
    
    
    17Investment and other income, net
    
    
    24
    
    
    
    24Earnings from continuing operations before income taxes
    
    $
    16,187
    
    
    $
    12,337
 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)
 (10) Supplementary Information
  Three Months Ended
January 31,2011
    
    
    2010Service revenueFuneral
    
    $
    49,634
    
    
    $
    45,043Cemetery
    
    
    16,189
    
    
    
    15,57165,823
    
    
    
    60,614Merchandise revenueFuneral
    
    
    22,417
    
    
    
    25,038Cemetery
    
    
    35,821
    
    
    
    33,14158,238
    
    
    
    58,179Other revenueFuneral
    
    
    1,815
    
    
    
    1,639Cemetery
    
    
    3,388
    
    
    
    3,5805,203
    
    
    
    5,219Total revenue
    
    $
    129,264
    
    
    $
    124,012Service costsFuneral
    
    $
    15,561
    
    
    $
    14,560Cemetery
    
    
    10,345
    
    
    
    9,75225,906
    
    
    
    24,312Merchandise costsFuneral
    
    
    14,145
    
    
    
    14,518Cemetery
    
    
    22,655
    
    
    
    22,20336,800
    
    
    
    36,721Facility expensesFuneral
    
    
    23,772
    
    
    
    23,371Cemetery
    
    
    14,431
    
    
    
    14,36538,203
    
    
    
    37,736Total costs
    
    $
    100,909
    
    
    $
    98,769
  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
  Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended January 31, 2011Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    68,699
    
    
    $
    484
    
    
    $
    4,683
    
    
    $
    
    
    
    $
    73,866Cemetery
    
    
    
    
    
    
    49,612
    
    
    
    715
    
    
    
    5,071
    
    
    
    
    
    
    
    55,398
    
    
    
    118,311
    
    
    
    1,199
    
    
    
    9,754
    
    
    
    
    
    
    
    129,264Costs and expenses:Funeral
    
    
    
    
    
    
    50,090
    
    
    
    293
    
    
    
    3,095
    
    
    
    
    
    
    
    53,478Cemetery
    
    
    
    
    
    
    42,980
    
    
    
    591
    
    
    
    3,860
    
    
    
    
    
    
    
    47,431
    
    
    
    93,070
    
    
    
    884
    
    
    
    6,955
    
    
    
    
    
    
    
    100,909Gross profit
    
    
    
    
    
    
    25,241
    
    
    
    315
    
    
    
    2,799
    
    
    
    
    
    
    
    28,355Corporate general and
administrative expenses
    
    
    (6,639
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,639
    )Hurricane related charges, net
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50
    )Other operating income, net
    
    
    18
    
    
    
    161
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    233Operating earnings (loss)
    
    
    (6,671
    )
    
    
    25,402
    
    
    
    315
    
    
    
    2,853
    
    
    
    
    
    
    
    21,899Interest income (expense)
    
    
    (826
    )
    
    
    (4,465
    )
    
    
    5
    
    
    
    (450
    )
    
    
    
    
    
    
    (5,736
    )Investment and other income, net
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24Equity in subsidiaries
    
    
    11,592
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    (11,762
    )
    
    
    Earnings before income taxes
    
    
    4,119
    
    
    
    21,107
    
    
    
    320
    
    
    
    2,403
    
    
    
    (11,762
    )
    
    
    16,187Income tax expense (benefit)
    
    
    (3,925
    )
    
    
    8,278
    
    
    
    110
    
    
    
    3,680
    
    
    
    
    
    
    
    8,143Net earnings (loss)
    
    
    8,044
    
    
    
    12,829
    
    
    
    210
    
    
    
    (1,277
    )
    
    
    (11,762
    )
    
    
    8,044Other comprehensive loss, net
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    3
    
    
    
    (3
    )Comprehensive income (loss)
    
    $
    8,041
    
    
    $
    12,829
    
    
    $
    210
    
    
    $
    (1,280
    )
    
    $
    (11,759
    )
    
    $
    8,041
 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
 Three Months Ended January 31, 2010Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    66,844
    
    
    $
    485
    
    
    $
    4,391
    
    
    $
    
    
    
    $
    71,720Cemetery
    
    
    
    
    
    
    46,676
    
    
    
    572
    
    
    
    5,044
    
    
    
    
    
    
    
    52,292
    
    
    
    113,520
    
    
    
    1,057
    
    
    
    9,435
    
    
    
    
    
    
    
    124,012Costs and expenses:Funeral
    
    
    
    
    
    
    48,989
    
    
    
    263
    
    
    
    3,197
    
    
    
    
    
    
    
    52,449Cemetery
    
    
    
    
    
    
    41,573
    
    
    
    620
    
    
    
    4,127
    
    
    
    
    
    
    
    46,320
    
    
    
    90,562
    
    
    
    883
    
    
    
    7,324
    
    
    
    
    
    
    
    98,769Gross profit
    
    
    
    
    
    
    22,958
    
    
    
    174
    
    
    
    2,111
    
    
    
    
    
    
    
    25,243Corporate general and administrative
expenses
    
    
    (6,670
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,670
    )Hurricane related charges, net
    
    
    (54
    )
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    Other operating income, net
    
    
    16
    
    
    
    143
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    179Operating earnings (loss)
    
    
    (6,708
    )
    
    
    23,101
    
    
    
    228
    
    
    
    2,131
    
    
    
    
    
    
    
    18,752Interest expense
    
    
    (487
    )
    
    
    (5,478
    )
    
    
    (8
    )
    
    
    (483
    )
    
    
    
    
    
    
    (6,456
    )Gain on early extinguishment of debt
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Investment and other income, net
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24Equity in subsidiaries
    
    
    11,937
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    (12,017
    )
    
    
    Earnings from continuing operations
before income taxes
    
    
    4,783
    
    
    
    17,703
    
    
    
    220
    
    
    
    1,648
    
    
    
    (12,017
    )
    
    
    12,337Income tax expense (benefit)
    
    
    (2,704
    )
    
    
    7,007
    
    
    
    74
    
    
    
    499
    
    
    
    
    
    
    
    4,876Earnings from continuing operations
    
    
    7,487
    
    
    
    10,696
    
    
    
    146
    
    
    
    1,149
    
    
    
    (12,017
    )
    
    
    7,461Discontinued operations:Earnings from discontinued
operations before income taxes
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42Income taxes
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16Earnings from discontinued operations
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Net earnings
    
    
    7,487
    
    
    
    10,722
    
    
    
    146
    
    
    
    1,149
    
    
    
    (12,017
    )
    
    
    7,487Other comprehensive loss, net
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    1
    
    
    
    (1
    )Comprehensive income
    
    $
    7,486
    
    
    $
    10,722
    
    
    $
    146
    
    
    $
    1,148
    
    
    $
    (12,016
    )
    
    $
    7,486
 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 Balance Sheets
 January 31, 2011Guarantor
    
    
    Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries-Tier 1
    
    
    Subsidiaries-Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    57,033
    
    
    $
    5,412
    
    
    $
    61
    
    
    $
    1,931
    
    
    $
    
    
    
    $
    64,437Receivables, net of allowances
    
    
    3,685
    
    
    
    40,463
    
    
    
    463
    
    
    
    6,254
    
    
    
    
    
    
    
    50,865Inventories
    
    
    319
    
    
    
    32,756
    
    
    
    326
    
    
    
    2,218
    
    
    
    
    
    
    
    35,619Prepaid expenses
    
    
    1,610
    
    
    
    6,199
    
    
    
    93
    
    
    
    1,692
    
    
    
    
    
    
    
    9,594Deferred income taxes, net
    
    
    13,366
    
    
    
    11,136
    
    
    
    26
    
    
    
    2,694
    
    
    
    
    
    
    
    27,222Intercompany receivables
    
    
    1,930
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,930
    )
    
    
    Total current assets
    
    
    77,943
    
    
    
    95,966
    
    
    
    969
    
    
    
    14,789
    
    
    
    (1,930
    )
    
    
    187,737Receivables due beyond one year, net of
allowances
    
    
    42
    
    
    
    53,446
    
    
    
    561
    
    
    
    11,418
    
    
    
    
    
    
    
    65,467Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    414,167
    
    
    
    
    
    
    
    9,573
    
    
    
    
    
    
    
    423,740Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    209,885
    
    
    
    1,140
    
    
    
    6,006
    
    
    
    
    
    
    
    217,031Goodwill
    
    
    
    
    
    
    227,203
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,038Cemetery property, at cost
    
    
    
    
    
    
    350,192
    
    
    
    11,121
    
    
    
    25,695
    
    
    
    
    
    
    
    387,008Property and equipment, at cost
    
    
    57,191
    
    
    
    477,180
    
    
    
    2,533
    
    
    
    39,389
    
    
    
    
    
    
    
    576,293Less accumulated depreciation
    
    
    42,022
    
    
    
    229,315
    
    
    
    1,231
    
    
    
    16,820
    
    
    
    
    
    
    
    289,388Net property and equipment
    
    
    15,169
    
    
    
    247,865
    
    
    
    1,302
    
    
    
    22,569
    
    
    
    
    
    
    
    286,905Deferred income taxes, net
    
    
    13,478
    
    
    
    76,522
    
    
    
    
    
    
    
    6,702
    
    
    
    (2,684
    )
    
    
    94,018Cemetery perpetual care trust investments
    
    
    
    
    
    
    221,768
    
    
    
    8,931
    
    
    
    3,931
    
    
    
    
    
    
    
    234,630Non-current assets held for sale
    
    
    
    
    
    
    360
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    360Other assets
    
    
    5,672
    
    
    
    4,850
    
    
    
    7
    
    
    
    1,025
    
    
    
    
    
    
    
    11,554Intercompany receivables
    
    
    695,586
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (695,586
    )
    
    
    Equity in subsidiaries
    
    
    14,372
    
    
    
    9,058
    
    
    
    
    
    
    
    
    
    
    
    (23,430
    )
    
    
    Total assets
    
    $
    822,262
    
    
    $
    1,911,282
    
    
    $
    24,079
    
    
    $
    121,495
    
    
    $
    (723,630
    )
    
    $
    2,155,488LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5Accounts payable, accrued expenses and
other current liabilities
    
    
    15,150
    
    
    
    64,838
    
    
    
    146
    
    
    
    5,491
    
    
    
    
    
    
    
    85,625Intercompany payables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,930
    
    
    
    (1,930
    )
    
    
    Total current liabilities
    
    
    15,155
    
    
    
    64,838
    
    
    
    146
    
    
    
    7,421
    
    
    
    (1,930
    )
    
    
    85,630Long-term debt, less current maturities
    
    
    314,951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314,951Deferred income taxes
    
    
    
    
    
    
    4,487
    
    
    
    3,260
    
    
    
    
    
    
    
    (2,684
    )
    
    
    5,063Intercompany payables
    
    
    
    
    
    
    680,499
    
    
    
    1,926
    
    
    
    13,161
    
    
    
    (695,586
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    196,028
    
    
    
    
    
    
    
    46,241
    
    
    
    
    
    
    
    242,269Deferred preneed cemetery revenue
    
    
    
    
    
    
    227,601
    
    
    
    494
    
    
    
    28,673
    
    
    
    
    
    
    
    256,768Deferred preneed funeral and cemetery
receipts held in trust
    
    
    
    
    
    
    564,955
    
    
    
    1,057
    
    
    
    6,944
    
    
    
    
    
    
    
    572,956Perpetual care trusts corpus
    
    
    
    
    
    
    220,603
    
    
    
    8,918
    
    
    
    3,873
    
    
    
    
    
    
    
    233,394Other long-term liabilities
    
    
    18,357
    
    
    
    1,954
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    20,341Negative equity in subsidiaries
    
    
    49,683
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,683
    )
    
    
    Total liabilities
    
    
    398,146
    
    
    
    1,960,965
    
    
    
    15,801
    
    
    
    106,343
    
    
    
    (749,883
    )
    
    
    1,731,372Common stock
    
    
    91,399
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    91,399Other
    
    
    332,702
    
    
    
    (49,785
    )
    
    
    7,954
    
    
    
    15,085
    
    
    
    26,746
    
    
    
    332,702Accumulated other comprehensive income
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    (15
    )
    
    
    15Total shareholders equity
    
    
    424,116
    
    
    
    (49,683
    )
    
    
    8,278
    
    
    
    15,152
    
    
    
    26,253
    
    
    
    424,116Total liabilities and shareholders equity
    
    $
    822,262
    
    
    $
    1,911,282
    
    
    $
    24,079
    
    
    $
    121,495
    
    
    $
    (723,630
    )
    
    $
    2,155,488
 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
 October 31, 2010Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    48,270
    
    
    $
    6,055
    
    
    $
    58
    
    
    $
    1,677
    
    
    $
    
    
    
    $
    56,060Certificates of deposit and marketable
securities
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Receivables, net of allowances
    
    
    3,685
    
    
    
    40,717
    
    
    
    372
    
    
    
    6,396
    
    
    
    
    
    
    
    51,170Inventories
    
    
    329
    
    
    
    32,786
    
    
    
    330
    
    
    
    2,270
    
    
    
    
    
    
    
    35,715Prepaid expenses
    
    
    1,292
    
    
    
    2,590
    
    
    
    60
    
    
    
    1,538
    
    
    
    
    
    
    
    5,480Deferred income taxes, net
    
    
    13,835
    
    
    
    11,604
    
    
    
    32
    
    
    
    2,841
    
    
    
    
    
    
    
    28,312Intercompany receivables
    
    
    7,782
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,782
    )
    
    
    Total current assets
    
    
    85,193
    
    
    
    93,752
    
    
    
    852
    
    
    
    14,722
    
    
    
    (7,782
    )
    
    
    186,737Receivables due beyond one year, net of
allowances
    
    
    1,973
    
    
    
    53,683
    
    
    
    572
    
    
    
    11,230
    
    
    
    
    
    
    
    67,458Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    405,296
    
    
    
    
    
    
    
    9,622
    
    
    
    
    
    
    
    414,918Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    202,423
    
    
    
    1,123
    
    
    
    6,204
    
    
    
    
    
    
    
    209,750Goodwill
    
    
    
    
    
    
    227,203
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,038Cemetery property, at cost
    
    
    
    
    
    
    349,342
    
    
    
    11,154
    
    
    
    25,598
    
    
    
    
    
    
    
    386,094Property and equipment, at cost
    
    
    56,964
    
    
    
    474,565
    
    
    
    2,509
    
    
    
    39,172
    
    
    
    
    
    
    
    573,210Less accumulated depreciation
    
    
    40,837
    
    
    
    225,122
    
    
    
    1,180
    
    
    
    16,498
    
    
    
    
    
    
    
    283,637Net property and equipment
    
    
    16,127
    
    
    
    249,443
    
    
    
    1,329
    
    
    
    22,674
    
    
    
    
    
    
    
    289,573Deferred income taxes, net
    
    
    16,620
    
    
    
    75,449
    
    
    
    
    
    
    
    9,224
    
    
    
    (3,268
    )
    
    
    98,025Cemetery perpetual care trust investments
    
    
    
    
    
    
    218,021
    
    
    
    8,973
    
    
    
    4,014
    
    
    
    
    
    
    
    231,008Non-current assets held for sale
    
    
    
    
    
    
    360
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    360Other assets
    
    
    6,096
    
    
    
    4,772
    
    
    
    7
    
    
    
    1,030
    
    
    
    
    
    
    
    11,905Intercompany receivables
    
    
    693,981
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (693,981
    )
    
    
    Equity in subsidiaries
    
    
    15,612
    
    
    
    8,888
    
    
    
    
    
    
    
    
    
    
    
    (24,500
    )
    
    
    Total assets
    
    $
    835,602
    
    
    $
    1,888,632
    
    
    $
    24,058
    
    
    $
    124,105
    
    
    $
    (729,531
    )
    
    $
    2,142,866LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5Accounts payable, accrued expenses and
other current liabilities
    
    
    15,524
    
    
    
    70,748
    
    
    
    151
    
    
    
    5,720
    
    
    
    
    
    
    
    92,143Intercompany payables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,782
    
    
    
    (7,782
    )
    
    
    Total current liabilities
    
    
    15,529
    
    
    
    70,748
    
    
    
    151
    
    
    
    13,502
    
    
    
    (7,782
    )
    
    
    92,148Long-term debt, less current maturities
    
    
    314,027
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314,027Deferred income taxes, net
    
    
    
    
    
    
    4,950
    
    
    
    3,268
    
    
    
    
    
    
    
    (3,268
    )
    
    
    4,950Intercompany payables
    
    
    
    
    
    
    683,501
    
    
    
    2,099
    
    
    
    8,381
    
    
    
    (693,981
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    197,148
    
    
    
    
    
    
    
    46,372
    
    
    
    
    
    
    
    243,520Deferred preneed cemetery revenue
    
    
    
    
    
    
    228,908
    
    
    
    500
    
    
    
    28,636
    
    
    
    
    
    
    
    258,044Deferred preneed funeral and cemetery
receipts held in trust
    
    
    
    
    
    
    547,312
    
    
    
    1,049
    
    
    
    6,791
    
    
    
    
    
    
    
    555,152Perpetual care trusts corpus
    
    
    
    
    
    
    216,657
    
    
    
    8,923
    
    
    
    3,938
    
    
    
    
    
    
    
    229,518Other long-term liabilities
    
    
    18,050
    
    
    
    1,920
    
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    20,023Negative equity in subsidiaries
    
    
    62,512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62,512
    )
    
    
    Total liabilities
    
    
    410,118
    
    
    
    1,951,144
    
    
    
    15,990
    
    
    
    107,673
    
    
    
    (767,543
    )
    
    
    1,717,382Common stock
    
    
    92,294
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    92,294Other
    
    
    333,172
    
    
    
    (62,614
    )
    
    
    7,744
    
    
    
    16,362
    
    
    
    38,508
    
    
    
    333,172Accumulated other comprehensive income
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    (18
    )
    
    
    18Total shareholders equity
    
    
    425,484
    
    
    
    (62,512
    )
    
    
    8,068
    
    
    
    16,432
    
    
    
    38,012
    
    
    
    425,484Total liabilities and shareholders equity
    
    $
    835,602
    
    
    $
    1,888,632
    
    
    $
    24,058
    
    
    $
    124,105
    
    
    $
    (729,531
    )
    
    $
    2,142,866
 34




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Three Months Ended January 31, 2011Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    3,765
    
    
    $
    9,698
    
    
    $
    228
    
    
    $
    1,543
    
    
    $
    
    
    
    $
    15,234Cash flows from investing activities:Proceeds from sales of certificates of
deposit
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Purchases of certificates of deposit
and marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (6
    )Purchase of subsidiaries and other
investments, net of cash acquired
    
    
    
    
    
    
    (1,809
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,809
    )Additions to property and equipment
    
    
    (592
    )
    
    
    (3,749
    )
    
    
    (52
    )
    
    
    (211
    )
    
    
    
    
    
    
    (4,604
    )Other
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Net cash provided by (used in)
investing activities
    
    
    9,408
    
    
    
    (5,530
    )
    
    
    (52
    )
    
    
    (217
    )
    
    
    
    
    
    
    3,609Cash flows from financing activities:Repayments of long-term debt
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Intercompany receivables (payables)
    
    
    6,056
    
    
    
    (4,811
    )
    
    
    (173
    )
    
    
    (1,072
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    341
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    341Purchase and retirement of common stock
    
    
    (8,108
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,108
    )Dividends
    
    
    (2,749
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,749
    )Excess tax benefits from share-based
payment arrangements
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51Net cash used in financing activities
    
    
    (4,410
    )
    
    
    (4,811
    )
    
    
    (173
    )
    
    
    (1,072
    )
    
    
    
    
    
    
    (10,466
    )Net increase (decrease) in cash
    
    
    8,763
    
    
    
    (643
    )
    
    
    3
    
    
    
    254
    
    
    
    
    
    
    
    8,377Cash and cash equivalents, beginning of
period
    
    
    48,270
    
    
    
    6,055
    
    
    
    58
    
    
    
    1,677
    
    
    
    
    
    
    
    56,060Cash and cash equivalents, end of period
    
    $
    57,033
    
    
    $
    5,412
    
    
    $
    61
    
    
    $
    1,931
    
    
    $
    
    
    
    $
    64,437
 35




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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
 Three Months Ended January 31, 2010Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (131
    )
    
    $
    1,411
    
    
    $
    380
    
    
    $
    1,113
    
    
    $
    
    
    
    $
    2,773Cash flows from investing activities:Purchases of certificates of deposit
    
    
    (5,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,000
    )Additions to property and equipment
    
    
    (366
    )
    
    
    (3,725
    )
    
    
    (76
    )
    
    
    (130
    )
    
    
    
    
    
    
    (4,297
    )Other
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39Net cash used in investing activities
    
    
    (5,366
    )
    
    
    (3,686
    )
    
    
    (76
    )
    
    
    (130
    )
    
    
    
    
    
    
    (9,258
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (846
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (846
    )Intercompany receivables (payables)
    
    
    (3,276
    )
    
    
    3,202
    
    
    
    (320
    )
    
    
    394
    
    
    
    
    
    
    
    Retirement of common stock warrants
    
    
    (107
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107
    )Issuance of common stock
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115Retirement of call options
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107Debt refinancing costs
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38
    )Dividends
    
    
    (2,794
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,794
    )Excess tax benefits from share based
payment arrangements
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20Net cash provided by (used in)
financing activities
    
    
    (6,819
    )
    
    
    3,202
    
    
    
    (320
    )
    
    
    394
    
    
    
    
    
    
    
    (3,543
    )Net increase (decrease) in cash
    
    
    (12,316
    )
    
    
    927
    
    
    
    (16
    )
    
    
    1,377
    
    
    
    
    
    
    
    (10,028
    )Cash and cash equivalents, beginning of
period
    
    
    56,734
    
    
    
    5,096
    
    
    
    52
    
    
    
    926
    
    
    
    
    
    
    
    62,808Cash and cash equivalents, end of period
    
    $
    44,418
    
    
    $
    6,023
    
    
    $
    36
    
    
    $
    2,303
    
    
    $
    
    
    
    $
    52,780
 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)
 (12)
    
    Dispositions and Acquisitions
   (13)
    
    Consolidated Comprehensive Income
  Three Months Ended January 31,2011
    
    
    2010Net earnings
    
    $
    8,044
    
    
    $
    7,487Other comprehensive income (loss):Unrealized depreciation of investments, net
of deferred tax benefit of $2 and $1,
respectively
    
    
    (3
    )
    
    
    (1
    )Reduction in net unrealized losses
associated with available-for-sale
securities of the trusts
    
    
    17,081
    
    
    
    20,230Reclassification of the net unrealized
losses activity attributable to the deferred
preneed funeral and cemetery receipts held
in trust and perpetual care trusts corpus
    
    
    (17,081
    )
    
    
    (20,230
    )Total other comprehensive loss
    
    
    (3
    )
    
    
    (1
    )Total comprehensive income
    
    $
    8,041
    
    
    $
    7,486
 (14)
    
    Long-term Debt
 January 31, 2011
    
    
    October 31, 2010Long-term debt:3.125% senior convertible notes due
2014, net of unamortized discount of
$9,626 and $10,275 as of January 31,
2011 and October 31, 2010, respectively
    
    $
    76,790
    
    
    $
    76,1413.375% senior convertible notes due
2016, net of unamortized discount of
$7,042 and $7,318 as of January 31,
2011 and October 31, 2010, respectively
    
    
    38,077
    
    
    
    37,801Senior secured 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
rate of 8.0% as of January 31, 2011 and
October 31, 2010, partially secured by
assets of subsidiaries, with maturities
through 2022
    
    
    89
    
    
    
    90Total long-term debt
    
    
    314,956
    
    
    
    314,032Less current maturities
    
    
    5
    
    
    
    5$
    314,951
    
    
    $
    314,027
 37




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (14)
    
    Long-term Debt(Continued)
 Fair Value
  (15)
    
    Income Taxes
  (16)
    
    Subsequent Events
  38




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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
   39




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##### Table of Contents



40




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##### Table of Contents



Funeral and CemeteryMerchandise and
    
    
    Cemetery PerpetualServices Trusts(1)
    
    
    Care Trusts(1)For the quarter ended January 31, 2011
    
    
    4.7
    %
    
    
    2.3
    %For the last twelve months ended January 31, 2011
    
    
    14.9
    %
    
    
    12.3
    %For the last five years ended January 31, 2011
    
    
    2.7
    %
    
    
    3.6
    %
 
 (1)
    
    Periods less than a year represent actual returns. Periods of one year or
more represent annualized returns. Critical Accounting Policies
  Results of Operations
  41




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##### Table of Contents



Three Months Ended January 31, 2011 Compared to Three Months Ended January 31, 2010
 Funeral Operations
 Three Months Ended January 31,Increase2011
    
    
    2010
    
    
    (Decrease)(In millions)Funeral Revenue:Funeral Home Locations
    
    $
    69.8
    
    
    $
    67.7
    
    
    $
    2.1Corporate Trust Management (1)
    
    
    4.1
    
    
    
    4.1
    
    
    
    Total Funeral Revenue
    
    $
    73.9
    
    
    $
    71.8
    
    
    $
    2.1Funeral Costs:Funeral Home Locations
    
    $
    53.3
    
    
    $
    52.2
    
    
    $
    1.1Corporate Trust Management (1)
    
    
    .2
    
    
    
    .3
    
    
    
    (.1
    )Total Funeral Costs
    
    $
    53.5
    
    
    $
    52.5
    
    
    $
    1.0Funeral Gross Profit:Funeral Home Locations
    
    $
    16.5
    
    
    $
    15.5
    
    
    $
    1.0Corporate Trust Management (1)
    
    
    3.9
    
    
    
    3.8
    
    
    
    .1Total Funeral Gross Profit
    
    $
    20.4
    
    
    $
    19.3
    
    
    $
    1.1
 Same-Store Analysis for the Three Months Ended January 31, 2011 and 2010
 Change in Average Revenue
    

    Change in Same-StorePer Funeral Service
    
    Funeral Services
    
    
    Same-Store Cremation Rate2011
    
    
    20101.6% (1)
    
    
    1.1%
    
    
    
    41.7%
    
    
    
    41.2%
 
 (1)
    
    Corporate trust management consists of the trust management fees and funeral
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
distributable earnings as stipulated by our respective trust agreements that are generated by
the trusts over the life of the preneed contracts and allocated to those products and services
delivered during the relevant periods. See Notes 3 and 6 to the condensed consolidated
financial statements included herein for information regarding the cost basis and market value
of the trust assets and current performance of the trusts (i.e., current realized gains and
losses, interest income and dividends). Trust management fees included in funeral revenue for
the three months ended January 31, 2011 and 2010 were $1.2 million and $1.1 million,
respectively. Funeral trust earnings recognized in funeral revenue for the three months ended
January 31, 2011 and 2010 were $2.9 million and $3.0 million, respectively.   42




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##### Table of Contents



Cemetery Operations
 Three Months Ended January 31,2011
    
    
    2010
    
    
    Increase(In millions)Cemetery Revenue:Cemetery Locations
    
    $
    53.4
    
    
    $
    50.5
    
    
    $
    2.9Corporate Trust Management (1)
    
    
    2.0
    
    
    
    1.8
    
    
    
    .2Total Cemetery Revenue
    
    $
    55.4
    
    
    $
    52.3
    
    
    $
    3.1Cemetery Costs:Cemetery Locations
    
    $
    47.2
    
    
    $
    46.1
    
    
    $
    1.1Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Cemetery Costs
    
    $
    47.4
    
    
    $
    46.3
    
    
    $
    1.1Cemetery Gross Profit:Cemetery Locations
    
    $
    6.2
    
    
    $
    4.4
    
    
    $
    1.8Corporate Trust Management (1)
    
    
    1.8
    
    
    
    1.6
    
    
    
    .2Total Cemetery Gross Profit
    
    $
    8.0
    
    
    $
    6.0
    
    
    $
    2.0
 
 (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
distributable earnings as stipulated by our respective trust agreements that are generated by
the trusts over the life of the preneed contracts and allocated to those products and services
delivered during the relevant periods. See Notes 4 and 6 to the condensed consolidated
financial statements included herein for information regarding the cost basis and market value
of the trust assets and current performance of the trusts (i.e., current realized gains and
losses, interest income and dividends). Trust management fees included in cemetery revenue
for the three months ended January 31, 2011 and 2010 were $1.3 million and $1.2 million,
respectively, and cemetery trust earnings recognized included in cemetery revenue for the
three months ended January 31, 2011 and 2010 were $0.7 million and $0.6 million, respectively.
Perpetual care trust earnings were $2.3 million and $2.4 million for the three months ended
January 31, 2011 and 2010, respectively, and are included in the revenues and gross profit of
the cemetery segment. See Notes 5 and 6 to the condensed consolidated financial statements
included herein for information regarding the cemetery perpetual care trusts.   Other
   43




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##### Table of Contents



Preneed Sales into the Backlog
   Liquidity and Capital Resources
 General
   44




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##### Table of Contents



Cash Flow
   45




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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)
    
    $
    331.6
    
    
    $
    
    
    
    $
    200.0
    
    
    $
    86.4
    
    
    $
    45.2Interest on long-term debt (2)
    
    
    49.1
    
    
    
    16.7
    
    
    
    27.2
    
    
    
    4.4
    
    
    
    .8Operating lease obligations (3)
    
    
    29.8
    
    
    
    3.6
    
    
    
    6.8
    
    
    
    3.7
    
    
    
    15.7Purchase obligations (4)
    
    
    2.3
    
    
    
    2.3
    
    
    
    
    
    
    
    
    
    
    
    Non-competition and other agreements (5)
    
    
    1.2
    
    
    
    .4
    
    
    
    .3
    
    
    
    .2
    
    
    
    .3$
    414.0
    
    
    $
    23.0
    
    
    $
    234.3
    
    
    $
    94.7
    
    
    $
    62.0
 
 (1)
    
    See below for a breakdown of our future scheduled principal payments and
maturities of our long-term debt by type as of January 31, 2011.(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 20 years, except for eight leases that expire between 2032 and 2039.
This category also includes leases under our vehicle fleet leasing program. Our future
minimum lease payments for all operating leases as of January 31, 2011 are $3.6 million, $3.7
million, $3.1 million, $2.2 million, $1.5 million and $15.7 million for the years ending
October 31, 2011, 2012, 2013, 2014, 2015 and later years, respectively.(4)
    
    Represents a construction contract for a funeral home currently under construction.(5)
    
    This category includes payments pursuant to non-competition agreements with prior
owners and key employees of acquired businesses.  Expiration by PeriodMore thanContingent Obligations
    
    Total
    
    
    Less than 1 year
    
    
    1 - 3 years
    
    
    3 - 5 years
    
    
    5 yearsCemetery perpetual
care trust funding
obligations
(1)
    
    $
    13.1
    
    
    $
    13.1
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term obligations
related to uncertain
tax positions
(2)
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.2$
    15.3
    
    
    $
    13.1
    
    
    $
    
    
    
    $
    
    
    
    $
    2.2
 
 (1)
    
    In those states where we have withdrawn realized net capital gains in the past
from our cemetery perpetual care trusts, regulators may seek replenishment of the subsequent
realized net capital losses either by requiring a cash deposit to the trust or by prohibiting
or restricting withdrawals of future earnings until they cover the loss. The estimated
probable funding obligation in the cemetery perpetual care trusts in these states was $13.1
million as 46




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##### Table of Contents



of January 31, 2011. As of January 31, 2011, we had net unrealized losses of $34.2 million in
the trusts in these states. Because some of these trusts currently have assets with a fair
market value less than the aggregate amounts required to be contributed to the trust, any
additional realized net capital losses in these trusts may result in a corresponding funding
liability and increase in cemetery costs. In those states where realized net capital gains have
not been withdrawn, we believe it is reasonably possible but not probable that additional
funding obligations may exist with an estimated amount of approximately $2.4 million; no charge
has been recorded for these amounts as of January 31, 2011.(2)
    
    In accordance with the required accounting guidance on uncertain tax positions, as
of January 31, 2011, we have recorded $2.2 million of unrecognized tax benefits and related
interest and penalties. Due to the uncertainty regarding the timing and completion of audits
and possible outcomes, it is not possible to estimate the range of increase and decrease and
the timing of any potential cash payments.  SeniorSecured
    
    
    
    
    
    
    
    
    
    
    Other, PrincipallyRevolving
    
    
    
    
    
    
    
    
    
    
    Seller FinancingCredit
    
    
    Senior Convertible
    
    
    Senior
    
    
    of AcquiredFiscal Years Ending October 31,
    
    Facility
    
    
    Notes
    
    
    Notes
    
    
    Operations
    
    
    Total2011
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2013
    
    
    
    
    
    
    
    
    
    
    200.0
    
    
    
    
    
    
    
    200.02014
    
    
    
    
    
    
    86.4
    
    
    
    
    
    
    
    
    
    
    
    86.42015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    
    
    
    
    45.1
    
    
    
    
    
    
    
    .1
    
    
    
    45.2Total long-term debt
    
    $
    
    
    
    $
    131.5
    
    
    $
    200.0
    
    
    $
    .1
    
    
    $
    331.6
 Off-Balance Sheet Arrangements
  (1)
    
    the $24.8 million bond we are required to maintain to guarantee our obligations
relating to funds we withdrew in fiscal year 2001 from our preneed funeral trusts in
Florida, which is discussed above and in Note 20 to the consolidated financial
statements in our 2010 Form 10-K; and(2)
    
    the insurance-funded preneed funeral contracts, which will be funded by life
insurance or annuity contracts issued by third-party insurers, are not reflected in our
condensed consolidated balance sheets, and are discussed in Note 2(i) to the
consolidated financial statements in our 2010 Form 10-K.
 Ratio of Earnings to Fixed Charges
  Three Months Ended
    
    Years ended October 31,January 31, 2011
    
    2010
    
    2009
    
    2008
    
    2007
    
    20063.59 (1)
    
    
    2.69
    (2)
    
    
    2.21
    (3)
    
    
    1.40
    (4)
    
    
    2.85
    (5)
    
    
    2.82
    (6)
 
 (1)
    
    Pre-tax earnings for the three months ended January 31, 2011 include a $0.1 million
charge for hurricane related expenses.(2)
    
    Pre-tax earnings for fiscal year 2010 include a $1.0 million pre-tax net loss on the
early extinguishment of debt due to fiscal year 2010 debt repurchases. 47




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##### Table of Contents



(3)
    
    Pre-tax earnings for fiscal year 2009 include a $6.2 million pre-tax net gain on the
early extinguishment of debt due to fiscal year 2009 debt repurchases, a $3.4 million charge
related to the estimated probable funding obligation to fund the cemetery perpetual care trust
net realized losses, a $0.4 million charge for hurricane related expenses, a $0.3 million
charge for separation charges primarily related to the retirement of an executive officer and
net impairment losses on dispositions of ($0.2) million.(4)
    
    Pre-tax earnings for fiscal year 2008 include a charge of $2.3 million related to
Hurricanes Katrina and Ike, a charge of $26.0 million for impairment of goodwill, a $13.3
million charge related to the estimated probable obligation to fund the cemetery perpetual
care trust net realized losses and net impairment losses on dispositions of ($0.4) million.(5)
    
    Pre-tax earnings for fiscal year 2007 include a charge of $2.5 million related to
Hurricane Katrina, a charge of $0.6 million for separation charges primarily related to
separation pay of a former executive officer who retired in the first quarter of 2007 and $0.7
million for the loss on early extinguishment of debt related to the June 2007 senior
convertible debt transaction.(6)
    
    Pre-tax earnings for fiscal year 2006 include a net recovery of $1.6 million related
to Hurricane Katrina, business interruption proceeds of $3.2 million related to Hurricane
Katrina, a charge of $1.0 million for separation charges related to July 2005 restructuring of
our divisions and the retirement of an executive officer and net impairment losses on
dispositions of ($0.2) million.  Recent Accounting Standards
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   48




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##### Table of Contents



Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 1A. Risk Factors
  49




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 Issuer Purchases of Equity Securities
 Maximum approximateTotal number of
    
    
    dollar value of sharesshares purchased as
    
    
    that may yet beTotal number
    
    
    
    
    
    
    part of
    
    
    purchased under theof shares
    
    
    Average price paid
    
    
    publicly-announced
    
    
    plans orPeriod
    
    purchased
    
    
    per share
    
    
    plans or programs
    
    
    programs(1)November 1,
2010 through
November 30, 2010
    
    
    847,200
    
    
    $
    5.65
    
    
    
    847,200
    
    
    $
    17,672,180December 1, 2010
through December
31, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    17,672,180January 1, 2011
through January 31,
2011
    
    
    500,000
    
    
    $
    6.56
    
    
    
    500,000
    
    
    $
    14,394,009Total
    
    
    1,347,200
    
    
    $
    5.99
    
    
    
    1,347,200
    
    
    $
    14,394,009
 
 (1)
    
    We announced a $25.0 million stock repurchase program in September 2007, which was
increased by $25.0 million in December 2007 and June 2008, resulting in a $75.0 million
program. As of January 31, 2011, we had repurchased 8.7 million shares for $60.6 million at
an average price of $6.95 per share and have $14.4 million remaining under this program. 
 Item 5. Other Information
  
 Item 6. Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
April 3, 2008 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended April 30, 2008)3.2
    
    By-laws of the Company, as amended and restated as of September 8, 2008 (incorporated by
reference to Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended
July 31, 2008)4.1
    
    See Exhibits 3.1 and 3.2 for provisions of the Companys Amended and Restated Articles of
Incorporation, as amended, and By-laws, as amended, defining the rights of holders of Class A
and Class B common stock4.2
    
    Specimen of Class A common stock certificate (incorporated by reference to Exhibit 3 to the
Companys Registration Statement on Form 8-A/A filed with the Commission on June 21, 2007)
 50




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##### Table of Contents



4.3
    
    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)4.4
    
    Indenture dated as of February 11, 2005 by and among Stewart Enterprises, Inc., the
Guarantors thereunder and U.S. Bank National Association, as Trustee, with respect to the 6.25
percent Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K filed February 14, 2005 (File No. 001-15449))4.5
    
    Form of 6.25 percent Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed February 14, 2005 (File No. 001-15449))4.6
    
    Indenture dated 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)4.7
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.375 percent Senior
Convertible Notes due 2016 (including Form of 3.375 percent Senior Convertible Notes due 2016)
(incorporated by reference to Exhibit 4.2 to the Companys Current Report on Form 8-K filed
June 27, 2007)10.1
    
    Employment Agreement between the Company and Thomas M. Kitchen dated February 24, 201110.2
    
    Form of Restricted Stock Agreement under the Stewart Enterprises, Inc. 2010 Stock Incentive
Plan between the Company and its Executive Officers10.3
    
    Form of Stock Option Agreement under the Stewart Enterprises, Inc. 2010 Stock Incentive Plan
between the Company and its Executive Officers10.4
    
    Consulting Agreement between the Company and Thomas J. Crawford dated February 24, 201112
    
    Calculation of Ratio of Earnings to Fixed Charges31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
 51




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.March 9, 2011
    /s/  THOMAS M. KITCHENThomas M. KitchenSenior Executive Vice President
and
Chief Financial OfficerMarch 9, 2011
    /s/  ANGELA M. LACOURAngela M. LacourVice President
Corporate Controller

Chief Accounting Officer 52




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##### Table of Contents



Exhibit Index
 10.1
    
    Employment Agreement between the Company and Thomas M. Kitchen dated February 24, 201110.2
    
    Form of Restricted Stock Agreement under the Stewart Enterprises, Inc. 2010 Stock Incentive Plan between the Company and its Executive Officers10.3
    
    Form of Stock Option Agreement under the Stewart Enterprises, Inc. 2010 Stock Incentive Plan between the Company and its Executive Officers10.4
    
    Consulting Agreement between the Company and Thomas J. Crawford dated February 24, 201112
    
    Calculation of Ratio of Earnings to Fixed Charges31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford, President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford, President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President and Chief Financial Officer
 53