##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 For the quarterly period ended April 30, 2006
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from to
 
 Commission File Number: 1-15449
 
 STEWART ENTERPRISES, INC.
  LOUISIANA
    
    72-0693290(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)1333 South Clearview ParkwayJefferson, Louisiana
    
    70121(Address of principal executive offices)
    
    (Zip Code)
 
 Registrants telephone number, including area code: (504) 729-1400
 
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
 o þ




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 INDEX
 PagePart I.
    
    Financial InformationItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings  Three Months Ended April 30, 2006 and 2005
    
    
    3Condensed Consolidated Statements of Earnings  Six Months Ended April 30, 2006 and 2005
    
    
    4Condensed Consolidated Balance Sheets  April 30, 2006 and October 31, 2005
    
    
    5Condensed Consolidated Statement of Shareholders Equity  Six Months Ended April 30, 2006
    
    
    7Condensed Consolidated Statements of Cash Flows  Six Months Ended April 30, 2006 and 2005
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    40Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    53Item 4.
    
    Controls and Procedures
    
    
    53Part II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    55Item 1A.
    
    Risk Factors
    
    
    55Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    55Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    56Item 6.
    
    Exhibits
    
    
    56Signatures
    
    
    58
 2




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
 (Unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended April 30,2006
    
    
    2005Revenues:Funeral
    
    $
    72,007
    
    
    $
    74,374Cemetery
    
    
    59,010
    
    
    
    57,794131,017
    
    
    
    132,168Costs and expenses:Funeral
    
    
    53,592
    
    
    
    54,241Cemetery
    
    
    45,510
    
    
    
    44,69799,102
    
    
    
    98,938Gross profit
    
    
    31,915
    
    
    
    33,230Corporate general and administrative expenses
    
    
    (7,256
    )
    
    
    (4,582
    )Hurricane related charges, net
    
    
    558
    
    
    
    Separation charges
    
    
    (122
    )
    
    
    Gains on dispositions and impairment (losses), net
    
    
    159
    
    
    
    364Other operating income, net
    
    
    36
    
    
    
    259Operating earnings
    
    
    25,290
    
    
    
    29,271Interest expense
    
    
    (7,681
    )
    
    
    (6,671
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (30,057
    )Investment and other income, net
    
    
    652
    
    
    
    112Earnings (loss) from continuing operations before income taxes
    
    
    18,261
    
    
    
    (7,345
    )Income tax expense (benefit)
    
    
    6,885
    
    
    
    (2,680
    )Earnings (loss) from continuing operations
    
    
    11,376
    
    
    
    (4,665
    )Discontinued operations:Earnings (loss) from discontinued operations before income taxes
    
    
    51
    
    
    
    (161
    )Income tax expense (benefit)
    
    
    (20
    )
    
    
    91Earnings (loss) from discontinued operations
    
    
    71
    
    
    
    (252
    )Net earnings (loss)
    
    $
    11,447
    
    
    $
    (4,917
    )Basic earnings (loss) per common share:Earnings (loss) from continuing operations
    
    $
    .11
    
    
    $
    (.04
    )Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings (loss)
    
    $
    .11
    
    
    $
    (.04
    )Diluted earnings (loss) per common share:Earnings (loss) from continuing operations
    
    $
    .11
    
    
    $
    (.04
    )Earnings from discontinued operations
    
    
    
    
    
    
    Net earnings (loss)
    
    $
    .11
    
    
    $
    (.04
    )Weighted average common shares outstanding (in thousands):Basic
    
    
    107,951
    
    
    
    109,506Diluted
    
    
    108,035
    
    
    
    109,506Dividends declared per common share
    
    $
    .025
    
    
    $
    .025
  3




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
 (Unaudited)
(Dollars in thousands, except per share amounts)
 Six Months Ended April 30,2006
    
    
    2005Revenues:Funeral
    
    $
    143,741
    
    
    $
    143,980Cemetery
    
    
    113,476
    
    
    
    110,297257,217
    
    
    
    254,277Costs and expenses:Funeral
    
    
    107,506
    
    
    
    106,082Cemetery
    
    
    88,713
    
    
    
    87,755196,219
    
    
    
    193,837Gross profit
    
    
    60,998
    
    
    
    60,440Corporate general and administrative expenses
    
    
    (14,475
    )
    
    
    (8,798
    )Hurricane related charges, net
    
    
    (2,080
    )
    
    
    Separation charges
    
    
    (276
    )
    
    
    Gains on dispositions and impairment (losses), net
    
    
    159
    
    
    
    1,178Other operating income, net
    
    
    1,014
    
    
    
    498Operating earnings
    
    
    45,340
    
    
    
    53,318Interest expense
    
    
    (15,209
    )
    
    
    (17,047
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (32,708
    )Investment and other income, net
    
    
    1,120
    
    
    
    220Earnings from continuing operations before income taxes and
cumulative effect of change in accounting principle
    
    
    31,251
    
    
    
    3,783Income taxes
    
    
    11,781
    
    
    
    1,143Earnings from continuing operations before cumulative
effect of change in accounting principle
    
    
    19,470
    
    
    
    2,640Discontinued operations:Earnings from discontinued operations before income taxes
    
    
    345
    
    
    
    465Income tax expense (benefit)
    
    
    (21
    )
    
    
    119Earnings from discontinued operations
    
    
    366
    
    
    
    346Earnings before cumulative effect of change in accounting principle
    
    
    19,836
    
    
    
    2,986Cumulative effect of change in accounting principle (net of
$101,061 income tax benefit)
    
    
    
    
    
    
    (153,180
    )Net earnings (loss)
    
    $
    19,836
    
    
    $
    (150,194
    )Basic earnings (loss) per common share:Earnings from continuing operations before cumulative effect
of change in accounting principle
    
    $
    .18
    
    
    $
    .03Earnings from discontinued operations
    
    
    
    
    
    
    Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (1.40
    )Net earnings (loss)
    
    $
    .18
    
    
    $
    (1.37
    )Diluted earnings (loss) per common share:Earnings from continuing operations before cumulative effect
of change in accounting principle
    
    $
    .18
    
    
    $
    .03Earnings from discontinued operations
    
    
    
    
    
    
    Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (1.40
    )Net earnings (loss)
    
    $
    .18
    
    
    $
    (1.37
    )Weighted average common shares outstanding (in thousands):Basic
    
    
    108,232
    
    
    
    109,293Diluted
    
    
    108,260
    
    
    
    109,506Dividends declared per common share
    
    $
    .05
    
    
    $
    .025
  4




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
(Dollars in thousands, except per share amounts)
 April 30,
    
    
    October 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    42,648
    
    
    $
    40,605Marketable securities
    
    
    1,318
    
    
    
    1,302Receivables, net of allowances
    
    
    70,598
    
    
    
    79,825Inventories
    
    
    32,428
    
    
    
    33,461Prepaid expenses
    
    
    3,675
    
    
    
    2,766Deferred income taxes, net
    
    
    4,982
    
    
    
    11,116Assets held for sale
    
    
    
    
    
    
    603Total current assets
    
    
    155,649
    
    
    
    169,678Receivables due beyond one year, net of allowances
    
    
    70,629
    
    
    
    68,935Preneed funeral receivables and trust investments
    
    
    505,551
    
    
    
    503,468Preneed cemetery receivables and trust investments
    
    
    253,202
    
    
    
    257,437Goodwill
    
    
    272,729
    
    
    
    272,729Cemetery property, at cost
    
    
    367,862
    
    
    
    366,776Property and equipment, at cost:Land
    
    
    41,093
    
    
    
    41,090Buildings
    
    
    291,122
    
    
    
    287,525Equipment and other
    
    
    164,572
    
    
    
    158,250496,787
    
    
    
    486,865Less accumulated depreciation
    
    
    205,919
    
    
    
    195,741Net property and equipment
    
    
    290,868
    
    
    
    291,124Deferred income taxes, net
    
    
    184,617
    
    
    
    187,573Cemetery perpetual care trust investments
    
    
    218,077
    
    
    
    213,088Other assets
    
    
    18,607
    
    
    
    20,318Total assets
    
    $
    2,337,791
    
    
    $
    2,351,126
  5




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 April 30,
    
    
    October 31,2006
    
    
    2005LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    3,079
    
    
    $
    3,168Accounts payable
    
    
    9,805
    
    
    
    10,758Accrued payroll
    
    
    11,711
    
    
    
    12,306Accrued insurance
    
    
    24,597
    
    
    
    20,757Accrued interest
    
    
    5,360
    
    
    
    5,236Other current liabilities
    
    
    17,253
    
    
    
    24,681Income taxes payable
    
    
    2,035
    
    
    
    886Liabilities associated with assets held for sale
    
    
    
    
    
    
    374Total current liabilities
    
    
    73,840
    
    
    
    78,166Long-term debt, less current maturities
    
    
    375,299
    
    
    
    406,859Deferred preneed funeral revenue
    
    
    276,062
    
    
    
    284,090Deferred preneed cemetery revenue
    
    
    304,709
    
    
    
    292,511Non-controlling interest in funeral and cemetery trusts
    
    
    632,745
    
    
    
    626,841Other long-term liabilities
    
    
    11,740
    
    
    
    11,442Total liabilities
    
    
    1,674,395
    
    
    
    1,699,909Commitments and contingencies
    
    
    
    
    
    
    Non-controlling interest in perpetual care trusts
    
    
    216,634
    
    
    
    211,764Shareholders equity:Preferred stock, $1.00 par
value, 5,000,000 shares authorized; no shares issued
    
    
    
    
    
    
    Common stock, $1.00 stated value:Class A authorized 150,000,000 shares issued
and outstanding 103,688,687 and 105,115,187
shares at April 30, 2006 and October 31,
2005, respectively
    
    
    103,689
    
    
    
    105,115Class B authorized 5,000,000 shares issued
and outstanding 3,555,020 shares at April 30,
2006 and October 31, 2005, 10 votes per
share, convertible into an equal number of
Class A shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    655,995
    
    
    
    667,663Accumulated deficit
    
    
    (316,472
    )
    
    
    (336,308
    )Unearned restricted stock compensation
    
    
    
    
    
    
    (569
    )Accumulated other comprehensive loss:Unrealized depreciation of investments
    
    
    (5
    )
    
    
    (3
    )Total accumulated other comprehensive losses
    
    
    (5
    )
    
    
    (3
    )Total shareholders equity
    
    
    446,762
    
    
    
    439,453Total liabilities and shareholders equity
    
    $
    2,337,791
    
    
    $
    2,351,126
  6




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
(Dollars in thousands, except per share amounts)
 Unearned
    
    
    UnrealizedAdditional
    
    
    
    
    
    
    Restricted
    
    
    Depreciation
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Accumulated
    
    
    Stock
    
    
    of
    
    
    ShareholdersStock(1)
    
    
    Capital
    
    
    Deficit
    
    
    Compensation
    
    
    Investments
    
    
    EquityBalance October 31, 2005
    
    $
    108,670
    
    
    $
    667,663
    
    
    $
    (336,308
    )
    
    $
    (569
    )
    
    $
    (3
    )
    
    $
    439,453Comprehensive income (loss):Net earnings
    
    
    
    
    
    
    
    
    
    
    19,836
    
    
    
    
    
    
    
    
    
    
    
    19,836Other comprehensive loss:Unrealized depreciation of
investments, net of deferred tax
benefit of $1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Total other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    19,836
    
    
    
    
    
    
    
    (2
    )
    
    
    19,834Adoption of SFAS No. 123R
    
    
    
    
    
    
    (569
    )
    
    
    
    
    
    
    569
    
    
    
    
    
    
    
    Restricted stock activity
    
    
    
    
    
    
    187
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187Share-based compensation
    
    
    
    
    
    
    834
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    834Purchase and retirement of common stock
    
    
    (1,426
    )
    
    
    (6,715
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,141
    )Dividends ($.05 per share)
    
    
    
    
    
    
    (5,405
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,405
    )Balance April 30, 2006
    
    $
    107,244
    
    
    $
    655,995
    
    
    $
    (316,472
    )
    
    $
    
    
    
    $
    (5
    )
    
    $
    446,762
 
 (1)
    
    Amount includes 103,689 and 105,115 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of April 30, 2006 and October 31, 2005, respectively,
and includes 3,555 shares (in thousands) of Class B common stock.  7




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
(Dollars in thousands, except per share amounts)
 Six Months Ended April 30,2006
    
    
    2005Cash flows from operating activities:Net earnings (loss)
    
    $
    19,836
    
    
    $
    (150,194
    )Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:(Gains) on dispositions and impairment losses, net
    
    
    (563
    )
    
    
    (1,682
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    153,180Loss on early extinguishment of debt
    
    
    
    
    
    
    32,708Premiums paid on early extinguishment of debt
    
    
    
    
    
    
    (25,369
    )Depreciation and amortization
    
    
    10,410
    
    
    
    10,324Amortization of deferred financing costs
    
    
    524
    
    
    
    739Provision for doubtful accounts
    
    
    3,049
    
    
    
    3,063Share-based compensation
    
    
    834
    
    
    
    Tax benefit on stock options exercised
    
    
    
    
    
    
    1,939Provision (benefit) for deferred income taxes
    
    
    9,091
    
    
    
    (681
    )Other
    
    
    187
    
    
    
    771Changes in assets and liabilities:Increase in other receivables
    
    
    (1,170
    )
    
    
    (6,066
    )(Increase) decrease in inventories and cemetery property
    
    
    (50
    )
    
    
    1,794Decrease in accounts payable and accrued expenses
    
    
    (3,485
    )
    
    
    (9,130
    )Net effect of preneed funeral production and maturities
    
    
    (4,761
    )
    
    
    (7,835
    )Net effect of preneed cemetery production and deliveries
    
    
    16,953
    
    
    
    2,266Increase (decrease) in other
    
    
    202
    
    
    
    (2,177
    )Net cash provided by operating activities
    
    
    51,057
    
    
    
    3,650Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    
    
    
    
    16Proceeds from sale of assets, net
    
    
    751
    
    
    
    6,385Insurance proceeds related to hurricane damaged properties
    
    
    5,300
    
    
    
    Additions to property and equipment
    
    
    (9,949
    )
    
    
    (12,968
    )Other
    
    
    19
    
    
    
    (188
    )Net cash used in investing activities
    
    
    (3,879
    )
    
    
    (6,755
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    
    
    
    
    440,000Repayments of long-term debt
    
    
    (31,650
    )
    
    
    (438,341
    )Debt issue costs
    
    
    
    
    
    
    (5,811
    )Issuance of common stock
    
    
    
    
    
    
    12,608Purchase and retirement of common stock
    
    
    (8,141
    )
    
    
    (5,681
    )Dividends
    
    
    (5,405
    )
    
    
    (2,742
    )Other
    
    
    61
    
    
    
    8Net cash provided by (used in) financing activities
    
    
    (45,135
    )
    
    
    41Net increase (decrease) in cash
    
    
    2,043
    
    
    
    (3,064
    )Cash and cash equivalents, beginning of period
    
    
    40,605
    
    
    
    21,514Cash and cash equivalents, end of period
    
    $
    42,648
    
    
    $
    18,450Supplemental cash flow information:Cash paid during the period for:Income taxes
    
    $
    700
    
    
    $
    2,400Interest
    
    $
    13,800
    
    
    $
    22,500
  8




---



##### 



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




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis of Presentation(Continued)
    Six Months Ended April 30, 2006Number of Shares
    
    
    Weighted Average
    
    
    AggregateUnderlying Options
    
    
    Exercise Prices
    
    
    Intrinsic ValueOutstanding as of November 1, 2005
    
    
    1,468,734
    
    

    $6.62Granted
    
    
    269,250
    
    
    $5.06Exercised/Repurchased
    
    
    
    
    
    $   Forfeited
    
    
    (7,000
    )
    
    $5.06Outstanding as of April 30, 2006
    
    
    1,730,984
    
    
    $6.38
    
    
    $
    314Exercisable as of April 30, 2006
    
    
    517,188
    
    
    $6.28
    
    
    $
    84Weighted-average fair value of options granted
    
    
    
    
    
    $2.22
  Options Outstanding
    
    
    Options ExercisableNumber
    
    
    Weighted Average
    
    
    
    
    
    
    NumberRange of
    
    Outstanding
    
    
    Remaining
    
    
    Weighted Average
    
    
    Exercisable
    
    
    Weighted AverageExercise Prices
    
    at 4/30/2006
    
    
    Contractual Life
    
    
    Exercise Prices
    
    
    at 4/30/2006
    
    
    Exercise Prices$5.06
    
    
    262,250
    
    
    6.58 years
    
    $5.06
    
    
    
    
    
    
    $    $5.44
    
    
    333,334
    
    
    7.64 years
    
    $5.44
    
    
    
    233,338
    
    
    $5.44$6.90
    
    
    560,400
    
    
    5.64 years
    
    $6.90
    
    
    
    140,100
    
    
    $6.90$7.03
    
    
    575,000
    
    
    5.55 years
    
    $7.03
    
    
    
    143,750
    
    
    $7.03$5.06 to $7.03
    
    
    1,730,984
    
    
    6.14 years
    
    $6.38
    
    
    
    517,188
    
    
    $6.28
 10




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis of Presentation(Continued)
 Weighted AverageSix Months Ended
    
    
    Grant-DateApril 30, 2006
    
    
    Fair ValueNonvested options as of November 1, 2005
    
    
    1,235,396
    
    
    $3.92Granted
    
    
    269,250
    
    
    $2.22Vested
    
    
    (283,850
    )
    
    $4.06Forfeited
    
    
    (7,000
    )
    
    $2.22Nonvested options as of April 30, 2006
    
    
    1,213,796
    
    
    $3.52
    Three Months
    
    
    Six MonthsEnded
    
    
    EndedApril 30, 2005
    
    
    April 30, 2005Net loss
    
    $
    (4,917
    )
    
    $
    (150,194
    )Stock-based employee compensation
expense included in reported net
earnings, net of tax
    
    
    129
    
    
    
    218Total stock-based employee
compensation expense determined
under fair value-based method,
net of tax
    
    
    (408
    )
    
    
    (935
    )Pro forma net loss
    
    $
    (5,196
    )
    
    $
    (150,911
    )Net loss per common share:Basic  as reported
    
    $
    (.04
    )
    
    $
    (1.37
    )Basic  pro forma
    
    $
    (.05
    )
    
    $
    (1.38
    )Diluted  as reported
    
    $
    (.04
    )
    
    $
    (1.37
    )Diluted  pro forma
    
    $
    (.05
    )
    
    $
    (1.38
    )
 11




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Basis of Presentation(Continued)
 Reclassifications
  (2) Change in Accounting Principles and New Accounting Principles
 Preneed Selling Costs
   Other Accounting Pronouncements
   12




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities
 Preneed Funeral Receivables and Trust Investments
  April 30, 2006
    
    
    October 31, 2005Trust assets
    
    $
    452,125
    
    
    $
    446,344Receivables from customers
    
    
    53,426
    
    
    
    57,124Preneed funeral receivables and trust
investments
    
    $
    505,551
    
    
    $
    503,468
  April 30, 2006Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    46,796
    
    
    $
    
    
    
    $
    
    
    
    $
    46,796U.S. Government, agencies and
municipalities
    
    
    8,526
    
    
    
    37
    
    
    
    (433
    )
    
    
    8,130Corporate bonds
    
    
    19,278
    
    
    
    498
    
    
    
    (703
    )
    
    
    19,073Preferred stocks
    
    
    78,004
    
    
    
    186
    
    
    
    (4,261
    )
    
    
    73,929Common stocks
    
    
    231,600
    
    
    
    23,720
    
    
    
    (7,304
    )
    
    
    248,016Mutual funds
    
    
    32,651
    
    
    
    1,281
    
    
    
    (246
    )
    
    
    33,686Insurance contracts and other long-
term investments
    
    
    20,181
    
    
    
    47
    
    
    
    
    
    
    
    20,228Trust investments
    
    $
    437,036
    
    
    $
    25,769
    
    
    $
    (12,947
    )
    
    
    449,858Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102.9
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,267Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    452,125
  April 30, 2006Due in one year or less
    
    $
    789Due in one to five years
    
    
    11,399Due in five to ten years
    
    
    14,187Thereafter
    
    
    828$
    27,203
  13




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Preneed Funeral Activities(Continued)
   October 31, 2005Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    52,275
    
    
    $
    
    
    
    $
    
    
    
    $
    52,275U.S. Government, agencies and
municipalities
    
    
    7,421
    
    
    
    52
    
    
    
    (384
    )
    
    
    7,089Corporate bonds
    
    
    19,702
    
    
    
    679
    
    
    
    (566
    )
    
    
    19,815Preferred stocks
    
    
    68,419
    
    
    
    503
    
    
    
    (1,577
    )
    
    
    67,345Common stocks
    
    
    239,970
    
    
    
    13,803
    
    
    
    (9,812
    )
    
    
    243,961Mutual funds
    
    
    30,254
    
    
    
    215
    
    
    
    (247
    )
    
    
    30,222Insurance contracts and other long-
term investments
    
    
    23,190
    
    
    
    351
    
    
    
    
    
    
    
    23,541Trust investments
    
    $
    441,231
    
    
    $
    15,603
    
    
    $
    (12,586
    )
    
    
    444,248Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100.7
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,096Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    446,344
 (4) Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  April 30, 2006
    
    
    October 31, 2005Trust assets
    
    $
    191,015
    
    
    $
    191,506Receivables from customers
    
    
    62,187
    
    
    
    65,931Preneed cemetery receivables and trust investments
    
    $
    253,202
    
    
    $
    257,437
  14




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Cemetery Merchandise and Service Activities(Continued)
 April 30, 2006Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    12,652
    
    
    $
    
    
    
    $
    
    
    
    $
    12,652U.S. Government, agencies and
municipalities
    
    
    11,679
    
    
    
    16
    
    
    
    (230
    )
    
    
    11,465Corporate bonds
    
    
    8,670
    
    
    
    214
    
    
    
    (110
    )
    
    
    8,774Preferred stocks
    
    
    33,174
    
    
    
    69
    
    
    
    (1,709
    )
    
    
    31,534Common stocks
    
    
    94,232
    
    
    
    8,518
    
    
    
    (3,662
    )
    
    
    99,088Mutual funds
    
    
    24,065
    
    
    
    1,547
    
    
    
    (2
    )
    
    
    25,610Insurance contracts and other
long-term investments
    
    
    569
    
    
    
    1
    
    
    
    
    
    
    
    570Trust investments
    
    $
    185,041
    
    
    $
    10,365
    
    
    $
    (5,713
    )
    
    
    189,693Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102.5
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,322Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    191,015
  April 30, 2006Due in one year or less
    
    $
    1,980Due in one to five years
    
    
    10,331Due in five to ten years
    
    
    7,328Thereafter
    
    
    600$
    20,239
   15




---



##### 



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, 2005Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    12,377
    
    
    $
    
    
    
    $
    
    
    
    $
    12,377U.S. Government, agencies and
municipalities
    
    
    10,686
    
    
    
    27
    
    
    
    (76
    )
    
    
    10,637Corporate bonds
    
    
    8,893
    
    
    
    309
    
    
    
    (145
    )
    
    
    9,057Preferred stocks
    
    
    34,319
    
    
    
    296
    
    
    
    (861
    )
    
    
    33,754Common stocks
    
    
    104,999
    
    
    
    5,465
    
    
    
    (5,486
    )
    
    
    104,978Mutual funds
    
    
    19,018
    
    
    
    86
    
    
    
    (47
    )
    
    
    19,057Insurance contracts and other
long-term investments
    
    
    568
    
    
    
    2
    
    
    
    
    
    
    
    570Trust investments
    
    $
    190,860
    
    
    $
    6,185
    
    
    $
    (6,615
    )
    
    
    190,430Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99.8
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,076Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    191,506
 (5) Cemetery Interment Rights and Perpetual Care Trusts
   April 30, 2006Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    11,325
    
    
    $
    2
    
    
    $
    (5
    )
    
    $
    11,322U.S. Government, agencies and
municipalities
    
    
    6,917
    
    
    
    23
    
    
    
    (207
    )
    
    
    6,733Corporate bonds
    
    
    19,802
    
    
    
    1,240
    
    
    
    (156
    )
    
    
    20,886Preferred stocks
    
    
    78,247
    
    
    
    161
    
    
    
    (4,179
    )
    
    
    74,229Common stocks
    
    
    84,164
    
    
    
    11,060
    
    
    
    (3,481
    )
    
    
    91,743Mutual funds
    
    
    10,672
    
    
    
    413
    
    
    
    (89
    )
    
    
    10,996Insurance contracts and other
long-term investments
    
    
    1,032
    
    
    
    86
    
    
    
    (11
    )
    
    
    1,107Trust investments
    
    $
    212,159
    
    
    $
    12,985
    
    
    $
    (8,128
    )
    
    
    217,016Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102.3
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,061Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    218,077
 16




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  April 30, 2006Due in one year or less
    
    $
    1,075Due in one to five years
    
    
    19,556Due in five to ten years
    
    
    5,428Thereafter
    
    
    1,560$
    27,619
   October 31, 2005Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    20,172
    
    
    $
    
    
    
    $
    
    
    
    $
    20,172U.S. Government, agencies and
municipalities
    
    
    7,077
    
    
    
    36
    
    
    
    (127
    )
    
    
    6,986Corporate bonds
    
    
    18,817
    
    
    
    1,669
    
    
    
    (156
    )
    
    
    20,330Preferred stocks
    
    
    71,168
    
    
    
    642
    
    
    
    (4,187
    )
    
    
    67,623Common stocks
    
    
    87,406
    
    
    
    10,659
    
    
    
    (5,795
    )
    
    
    92,270Mutual funds
    
    
    3,557
    
    
    
    129
    
    
    
    (72
    )
    
    
    3,614Insurance contracts and other
long-term investments
    
    
    1,132
    
    
    
    45
    
    
    
    (26
    )
    
    
    1,151Trust investments
    
    $
    209,329
    
    
    $
    13,180
    
    
    $
    (10,363
    )
    
    
    212,146Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101.3
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    942Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    213,088
 (6) Non-Controlling Interest in Funeral and Cemetery Trusts and in Perpetual Care Trusts
  17




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (6) Non-Controlling Interest in Funeral and Cemetery Trusts and in Perpetual Care
Trusts(Continued)
 Non-controlling InterestNon-controllingInterest inPreneed
    
    
    Preneed
    
    
    
    
    
    
    PerpetualFuneral
    
    
    Cemetery
    
    
    Total
    
    
    Care TrustsTrust assets at market value
    
    $
    452,125
    
    
    $
    191,015
    
    
    $
    643,140
    
    
    $
    218,077Less:Pending withdrawals
    
    
    (8,639
    )
    
    
    (5,334
    )
    
    
    (13,973
    )
    
    
    (1,996
    )Pending deposits
    
    
    2,021
    
    
    
    1,557
    
    
    
    3,578
    
    
    
    553Non-controlling interest
    
    $
    445,507
    
    
    $
    187,238
    
    
    $
    632,745
    
    
    $
    216,634
  Non-controlling InterestNon-controllingInterest inPreneed
    
    
    Preneed
    
    
    
    
    
    
    PerpetualFuneral
    
    
    Cemetery
    
    
    Total
    
    
    Care TrustsTrust assets at market value
    
    $
    446,344
    
    
    $
    191,506
    
    
    $
    637,850
    
    
    $
    213,088Less:Pending withdrawals
    
    
    (7,868
    )
    
    
    (6,104
    )
    
    
    (13,972
    )
    
    
    (1,866
    )Pending deposits
    
    
    1,648
    
    
    
    1,315
    
    
    
    2,963
    
    
    
    542Non-controlling interest
    
    $
    440,124
    
    
    $
    186,717
    
    
    $
    626,841
    
    
    $
    211,764
 Investment and other income, net
  Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005Non-controlling interest:Realized gains
    
    $
    13,174
    
    
    $
    6,523
    
    
    $
    14,344
    
    
    $
    10,107Realized losses
    
    
    (4,733
    )
    
    
    (5,571
    )
    
    
    (6,051
    )
    
    
    (9,640
    )Interest income, dividend and other
ordinary income
    
    
    7,121
    
    
    
    6,029
    
    
    
    14,696
    
    
    
    12,880Trust expenses and income taxes
    
    
    (3,718
    )
    
    
    (3,448
    )
    
    
    (6,549
    )
    
    
    (6,312
    )Net trust investment income
    
    
    11,844
    
    
    
    3,533
    
    
    
    16,440
    
    
    
    7,035Interest expense related to non-controlling
interest in funeral and cemetery trust
investments
    
    
    (11,405
    )
    
    
    (2,655
    )
    
    
    (13,399
    )
    
    
    (4,668
    )Interest expense related to non-controlling
interest in perpetual care trust
investments
    
    
    (439
    )
    
    
    (878
    )
    
    
    (3,041
    )
    
    
    (2,367
    )Total non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    652
    
    
    
    112
    
    
    
    1,120
    
    
    
    220Total investment and other income, net
    
    $
    652
    
    
    $
    112
    
    
    $
    1,120
    
    
    $
    220
 
 (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. 18




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7) Commitments and Contingencies
 Henrietta Torres and Teresa Fiore, on behalf of themselves and all others similarly situated
and the General Public v. Stewart Enterprises, Inc., et al.
     In re: Funeral Consumer Antitrust Litigation Funeral Consumers Alliance, Inc, et al. v. Service Corporation International,
Alderwoods Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville
Casket Co.
   Pioneer Valley Casket Co., Inc., et al. v. Service Corporation International, Alderwoods Group, Inc.,
Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville Casket Co.
 19




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7) Commitments and Contingencies(Continued)
    Ralph Lee Fancher, on behalf of himself and all others similarly
situated v. Service Corporation International, Alderwoods Group, Inc., Stewart Enterprises, Inc.,
Hillenbrand Industries, Inc., Aurora Casket Co., York Group, Inc., and Batesville Casket Co., ,
 State Attorney General Civil Investigative Demands
  20




---



##### 



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 ShareThree Months Ended April 30, 2006
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataEarnings from continuing operations
    
    $
    11,376Basic earnings per common share:Earnings from continuing operations
available to common shareholders
    
    $
    11,376
    
    
    
    107,951
    
    
    $
    .11Effect of dilutive securities:Time-vest stock options assumed
exercised and restricted stock
    
    
    
    
    
    
    84Diluted earnings per common share:Earnings from continuing operations
available to common shareholders
plus time-vest stock options
assumed exercised and restricted
stock
    
    $
    11,376
    
    
    
    108,035
    
    
    $
    .11
 Loss
    
    
    Shares
    
    
    Per ShareThree Months Ended April 30, 2005
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataLoss from continuing operations
    
    $
    (4,665
    )Basic loss per common share:Loss from continuing operations
available to common
shareholders
    
    $
    (4,665
    )
    
    
    109,506
    
    
    $
    (.04
    )Effect of dilutive securities:Time-vest stock options assumed
exercised and restricted stock
    
    
    
    
    
    
    Diluted loss per common share:Loss from continuing operations
available to common
shareholders plus time-vest
stock options assumed exercised
and restricted stock
    
    $
    (4,665
    )
    
    
    109,506
    
    
    $
    (.04
    )
 21




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8) Reconciliation of Basic and Diluted Per Share Data(Continued)
 Earnings
    
    
    Shares
    
    
    Per ShareSix Months Ended April 30, 2006
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataEarnings from continuing operations
    
    $
    19,470Basic earnings per common share:Earnings from continuing operations
available to common shareholders
    
    $
    19,470
    
    
    
    108,232
    
    
    $
    .18Effect of dilutive securities:Time-vest stock options assumed
exercised and restricted stock
    
    
    
    
    
    
    28Diluted earnings per common share:Earnings from continuing operations
available to common shareholders
plus time-vest stock options
assumed exercised and restricted
stock
    
    $
    19,470
    
    
    
    108,260
    
    
    $
    .18
 Earnings
    
    
    Shares
    
    
    Per ShareSix Months Ended April 30, 2005
    
    (Numerator)
    
    
    (Denominator)
    
    
    DataEarnings from continuing
operations before cumulative
effect of change in accounting
principle
    
    $
    2,640Basic earnings per common share:Earnings from continuing
operations before cumulative
effect of change in
accounting principle
available to common
shareholders
    
    $
    2,640
    
    
    
    109,293
    
    
    $
    .03Effect of dilutive securities:Time-vest stock options
assumed exercised and
restricted stock
    
    
    
    
    
    
    213Diluted earnings per common share:Earnings from continuing
operations before cumulative
effect of change in
accounting principle
available to common
shareholders plus time-vest
stock options assumed
exercised and restricted
stock
    
    $
    2,640
    
    
    
    109,506
    
    
    $
    .03
   22




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9) Segment Data
         23




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9) Segment Data(Continued)
    Funeral Revenue
    
    
    Cemetery Revenue(1)
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005Western Division
    
    $
    37,259
    
    
    $
    38,390
    
    
    $
    21,808
    
    
    $
    20,358
    
    
    $
    59,067
    
    
    $
    58,748Eastern Division
    
    
    30,147
    
    
    
    30,606
    
    
    
    34,560
    
    
    
    34,439
    
    
    
    64,707
    
    
    
    65,045Corporate Trust
Management
(2)
    
    
    4,601
    
    
    
    5,378
    
    
    
    2,642
    
    
    
    2,997
    
    
    
    7,243
    
    
    
    8,375Total
    
    $
    72,007
    
    
    $
    74,374
    
    
    $
    59,010
    
    
    $
    57,794
    
    
    $
    131,017
    
    
    $
    132,168
 Funeral Revenue
    
    
    Cemetery Revenue(1)
    
    
    Total RevenueSix Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005Western Division
    
    $
    74,232
    
    
    $
    74,080
    
    
    $
    41,169
    
    
    $
    40,162
    
    
    $
    115,401
    
    
    $
    114,242Eastern Division
    
    
    60,254
    
    
    
    60,044
    
    
    
    67,059
    
    
    
    64,433
    
    
    
    127,313
    
    
    
    124,477Corporate Trust
Management
(2)
    
    
    9,255
    
    
    
    9,856
    
    
    
    5,248
    
    
    
    5,702
    
    
    
    14,503
    
    
    
    15,558Total
    
    $
    143,741
    
    
    $
    143,980
    
    
    $
    113,476
    
    
    $
    110,297
    
    
    $
    257,217
    
    
    $
    254,277
 Funeral Gross Profit
    
    
    Cemetery Gross Profit(1)
    
    
    Total Gross ProfitThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005Western Division
    
    $
    8,086
    
    
    $
    9,006
    
    
    $
    4,583
    
    
    $
    4,294
    
    
    $
    12,669
    
    
    $
    13,300Eastern Division
    
    
    5,869
    
    
    
    5,909
    
    
    
    6,402
    
    
    
    5,949
    
    
    
    12,271
    
    
    
    11,858Corporate Trust
Management
(2)
    
    
    4,460
    
    
    
    5,218
    
    
    
    2,515
    
    
    
    2,854
    
    
    
    6,975
    
    
    
    8,072Total
    
    $
    18,415
    
    
    $
    20,133
    
    
    $
    13,500
    
    
    $
    13,097
    
    
    $
    31,915
    
    
    $
    33,230
 Funeral Gross Profit
    
    
    Cemetery Gross Profit(1)
    
    
    Total Gross ProfitSix Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005Western Division
    
    $
    15,784
    
    
    $
    16,621
    
    
    $
    8,310
    
    
    $
    7,930
    
    
    $
    24,094
    
    
    $
    24,551Eastern Division
    
    
    11,472
    
    
    
    11,722
    
    
    
    11,451
    
    
    
    9,180
    
    
    
    22,923
    
    
    
    20,902Corporate Trust
Management
(2)
    
    
    8,979
    
    
    
    9,555
    
    
    
    5,002
    
    
    
    5,432
    
    
    
    13,981
    
    
    
    14,987Total
    
    $
    36,235
    
    
    $
    37,898
    
    
    $
    24,763
    
    
    $
    22,542
    
    
    $
    60,998
    
    
    $
    60,440
 24




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9) Segment Data(Continued)
 Net Preneed Funeral Merchandise
    
    
    Net Preneed Cemetery Merchandise
    
    
    Net Total Preneed Merchandiseand Service Sales(3)
    
    
    and Service Sales(3)
    
    
    and Service Sales(3)Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005Western Division
    
    $
    14,221
    
    
    $
    12,500
    
    
    $
    4,673
    
    
    $
    4,294
    
    
    $
    18,894
    
    
    $
    16,794Eastern Division
    
    
    11,767
    
    
    
    11,648
    
    
    
    10,571
    
    
    
    11,608
    
    
    
    22,338
    
    
    
    23,256Total
    
    $
    25,988
    
    
    $
    24,148
    
    
    $
    15,244
    
    
    $
    15,902
    
    
    $
    41,232
    
    
    $
    40,050
 Net Preneed Funeral Merchandise
    
    
    Net Preneed Cemetery Merchandise
    
    
    Net Total Preneed Merchandiseand Service Sales(3)
    
    
    and Service Sales(3)
    
    
    and Service Sales(3)Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005Western Division
    
    $
    26,588
    
    
    $
    23,562
    
    
    $
    8,483
    
    
    $
    8,071
    
    
    $
    35,071
    
    
    $
    31,633Eastern Division
    
    
    21,357
    
    
    
    20,763
    
    
    
    20,704
    
    
    
    21,503
    
    
    
    42,061
    
    
    
    42,266Total
    
    $
    47,945
    
    
    $
    44,325
    
    
    $
    29,187
    
    
    $
    29,574
    
    
    $
    77,132
    
    
    $
    73,899
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of
the related geographic segment and amounted to $2,333 and $1,578 for the three months ended
April 30, 2006 and 2005, respectively, and $4,951 and $2,700 for the six months ended April
30, 2006 and 2005, respectively.(2)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and service trust earnings recognized with respect to preneed contracts
delivered during the period. Trust management fees are established by the Company at rates
consistent with industry norms and are paid by the trusts to the Companys subsidiary,
Investors Trust, Inc. The trust earnings represent earnings realized over the life of the
preneed contracts delivered during the relevant periods. Trust management fees included in
funeral revenue for the three months ended April 30, 2006 and 2005 were $1,399 and $1,524,
respectively, and funeral trust earnings for the three months ended April 30, 2006 and 2005
were $3,202 and $3,854, respectively. Trust management fees included in cemetery revenue for
the three months ended April 30, 2006 and 2005 were $1,221 and $1,234, respectively, and
cemetery trust earnings for the three months ended April 30, 2006 and 2005 were $1,421 and
$1,763, respectively. Trust management fees included in funeral revenue for the six months
ended April 30, 2006 and 2005 were $2,768 and $2,677, respectively, and funeral trust earnings
for the six months ended April 30, 2006 and 2005 were $6,487 and $7,179, respectively. Trust
management fees included in cemetery revenue for the six months ended April 30, 2006 and 2005
were $2,426 and $2,465, respectively, and cemetery trust earnings for the six months ended
April 30, 2006 and 2005 were $2,822 and $3,237, respectively.(3)
    
    Preneed sales amounts represent total preneed funeral and cemetery service and
merchandise sales generated in the applicable period, net of cancellations.
  25




---



##### 



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
    
    
    Six Months EndedApril 30,
    
    
    April 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Restated)
    
    
    
    
    
    
    (Restated)Gross profit for reportable segments
    
    $
    31,915
    
    
    $
    33,230
    
    
    $
    60,998
    
    
    $
    60,440Corporate general and administrative expenses
    
    
    (7,256
    )
    
    
    (4,582
    )
    
    
    (14,475
    )
    
    
    (8,798
    )Hurricane related charges, net
    
    
    558
    
    
    
    
    
    
    
    (2,080
    )
    
    
    Separation charges
    
    
    (122
    )
    
    
    
    
    
    
    (276
    )
    
    
    Gains on dispositions and impairment (losses), net
    
    
    159
    
    
    
    364
    
    
    
    159
    
    
    
    1,178Other operating income, net
    
    
    36
    
    
    
    259
    
    
    
    1,014
    
    
    
    498Interest expense
    
    
    (7,681
    )
    
    
    (6,671
    )
    
    
    (15,209
    )
    
    
    (17,047
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (30,057
    )
    
    
    
    
    
    
    (32,708
    )Investment and other income, net
    
    
    652
    
    
    
    112
    
    
    
    1,120
    
    
    
    220Earnings (loss) from continuing operations
before income taxes and cumulative effect of
change in accounting principle
    
    $
    18,261
    
    
    $
    (7,345
    )
    
    $
    31,251
    
    
    $
    3,783
 (10) Supplementary Information
  Three Months Ended
    
    
    Six Months EndedApril 30,
    
    
    April 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Restated)
    
    
    
    
    
    
    (Restated)Service revenueFuneral
    
    $
    41,461
    
    
    $
    42,114
    
    
    $
    82,608
    
    
    $
    81,687Cemetery
    
    
    15,812
    
    
    
    15,290
    
    
    
    31,534
    
    
    
    28,75157,273
    
    
    
    57,404
    
    
    
    114,142
    
    
    
    110,438Merchandise revenueFuneral
    
    
    28,500
    
    
    
    30,073
    
    
    
    57,052
    
    
    
    58,299Cemetery
    
    
    39,122
    
    
    
    38,547
    
    
    
    73,871
    
    
    
    73,91267,622
    
    
    
    68,620
    
    
    
    130,923
    
    
    
    132,211Other revenueFuneral
    
    
    2,046
    
    
    
    2,187
    
    
    
    4,081
    
    
    
    3,994Cemetery
    
    
    4,076
    
    
    
    3,957
    
    
    
    8,071
    
    
    
    7,6346,122
    
    
    
    6,144
    
    
    
    12,152
    
    
    
    11,628Total revenue
    
    $
    131,017
    
    
    $
    132,168
    
    
    $
    257,217
    
    
    $
    254,277Service costsFuneral
    
    
    13,864
    
    
    
    12,833
    
    
    
    27,189
    
    
    
    25,148Cemetery
    
    
    10,438
    
    
    
    9,869
    
    
    
    20,134
    
    
    
    19,39524,302
    
    
    
    22,702
    
    
    
    47,323
    
    
    
    44,543Merchandise costsFuneral
    
    
    17,059
    
    
    
    17,684
    
    
    
    34,043
    
    
    
    33,763Cemetery
    
    
    22,861
    
    
    
    21,744
    
    
    
    43,443
    
    
    
    42,27039,920
    
    
    
    39,428
    
    
    
    77,486
    
    
    
    76,033General and administrative expensesFuneral
    
    
    22,669
    
    
    
    23,724
    
    
    
    46,274
    
    
    
    47,171Cemetery
    
    
    12,211
    
    
    
    13,084
    
    
    
    25,136
    
    
    
    26,09034,880
    
    
    
    36,808
    
    
    
    71,410
    
    
    
    73,261Total costs
    
    $
    99,102
    
    
    $
    98,938
    
    
    $
    196,219
    
    
    $
    193,837
 26




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (10) Supplementary
Information  (Continued)
  (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes
  Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended April 30, 2006Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    67,050
    
    
    $
    4,957
    
    
    $
    
    
    
    $
    72,007Cemetery
    
    
    
    
    
    
    53,815
    
    
    
    5,195
    
    
    
    
    
    
    
    59,010
    
    
    
    120,865
    
    
    
    10,152
    
    
    
    
    
    
    
    131,017Costs and expenses:Funeral
    
    
    
    
    
    
    50,640
    
    
    
    2,952
    
    
    
    
    
    
    
    53,592Cemetery
    
    
    
    
    
    
    42,027
    
    
    
    3,483
    
    
    
    
    
    
    
    45,510
    
    
    
    92,667
    
    
    
    6,435
    
    
    
    
    
    
    
    99,102Gross profit
    
    
    
    
    
    
    28,198
    
    
    
    3,717
    
    
    
    
    
    
    
    31,915Corporate general and administrative expenses
    
    
    (7,256
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,256
    )Hurricane related charges, net
    
    
    (135
    )
    
    
    693
    
    
    
    
    
    
    
    
    
    
    
    558Separation charges
    
    
    (78
    )
    
    
    (44
    )
    
    
    
    
    
    
    
    
    
    
    (122
    )Gains on dispositions and impairment (losses), net
    
    
    
    
    
    
    63
    
    
    
    96
    
    
    
    
    
    
    
    159Other operating income (expense), net
    
    
    21
    
    
    
    (54
    )
    
    
    69
    
    
    
    
    
    
    
    36Operating earnings (loss)
    
    
    (7,448
    )
    
    
    28,856
    
    
    
    3,882
    
    
    
    
    
    
    
    25,290Interest income (expense)
    
    
    3,420
    
    
    
    (11,900
    )
    
    
    799
    
    
    
    
    
    
    
    (7,681
    )Investment and other income, net
    
    
    652
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    652Equity in subsidiaries
    
    
    12,305
    
    
    
    186
    
    
    
    
    
    
    
    (12,491
    )
    
    
    Earnings from continuing operations before
income taxes
    
    
    8,929
    
    
    
    17,142
    
    
    
    4,681
    
    
    
    (12,491
    )
    
    
    18,261Income tax expense (benefit)
    
    
    (2,518
    )
    
    
    7,495
    
    
    
    1,908
    
    
    
    
    
    
    
    6,885Earnings from continuing operations
    
    
    11,447
    
    
    
    9,647
    
    
    
    2,773
    
    
    
    (12,491
    )
    
    
    11,376Discontinued operations:Earnings from discontinued operations before
income taxes
    
    
    
    
    
    
    9
    
    
    
    42
    
    
    
    
    
    
    
    51Income tax benefit
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    (20
    )Earnings from discontinued operations
    
    
    
    
    
    
    29
    
    
    
    42
    
    
    
    
    
    
    
    71Net earnings
    
    
    11,447
    
    
    
    9,676
    
    
    
    2,815
    
    
    
    (12,491
    )
    
    
    11,447Other comprehensive loss, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income
    
    $
    11,447
    
    
    $
    9,676
    
    
    $
    2,815
    
    
    $
    (12,491
    )
    
    $
    11,447
 27




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
Condensed Consolidating Financial Statements of Guarantors of Senior
Notes  (Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended April 30, 2005Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    69,371
    
    
    $
    5,003
    
    
    $
    
    
    
    $
    74,374Cemetery
    
    
    
    
    
    
    51,722
    
    
    
    6,072
    
    
    
    
    
    
    
    57,794
    
    
    
    121,093
    
    
    
    11,075
    
    
    
    
    
    
    
    132,168Costs and expenses:Funeral
    
    
    
    
    
    
    51,147
    
    
    
    3,094
    
    
    
    
    
    
    
    54,241Cemetery
    
    
    
    
    
    
    41,037
    
    
    
    3,660
    
    
    
    
    
    
    
    44,697
    
    
    
    92,184
    
    
    
    6,754
    
    
    
    
    
    
    
    98,938Gross profit
    
    
    
    
    
    
    28,909
    
    
    
    4,321
    
    
    
    
    
    
    
    33,230Corporate general and
administrative expenses
    
    
    (4,582
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,582
    )Gains on dispositions and
impairment (losses), net
    
    
    
    
    
    
    373
    
    
    
    (9
    )
    
    
    
    
    
    
    364Other operating income, net
    
    
    44
    
    
    
    207
    
    
    
    8
    
    
    
    
    
    
    
    259Operating earnings (loss)
    
    
    (4,538
    )
    
    
    29,489
    
    
    
    4,320
    
    
    
    
    
    
    
    29,271Interest income (expense)
    
    
    14,276
    
    
    
    (19,136
    )
    
    
    (1,811
    )
    
    
    
    
    
    
    (6,671
    )Loss on early extinguishment of debt
    
    
    (30,057
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,057
    )Investment and other income, net
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112Equity in subsidiaries
    
    
    7,755
    
    
    
    
    
    
    
    
    
    
    
    (7,755
    )
    
    
    Earnings (loss) from continuing
operations before income taxes
    
    
    (12,452
    )
    
    
    10,353
    
    
    
    2,509
    
    
    
    (7,755
    )
    
    
    (7,345
    )Income tax expense (benefit)
    
    
    (7,535
    )
    
    
    3,761
    
    
    
    1,094
    
    
    
    
    
    
    
    (2,680
    )Earnings (loss) from continuing
operations
    
    
    (4,917
    )
    
    
    6,592
    
    
    
    1,415
    
    
    
    (7,755
    )
    
    
    (4,665
    )Discontinued operations:Earnings (loss) from
discontinued operations before
income taxes
    
    
    
    
    
    
    (211
    )
    
    
    50
    
    
    
    
    
    
    
    (161
    )Income taxes
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    91Earnings (loss) from
discontinued operations
    
    
    
    
    
    
    (302
    )
    
    
    50
    
    
    
    
    
    
    
    (252
    )Net earnings (loss)
    
    
    (4,917
    )
    
    
    6,290
    
    
    
    1,465
    
    
    
    (7,755
    )
    
    
    (4,917
    )Other comprehensive income, net
    
    
    140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140Comprehensive income (loss)
    
    $
    (4,777
    )
    
    $
    6,290
    
    
    $
    1,465
    
    
    $
    (7,755
    )
    
    $
    (4,777
    )
 28




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)
Condensed Consolidating Financial Statements of Guarantors of Senior
Notes  (Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Six Months Ended April 30, 2006Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    133,925
    
    
    $
    9,816
    
    
    $
    
    
    
    $
    143,741Cemetery
    
    
    
    
    
    
    103,924
    
    
    
    9,552
    
    
    
    
    
    
    
    113,476
    
    
    
    237,849
    
    
    
    19,368
    
    
    
    
    
    
    
    257,217Costs and expenses:Funeral
    
    
    
    
    
    
    101,442
    
    
    
    6,064
    
    
    
    
    
    
    
    107,506Cemetery
    
    
    
    
    
    
    81,767
    
    
    
    6,946
    
    
    
    
    
    
    
    88,713
    
    
    
    183,209
    
    
    
    13,010
    
    
    
    
    
    
    
    196,219Gross profit
    
    
    
    
    
    
    54,640
    
    
    
    6,358
    
    
    
    
    
    
    
    60,998Corporate general and administrative expenses
    
    
    (14,475
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,475
    )Hurricane related charges, net
    
    
    (135
    )
    
    
    (1,945
    )
    
    
    
    
    
    
    
    
    
    
    (2,080
    )Separation charges
    
    
    (202
    )
    
    
    (74
    )
    
    
    
    
    
    
    
    
    
    
    (276
    )Gains on dispositions and impairment
(losses), net
    
    
    
    
    
    
    63
    
    
    
    96
    
    
    
    
    
    
    
    159Other operating income, net
    
    
    37
    
    
    
    865
    
    
    
    112
    
    
    
    
    
    
    
    1,014Operating earnings (loss)
    
    
    (14,775
    )
    
    
    53,549
    
    
    
    6,566
    
    
    
    
    
    
    
    45,340Interest income (expense)
    
    
    13,155
    
    
    
    (27,486
    )
    
    
    (878
    )
    
    
    
    
    
    
    (15,209
    )Investment and other income, net
    
    
    1,120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,120Equity in subsidiaries
    
    
    18,950
    
    
    
    294
    
    
    
    
    
    
    
    (19,244
    )
    
    
    Earnings from continuing operations
before income taxes
    
    
    18,450
    
    
    
    26,357
    
    
    
    5,688
    
    
    
    (19,244
    )
    
    
    31,251Income tax expense (benefit)
    
    
    (1,386
    )
    
    
    10,878
    
    
    
    2,289
    
    
    
    
    
    
    
    11,781Earnings from continuing operations
    
    
    19,836
    
    
    
    15,479
    
    
    
    3,399
    
    
    
    (19,244
    )
    
    
    19,470Discontinued operations:Earnings from discontinued operations
before income taxes
    
    
    
    
    
    
    9
    
    
    
    336
    
    
    
    
    
    
    
    345Income tax benefit
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    (21
    )Earnings from discontinued operations
    
    
    
    
    
    
    30
    
    
    
    336
    
    
    
    
    
    
    
    366Net earnings
    
    
    19,836
    
    
    
    15,509
    
    
    
    3,735
    
    
    
    (19,244
    )
    
    
    19,836Other comprehensive loss, net
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )
    
    
    2
    
    
    
    (2
    )Comprehensive income
    
    $
    19,834
    
    
    $
    15,509
    
    
    $
    3,733
    
    
    $
    (19,242
    )
    
    $
    19,834
 29




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes  (Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Six Months Ended April 30, 2005Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    133,646
    
    
    $
    10,334
    
    
    $
    
    
    
    $
    143,980Cemetery
    
    
    
    
    
    
    98,788
    
    
    
    11,509
    
    
    
    
    
    
    
    110,297
    
    
    
    232,434
    
    
    
    21,843
    
    
    
    
    
    
    
    254,277Costs and expenses:Funeral
    
    
    
    
    
    
    99,774
    
    
    
    6,308
    
    
    
    
    
    
    
    106,082Cemetery
    
    
    
    
    
    
    79,930
    
    
    
    7,825
    
    
    
    
    
    
    
    87,755
    
    
    
    179,704
    
    
    
    14,133
    
    
    
    
    
    
    
    193,837Gross profit
    
    
    
    
    
    
    52,730
    
    
    
    7,710
    
    
    
    
    
    
    
    60,440Corporate general and
administrative expenses
    
    
    (8,798
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,798
    )Gains on dispositions and
impairment (losses), net
    
    
    
    
    
    
    987
    
    
    
    191
    
    
    
    
    
    
    
    1,178Other operating income, net
    
    
    161
    
    
    
    250
    
    
    
    87
    
    
    
    
    
    
    
    498Operating earnings (loss)
    
    
    (8,637
    )
    
    
    53,967
    
    
    
    7,988
    
    
    
    
    
    
    
    53,318Interest income (expense)
    
    
    25,560
    
    
    
    (38,813
    )
    
    
    (3,794
    )
    
    
    
    
    
    
    (17,047
    )Loss on early extinguishment of debt
    
    
    (32,708
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,708
    )Investment and other income, net
    
    
    220
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    220Equity loss in subsidiaries
    
    
    (140,465
    )
    
    
    
    
    
    
    
    
    
    
    140,465
    
    
    
    Earnings (loss) from continuing
operations before income taxes
    
    
    (156,030
    )
    
    
    15,154
    
    
    
    4,194
    
    
    
    140,465
    
    
    
    3,783Income tax expense (benefit)
    
    
    (5,836
    )
    
    
    5,339
    
    
    
    1,640
    
    
    
    
    
    
    
    1,143Earnings (loss) from continuing
operations
    
    
    (150,194
    )
    
    
    9,815
    
    
    
    2,554
    
    
    
    140,465
    
    
    
    2,640Discontinued operations:Earnings from discontinued
operations before income taxes
    
    
    
    
    
    
    35
    
    
    
    430
    
    
    
    
    
    
    
    465Income taxes
    
    
    
    
    
    
    119
    
    
    
    
    
    
    
    
    
    
    
    119Earnings (loss) from
discontinued operations
    
    
    
    
    
    
    (84
    )
    
    
    430
    
    
    
    
    
    
    
    346Earnings (loss) before
cumulative effect of change in
accounting principle
    
    
    (150,194
    )
    
    
    9,731
    
    
    
    2,984
    
    
    
    140,465
    
    
    
    2,986Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    (145,276
    )
    
    
    (7,904
    )
    
    
    
    
    
    
    (153,180
    )Net loss
    
    
    (150,194
    )
    
    
    (135,545
    )
    
    
    (4,920
    )
    
    
    140,465
    
    
    
    (150,194
    )Other comprehensive income, net
    
    
    333
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333Comprehensive loss
    
    $
    (149,861
    )
    
    $
    (135,545
    )
    
    $
    (4,920
    )
    
    $
    140,465
    
    
    $
    (149,861
    )
 30




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes  (Continued)
 Condensed Consolidating Balance Sheets
 April 30, 2006Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    33,657
    
    
    $
    7,752
    
    
    $
    1,239
    
    
    $
    
    
    
    $
    42,648Marketable securities
    
    
    
    
    
    
    
    
    
    
    1,318
    
    
    
    
    
    
    
    1,318Receivables, net of allowances
    
    
    14,219
    
    
    
    49,998
    
    
    
    6,381
    
    
    
    
    
    
    
    70,598Inventories
    
    
    252
    
    
    
    25,289
    
    
    
    6,887
    
    
    
    
    
    
    
    32,428Prepaid expenses
    
    
    459
    
    
    
    3,187
    
    
    
    29
    
    
    
    
    
    
    
    3,675Deferred income taxes, net
    
    
    2,918
    
    
    
    1,939
    
    
    
    125
    
    
    
    
    
    
    
    4,982Total current assets
    
    
    51,505
    
    
    
    88,165
    
    
    
    15,979
    
    
    
    
    
    
    
    155,649Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    51,496
    
    
    
    19,133
    
    
    
    
    
    
    
    70,629Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    495,293
    
    
    
    10,258
    
    
    
    
    
    
    
    505,551Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    236,224
    
    
    
    16,978
    
    
    
    
    
    
    
    253,202Goodwill
    
    
    
    
    
    
    252,942
    
    
    
    19,787
    
    
    
    
    
    
    
    272,729Cemetery property, at cost
    
    
    
    
    
    
    348,675
    
    
    
    19,187
    
    
    
    
    
    
    
    367,862Property and equipment, at cost
    
    
    36,356
    
    
    
    425,044
    
    
    
    35,387
    
    
    
    
    
    
    
    496,787Less accumulated depreciation
    
    
    21,336
    
    
    
    173,007
    
    
    
    11,576
    
    
    
    
    
    
    
    205,919Net property and equipment
    
    
    15,020
    
    
    
    252,037
    
    
    
    23,811
    
    
    
    
    
    
    
    290,868Deferred income taxes, net
    
    
    11,649
    
    
    
    159,243
    
    
    
    13,725
    
    
    
    
    
    
    
    184,617Cemetery perpetual care trust investments
    
    
    
    
    
    
    218,077
    
    
    
    
    
    
    
    
    
    
    
    218,077Other assets
    
    
    5,885
    
    
    
    11,978
    
    
    
    744
    
    
    
    
    
    
    
    18,607Equity in subsidiaries
    
    
    10,381
    
    
    
    5,647
    
    
    
    
    
    
    
    (16,028
    )
    
    
    Total assets
    
    $
    94,440
    
    
    $
    2,119,777
    
    
    $
    139,602
    
    
    $
    (16,028
    )
    
    $
    2,337,791LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    3,079
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,079Accounts payable
    
    
    525
    
    
    
    8,922
    
    
    
    358
    
    
    
    
    
    
    
    9,805Accrued expenses and other current
liabilities
    
    
    18,109
    
    
    
    38,982
    
    
    
    3,865
    
    
    
    
    
    
    
    60,956Total current liabilities
    
    
    21,713
    
    
    
    47,904
    
    
    
    4,223
    
    
    
    
    
    
    
    73,840Long-term debt, less current maturities
    
    
    345,299
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    375,299Intercompany payables, net
    
    
    (963,221
    )
    
    
    948,306
    
    
    
    14,915
    
    
    
    
    
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    229,363
    
    
    
    46,699
    
    
    
    
    
    
    
    276,062Deferred preneed cemetery revenue
    
    
    
    
    
    
    276,972
    
    
    
    27,737
    
    
    
    
    
    
    
    304,709Non-controlling interest in funeral and
cemetery trusts
    
    
    
    
    
    
    632,745
    
    
    
    
    
    
    
    
    
    
    
    632,745Other long-term liabilities
    
    
    9,406
    
    
    
    2,334
    
    
    
    
    
    
    
    
    
    
    
    11,740Negative equity in subsidiaries
    
    
    234,481
    
    
    
    
    
    
    
    
    
    
    
    (234,481
    )
    
    
    Total liabilities
    
    
    (352,322
    )
    
    
    2,137,624
    
    
    
    123,574
    
    
    
    (234,481
    )
    
    
    1,674,395Non-controlling interest in perpetual
care trusts
    
    
    
    
    
    
    216,634
    
    
    
    
    
    
    
    
    
    
    
    216,634Common stock
    
    
    107,244
    
    
    
    426
    
    
    
    52
    
    
    
    (478
    )
    
    
    107,244Other
    
    
    339,523
    
    
    
    (234,907
    )
    
    
    15,981
    
    
    
    218,926
    
    
    
    339,523Accumulated other comprehensive loss
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )
    
    
    5
    
    
    
    (5
    )Total shareholders equity
    
    
    446,762
    
    
    
    (234,481
    )
    
    
    16,028
    
    
    
    218,453
    
    
    
    446,762Total liabilities and shareholders equity
    
    $
    94,440
    
    
    $
    2,119,777
    
    
    $
    139,602
    
    
    $
    (16,028
    )
    
    $
    2,337,791
 31




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes  (Continued)
 Condensed Consolidating Balance Sheets
 October 31, 2005Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    38,675
    
    
    $
    874
    
    
    $
    1,056
    
    
    $
    
    
    
    $
    40,605Marketable securities
    
    
    
    
    
    
    
    
    
    
    1,302
    
    
    
    
    
    
    
    1,302Receivables, net of allowances
    
    
    17,337
    
    
    
    56,381
    
    
    
    6,107
    
    
    
    
    
    
    
    79,825Inventories
    
    
    401
    
    
    
    26,194
    
    
    
    6,866
    
    
    
    
    
    
    
    33,461Prepaid expenses
    
    
    451
    
    
    
    2,278
    
    
    
    37
    
    
    
    
    
    
    
    2,766Deferred income taxes, net
    
    
    2,918
    
    
    
    8,060
    
    
    
    138
    
    
    
    
    
    
    
    11,116Assets held for sale
    
    
    
    
    
    
    
    
    
    
    603
    
    
    
    
    
    
    
    603Total current assets
    
    
    59,782
    
    
    
    93,787
    
    
    
    16,109
    
    
    
    
    
    
    
    169,678Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    49,384
    
    
    
    19,551
    
    
    
    
    
    
    
    68,935Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    492,247
    
    
    
    11,221
    
    
    
    
    
    
    
    503,468Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    239,027
    
    
    
    18,410
    
    
    
    
    
    
    
    257,437Goodwill
    
    
    
    
    
    
    252,942
    
    
    
    19,787
    
    
    
    
    
    
    
    272,729Cemetery property, at cost
    
    
    
    
    
    
    346,611
    
    
    
    20,165
    
    
    
    
    
    
    
    366,776Property and equipment, at cost
    
    
    35,078
    
    
    
    415,970
    
    
    
    35,817
    
    
    
    
    
    
    
    486,865Less accumulated depreciation
    
    
    19,744
    
    
    
    164,959
    
    
    
    11,038
    
    
    
    
    
    
    
    195,741Net property and equipment
    
    
    15,334
    
    
    
    251,011
    
    
    
    24,779
    
    
    
    
    
    
    
    291,124Deferred income taxes, net
    
    
    13,176
    
    
    
    160,918
    
    
    
    13,479
    
    
    
    
    
    
    
    187,573Cemetery perpetual care trust investments
    
    
    
    
    
    
    213,088
    
    
    
    
    
    
    
    
    
    
    
    213,088Other assets
    
    
    6,447
    
    
    
    13,061
    
    
    
    810
    
    
    
    
    
    
    
    20,318Equity in subsidiaries
    
    
    6,942
    
    
    
    5,353
    
    
    
    
    
    
    
    (12,295
    )
    
    
    Total assets
    
    $
    101,681
    
    
    $
    2,117,429
    
    
    $
    144,311
    
    
    $
    (12,295
    )
    
    $
    2,351,126LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    3,168
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,168Accounts payable
    
    
    513
    
    
    
    9,578
    
    
    
    667
    
    
    
    
    
    
    
    10,758Accrued expenses and other current
liabilities
    
    
    15,322
    
    
    
    45,356
    
    
    
    3,188
    
    
    
    
    
    
    
    63,866Liabilities associated with assets
held for sale
    
    
    
    
    
    
    
    
    
    
    374
    
    
    
    
    
    
    
    374Total current liabilities
    
    
    19,003
    
    
    
    54,934
    
    
    
    4,229
    
    
    
    
    
    
    
    78,166Long-term debt, less current maturities
    
    
    376,859
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    406,859Intercompany payables, net
    
    
    (992,609
    )
    
    
    968,998
    
    
    
    23,611
    
    
    
    
    
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    237,200
    
    
    
    46,890
    
    
    
    
    
    
    
    284,090Deferred preneed cemetery revenue
    
    
    
    
    
    
    265,225
    
    
    
    27,286
    
    
    
    
    
    
    
    292,511Non-controlling interest in funeral and
cemetery trusts
    
    
    
    
    
    
    626,841
    
    
    
    
    
    
    
    
    
    
    
    626,841Other long-term liabilities
    
    
    8,985
    
    
    
    2,457
    
    
    
    
    
    
    
    
    
    
    
    11,442Negative equity in subsidiaries
    
    
    249,990
    
    
    
    
    
    
    
    
    
    
    
    (249,990
    )
    
    
    Total liabilities
    
    
    (337,772
    )
    
    
    2,155,655
    
    
    
    132,016
    
    
    
    (249,990
    )
    
    
    1,699,909Non-controlling interest in perpetual
care trusts
    
    
    
    
    
    
    211,764
    
    
    
    
    
    
    
    
    
    
    
    211,764Common stock
    
    
    108,670
    
    
    
    426
    
    
    
    52
    
    
    
    (478
    )
    
    
    108,670Other
    
    
    330,786
    
    
    
    (250,416
    )
    
    
    12,246
    
    
    
    238,170
    
    
    
    330,786Accumulated other comprehensive loss
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    3
    
    
    
    (3
    )Total shareholders equity
    
    
    439,453
    
    
    
    (249,990
    )
    
    
    12,295
    
    
    
    237,695
    
    
    
    439,453Total liabilities and shareholders equity
    
    $
    101,681
    
    
    $
    2,117,429
    
    
    $
    144,311
    
    
    $
    (12,295
    )
    
    $
    2,351,126
 32




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes  (Continued)
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended April 30, 2006Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    15,349
    
    
    $
    30,631
    
    
    $
    5,077
    
    
    $
    
    
    
    $
    51,057Cash flows from investing activities:Proceeds from sale of assets, net
    
    
    
    
    
    
    19
    
    
    
    732
    
    
    
    
    
    
    
    751Insurance proceeds related to hurricane
damaged properties
    
    
    
    
    
    
    5,300
    
    
    
    
    
    
    
    
    
    
    
    5,300Additions to property and equipment
    
    
    (1,278
    )
    
    
    (8,417
    )
    
    
    (254
    )
    
    
    
    
    
    
    (9,949
    )Other
    
    
    
    
    
    
    37
    
    
    
    (18
    )
    
    
    
    
    
    
    19Net cash provided by (used in) investing
activities
    
    
    (1,278
    )
    
    
    (3,061
    )
    
    
    460
    
    
    
    
    
    
    
    (3,879
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (31,650
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,650
    )Intercompany receivables (payables)
    
    
    26,046
    
    
    
    (20,692
    )
    
    
    (5,354
    )
    
    
    
    
    
    
    Purchase and retirement of common
stock
    
    
    (8,141
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,141
    )Dividends
    
    
    (5,405
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,405
    )Other
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61Net cash used in financing activities
    
    
    (19,089
    )
    
    
    (20,692
    )
    
    
    (5,354
    )
    
    
    
    
    
    
    (45,135
    )Net increase (decrease) in cash
    
    
    (5,018
    )
    
    
    6,878
    
    
    
    183
    
    
    
    
    
    
    
    2,043Cash and cash equivalents, beginning of period
    
    
    38,675
    
    
    
    874
    
    
    
    1,056
    
    
    
    
    
    
    
    40,605Cash and cash equivalents, end of period
    
    $
    33,657
    
    
    $
    7,752
    
    
    $
    1,239
    
    
    $
    
    
    
    $
    42,648
 33




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes  (Continued)
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended April 30, 2005Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (10,701
    )
    
    $
    7,311
    
    
    $
    7,040
    
    
    $
    
    
    
    $
    3,650Cash flows from investing activities:Proceeds from sales of marketable
securities
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16Proceeds from sale of assets, net
    
    
    (205
    )
    
    
    5,915
    
    
    
    675
    
    
    
    
    
    
    
    6,385Additions to property and equipment
    
    
    (1,636
    )
    
    
    (7,988
    )
    
    
    (3,344
    )
    
    
    
    
    
    
    (12,968
    )Other
    
    
    
    
    
    
    (188
    )
    
    
    
    
    
    
    
    
    
    
    (188
    )Net cash used in investing activities
    
    
    (1,841
    )
    
    
    (2,245
    )
    
    
    (2,669
    )
    
    
    
    
    
    
    (6,755
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    440,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    440,000Repayments of long-term debt
    
    
    (438,341
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (438,341
    )Intercompany receivables (payables)
    
    
    13,951
    
    
    
    (9,998
    )
    
    
    (3,953
    )
    
    
    
    
    
    
    Debt issue costs
    
    
    (5,811
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,811
    )Issuance of common stock
    
    
    12,608
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,608Purchase and retirement of common
stock
    
    
    (5,681
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,681
    )Dividends
    
    
    (2,742
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,742
    )Other
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Net cash provided by (used in)
financing activities
    
    
    13,992
    
    
    
    (9,998
    )
    
    
    (3,953
    )
    
    
    
    
    
    
    41Net increase (decrease) in cash
    
    
    1,450
    
    
    
    (4,932
    )
    
    
    418
    
    
    
    
    
    
    
    (3,064
    )Cash and cash equivalents, beginning of
period
    
    
    13,553
    
    
    
    7,625
    
    
    
    336
    
    
    
    
    
    
    
    21,514Cash and cash equivalents, end of
period
    
    $
    15,003
    
    
    $
    2,693
    
    
    $
    754
    
    
    $
    
    
    
    $
    18,450
 34




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12) Discontinued Operations, Assets Held for Sale and Impairment Charges
    Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2006
    
    
    April 30, 2005
    
    
    April 30, 2006
    
    
    April 30, 2005Revenue:Funeral
    
    $
    2
    
    
    $
    265
    
    
    $
    56
    
    
    $
    707Cemetery
    
    
    
    
    
    
    208
    
    
    
    
    
    
    
    411$
    2
    
    
    $
    473
    
    
    $
    56
    
    
    $
    1,118Gross profit:Funeral
    
    $
    (54
    )
    
    $
    (112
    )
    
    $
    (59
    )
    
    $
    (183
    )Cemetery
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    146(54
    )
    
    
    (53
    )
    
    
    (59
    )
    
    
    (37
    )Gains on dispositions and
impairment (losses), net
    
    
    105
    
    
    
    (102
    )
    
    
    404
    
    
    
    504Other operating expense, net
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (2
    )Earnings (loss) from
discontinued operations
before income taxes
    
    $
    51
    
    
    $
    (161
    )
    
    $
    345
    
    
    $
    465
 (13) Separation Charges
  35




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (13) Separation Charges  (Continued)
  (14) Consolidated Comprehensive Income (Loss)
  Three Months Ended April 30,
    
    
    Six Months Ended April 30,2006
    
    2005
    
    
    2006
    
    2005Net earnings (loss)
    
    $
    11,447
    
    $
    (4,917
    )
    
    $
    19,836
    
    $
    (150,194
    )Other comprehensive income (loss):Unrealized depreciation of
investments, net of deferred tax
benefit of $1
    
    
    
    
    
    
    
    
    
    (2
    )
    
    Unrealized appreciation on derivative
instrument designated and qualifying
as a cash flow hedging instrument, net
of deferred tax expense of ($86) and
($204), respectively
    
    
    
    
    
    140
    
    
    
    
    
    
    333(Increase) reduction in net unrealized
losses associated with
available-for-sale securities of the
trusts
    
    
    (6,767
    )
    
    (19,732
    )
    
    
    22,331
    
    
    954Reclassification of the net unrealized
losses activity attributable to the
non-controlling interest holders
    
    
    6,767
    
    
    19,732
    
    
    
    (22,331
    )
    
    (954
    )Total other comprehensive income (loss)
    
    
    
    
    
    140
    
    
    
    (2
    )
    
    333Total comprehensive income (loss)
    
    $
    11,447
    
    $
    (4,777
    )
    
    $
    19,834
    
    $
    (149,861
    )
 (15) Guarantees
    36




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (15) Guarantees
 (Continued)
   (16) Related Party Transactions
      (17) Hurricane Related Charges
  37




---



##### 



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




---



##### 



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




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
         40




---



##### 



Other Matters
  Critical Accounting Policies
  Results of Operations
  41




---



##### 



Three Months Ended April 30, 2006 Compared to Three Months Ended April 30, 2005Continuing
Operations
 Funeral Operations
 Three Months EndedApril 30,2006
    
    
    2005
    
    
    Decrease(In millions)Funeral Revenue:Eastern Division
    
    $
    30.1
    
    
    $
    30.6
    
    
    $
    (.5
    )Western Division
    
    
    37.3
    
    
    
    38.4
    
    
    
    (1.1
    )Corporate Trust Management (1)
    
    
    4.6
    
    
    
    5.4
    
    
    
    (.8
    )Total Funeral Revenue
    
    $
    72.0
    
    
    $
    74.4
    
    
    $
    (2.4
    )Funeral Costs:Eastern Division
    
    $
    24.3
    
    
    $
    24.7
    
    
    $
    (.4
    )Western Division
    
    
    29.2
    
    
    
    29.4
    
    
    
    (.2
    )Corporate Trust Management (1)
    
    
    .1
    
    
    
    .2
    
    
    
    (.1
    )Total Funeral Costs
    
    $
    53.6
    
    
    $
    54.3
    
    
    $
    (.7
    )Funeral Gross Profit:Eastern Division
    
    $
    5.8
    
    
    $
    5.9
    
    
    $
    (.1
    )Western Division
    
    
    8.1
    
    
    
    9.0
    
    
    
    (.9
    )Corporate Trust Management (1)
    
    
    4.5
    
    
    
    5.2
    
    
    
    (.7
    )Total Funeral Gross Profit
    
    $
    18.4
    
    
    $
    20.1
    
    
    $
    (1.7
    )
 Same-Store
Analysis (2)
 Change in Average
    
    Change in Same-Store
    
    Cremation RateRevenue Per Call
    
    Funeral Services
    
    2006
    
    2005Eastern Division
    
    
    1.0
    %
    
    
    (1.9
    %)
    
    
    33.4
    %
    
    
    30.5
    %Western Division
    
    
    (1.0
    %)
    
    
    (.9
    %)
    
    
    42.4
    %
    
    
    41.2
    %Total
    
    
    (1.0
    %)
    
    
    (2.8
    %)
    
    
    38.6
    %
    
    
    36.7
    %
 
 (1)
    
    Corporate trust management consists of trust management fees and funeral
merchandise and service trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by us at rates consistent with
industry norms and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust
earnings represent earnings realized over the life of the preneed contracts delivered during
the relevant periods. See Notes 3 and 6 to the consolidated financial statements included
herein for information regarding the cost basis and market value of the trust assets and
current performance of the trusts (i.e., current realized gains and losses, interest income
and dividends). Trust management fees included in funeral revenue for the three months ended
April 30, 2006 and 2005 were $1.4 million and $1.5 million, respectively, and funeral trust
earnings for the three months ended April 30, 2006 and 2005 were $3.2 million and $3.9
million, respectively.(2)
    
    On August 29, 2005, Hurricane Katrina struck the New Orleans metropolitan area and
severely damaged three of our funeral homes located in that area, which is part of our Western
division. This same-store analysis includes these three funeral homes which had funeral
revenue of $2.1 million and $2.6 million for the three months ended April 30, 2006 and 2005,
respectively, and performed 425 and 563 funeral services in the second quarter of 2006 and
2005, respectively. Excluding these three funeral homes, the decrease in average revenue per
call for the Western division and the Company was 1.2 percent, and the change in same-store
funeral services for the Western division and the Company was a 0.6 percent increase and a 2.0
percent decrease, respectively.
 Consolidated Operations  Funeral
  42




---



##### 



Segment Discussion  Funeral
   Cemetery Operations
 Three Months EndedApril 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)(In millions)Cemetery Revenue:Eastern Division
    
    $
    34.6
    
    
    $
    34.4
    
    
    $
    .2Western Division
    
    
    21.8
    
    
    
    20.4
    
    
    
    1.4Corporate Trust Management (1)
    
    
    2.6
    
    
    
    3.0
    
    
    
    (.4
    )Total Cemetery Revenue
    
    $
    59.0
    
    
    $
    57.8
    
    
    $
    1.2Cemetery Costs:Eastern Division
    
    $
    28.2
    
    
    $
    28.5
    
    
    $
    (.3
    )Western Division
    
    
    17.2
    
    
    
    16.1
    
    
    
    1.1Corporate Trust Management (1)
    
    
    .1
    
    
    
    .1
    
    
    
    Total Cemetery Costs
    
    $
    45.5
    
    
    $
    44.7
    
    
    $
    .8Cemetery Gross Profit:Eastern Division
    
    $
    6.4
    
    
    $
    5.9
    
    
    $
    .5Western Division
    
    
    4.6
    
    
    
    4.3
    
    
    
    .3Corporate Trust Management (1)
    
    
    2.5
    
    
    
    2.9
    
    
    
    (.4
    )Total Cemetery Gross Profit
    
    $
    13.5
    
    
    $
    13.1
    
    
    $
    .4
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and service trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are
 43




---



##### 



established by us at rates consistent with
industry norms and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust
earnings represent earnings realized over the life of the preneed contracts delivered during
the relevant periods. See Notes 4 and 6 to the consolidated financial statements included
herein for information regarding the cost basis and market value of the trust assets and
current performance of the trusts (i.e., current realized gains and
losses, interest income and dividends). Trust management fees included in cemetery revenue for
the three months ended April 30, 2006 and 2005 were $1.2 million, and cemetery trust earnings
for the three months ended April 30, 2006 and 2005 were $1.4 million and $1.8 million,
respectively. Perpetual care trust earnings are included in the revenues and gross profit of
the related geographic segment.
 Consolidated Operations  Cemetery
    Segment Discussion  Cemetery
   Discontinued Operations
  44




---



##### 



Other
         Preneed Sales into and Deliveries out of the Backlog
   45




---



##### 



Six Months Ended April 30, 2006 Compared to Six Months Ended April 30, 2005Continuing Operations
 Funeral Operations
 Six Months EndedApril 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)(In millions)Funeral Revenue:Eastern Division
    
    $
    60.3
    
    
    $
    60.0
    
    
    $
    .3Western Division
    
    
    74.2
    
    
    
    74.1
    
    
    
    .1Corporate Trust Management (1)
    
    
    9.2
    
    
    
    9.9
    
    
    
    (.7
    )Total Funeral Revenue
    
    $
    143.7
    
    
    $
    144.0
    
    
    $
    (.3
    )Funeral Costs:Eastern Division
    
    $
    48.8
    
    
    $
    48.3
    
    
    $
    .5Western Division
    
    
    58.4
    
    
    
    57.5
    
    
    
    .9Corporate Trust Management (1)
    
    
    .3
    
    
    
    .3
    
    
    
    Total Funeral Costs
    
    $
    107.5
    
    
    $
    106.1
    
    
    $
    1.4Funeral Gross Profit:Eastern Division
    
    $
    11.5
    
    
    $
    11.7
    
    
    $
    (.2
    )Western Division
    
    
    15.8
    
    
    
    16.6
    
    
    
    (.8
    )Corporate Trust Management (1)
    
    
    8.9
    
    
    
    9.6
    
    
    
    (.7
    )Total Funeral Gross Profit
    
    $
    36.2
    
    
    $
    37.9
    
    
    $
    (1.7
    )
 Same-Store
Analysis (2)
 Change in Average
    
    Change in Same-Store
    
    Cremation RateRevenue Per Call
    
    Funeral Services
    
    2006
    
    2005Eastern Division
    
    
    1.3
    %
    
    
    (.4
    %)
    
    
    33.0
    %
    
    
    29.9
    %Western Division
    
    
    
    %
    
    
    1.1
    %
    
    
    42.8
    %
    
    
    42.0
    %Total
    
    
    
    %
    
    
    (.2
    %)
    
    
    38.6
    %
    
    
    36.8
    %
 
 (1)
    
    Corporate trust management consists of trust management fees and funeral
merchandise and service trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by us at rates consistent with
industry norms and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust
earnings represent earnings realized over the life of the preneed contracts delivered during
the relevant periods. See Notes 3 and 6 to the consolidated financial statements included
herein for information regarding the cost basis and market value of the trust assets and
current performance of the trusts (i.e., current realized gains and losses, interest income
and dividends). Trust management fees included in funeral revenue for the six months ended
April 30, 2006 and 2005 were $2.7 million, and funeral trust earnings for the six months ended
April 30, 2006 and 2005 were $6.5 million and $7.2 million, respectively.(2)
    
    On August 29, 2005, Hurricane Katrina struck the New Orleans metropolitan area and
severely damaged three of our funeral homes located in that area, which is part of our Western
division. This same-store analysis includes these three funeral homes which had funeral
revenue of $3.6 million and $4.8 million for the six months ended April 30, 2006 and 2005,
respectively, and performed 784 and 1,039 funeral services in the first half of 2006 and 2005,
respectively. Excluding these three funeral homes, the increase in average revenue per call
for the Western division and the Company was 0.3 percent and 0.1 percent, respectively, and
the increase in same-store funeral services for the Western division and the Company was 2.6
percent and 0.8 percent, respectively.
 46




---



##### 



Consolidated Operations  Funeral
    Segment Discussion  Funeral
   47




---



##### 



Cemetery Operations
 Six Months EndedApril 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)(In millions)Cemetery Revenue:Eastern Division
    
    $
    67.1
    
    
    $
    64.4
    
    
    $
    2.7Western Division
    
    
    41.2
    
    
    
    40.2
    
    
    
    1.0Corporate Trust Management (1)
    
    
    5.2
    
    
    
    5.7
    
    
    
    (.5
    )Total Cemetery Revenue
    
    $
    113.5
    
    
    $
    110.3
    
    
    $
    3.2Cemetery Costs:Eastern Division
    
    $
    55.6
    
    
    $
    55.2
    
    
    $
    .4Western Division
    
    
    32.9
    
    
    
    32.3
    
    
    
    .6Corporate Trust Management (1)
    
    
    .2
    
    
    
    .3
    
    
    
    (.1
    )Total Cemetery Costs
    
    $
    88.7
    
    
    $
    87.8
    
    
    $
    0.9Cemetery Gross Profit:Eastern Division
    
    $
    11.5
    
    
    $
    9.2
    
    
    $
    2.3Western Division
    
    
    8.3
    
    
    
    7.9
    
    
    
    .4Corporate Trust Management (1)
    
    
    5.0
    
    
    
    5.4
    
    
    
    (.4
    )Total Cemetery Gross Profit
    
    $
    24.8
    
    
    $
    22.5
    
    
    $
    2.3
 
 (1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and service trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by us at rates consistent with
industry norms and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust
earnings represent earnings realized over the life of the preneed contracts delivered during
the relevant periods. See Notes 4 and 6 to the consolidated financial statements included
herein for information regarding the cost basis and market value of the trust assets and
current performance of the trusts (i.e., current realized gains and losses, interest income
and dividends). Trust management fees included in cemetery revenue for the six months ended
April 30, 2006 and 2005 were $2.4 million and $2.5 million, respectively, and cemetery trust
earnings for the six months ended April 30, 2006 and 2005 were $2.8 million and $3.2 million,
respectively. Perpetual care trust earnings are included in the revenues and gross profit of
the related geographic segment.
 Consolidated Operations  Cemetery
    Segment Discussion  Cemetery
  48




---



##### 



Discontinued Operations
  Other
        49




---



##### 



Preneed Sales into and Deliveries out of the Backlog
   Liquidity and Capital Resources
 Cash Flow
   50




---



##### 



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)
    
    $
    378.4
    
    
    $
    3.1
    
    
    $
    4.8
    
    
    $
    45.5
    
    
    $
    325.0Interest on long-term debt (2)
    
    
    152.6
    
    
    
    25.4
    
    
    
    48.6
    
    
    
    47.8
    
    
    
    30.8Operating lease obligations (3)
    
    
    32.7
    
    
    
    2.4
    
    
    
    6.9
    
    
    
    4.9
    
    
    
    18.5Non-competition and other agreements (4)
    
    
    5.2
    
    
    
    1.3
    
    
    
    3.0
    
    
    
    .6
    
    
    
    .3$
    568.9
    
    
    $
    32.2
    
    
    $
    63.3
    
    
    $
    98.8
    
    
    $
    374.6
 
 (1)
    
    See below for a breakdown of our future scheduled principal payments and maturities
of our long-term debt by type as of April 30, 2006.(2)
    
    Includes contractual interest payments for our revolving credit facility, Term Loan
B, senior notes and third-party debt. The interest on the revolving credit facility and Term
Loan B was calculated based on interest rates in effect as of April 30, 2006.(3)
    
    Our noncancellable operating leases are primarily for land and buildings and expire
over the next one to 13 years, except for six leases that expire between 2032 and 2039. Our
future minimum lease payments as of April 30, 2006 are $2.4 million, $3.8 million, $3.1
million, $2.7 million, $2.2 million, and $18.5 million for the years ending October 31, 2006,
2007, 2008, 2009, 2010 and later years, respectively.(4)
    
    We have entered into non-competition agreements with prior owners and key employees
of acquired subsidiaries that expire through 2012. This category also includes separation pay
related to former executive officers.
   51




---



##### 



Other, PrincipallyRevolving
    
    
    
    
    
    
    
    
    
    
    Seller FinancingFiscal Year Ending
    
    Credit
    
    
    Term
    
    
    Senior
    
    
    of AcquiredOctober 31,
    
    Facility
    
    
    Loan B
    
    
    Notes
    
    
    Operations
    
    
    Total2006
    
    $
    
    
    
    $
    1.1
    
    
    $
    
    
    
    $
    .5
    
    
    $
    1.62007
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    .6
    
    
    
    2.82008
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    .2
    
    
    
    2.42009
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    2.22010
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    2.2Thereafter
    
    
    
    
    
    
    167.1
    
    
    
    200.0
    
    
    
    .1
    
    
    
    367.2Total long-term debt
    
    $
    
    
    
    $
    177.0
    
    
    $
    200.0
    
    
    $
    1.4
    
    
    $
    378.4
      Off-Balance Sheet Arrangements
  (1)
    
    the $41.1 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 21 to the consolidated financial
statements in our 2005 Form 10-K; and(2)
    
    the insurance-funded preneed funeral contracts, which will be funded by life
insurance or annuity contracts issued by third-party insurers, are not reflected in our
consolidated balance sheets, and are discussed in Note 3(i) to the consolidated
financial statements in our 2005 Form 10-K.
 52




---



##### 



Ratio of Earnings to Fixed Charges
  Six MonthsEnded
    Years Ended October 31,April 30, 2006
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001(Restated)
    
    (Restated)
    
    (Restated)
    
    (Restated)2.92(1)
    
    1.36(2)(6)
    
    1.98(3)
    
    1.08(4)
    
    1.27(5)(6)
    
     (6)(7)
 
 (1)
    
    Pretax earnings for the six months ended April 30, 2006 include $2.1 million in net
hurricane related charges, $0.2 million of gains on dispositions and impairment (losses), net
and $0.3 million in separation charges.(2)
    
    Pretax earnings for fiscal year 2005 include a charge of $9.4 million for expenses
related to Hurricane Katrina, a charge of $1.5 million for separation charges related to the
July 2005 restructuring of our divisions, $1.3 million of gains on dispositions and impairment
(losses), net and $32.8 million for the loss on early extinguishment of debt related to the
2005 debt refinancings.(3)
    
    Pretax earnings for fiscal year 2004 includes separation charges of $3.4
million for costs related to workforce reductions and separation pay to a former executive
officer and ($0.2) million in gains on dispositions and impairment (losses), net.(4)
    
    Pretax earnings for fiscal year 2003 include a charge of $11.3 million for the loss
on early extinguishment of debt in connection with redemption of the ROARS, a noncash charge
of $10.2 million for long-lived asset impairment and a charge of $2.5 million for separation
payments to former executive officers.(5)
    
    Pretax earnings for fiscal year 2002 include a noncash charge of $18.5 million in
connection with the write-down of assets held for sale.(6)
    
    Excludes the cumulative effect of change in accounting principles.(7)
    
    Pretax earnings for fiscal year 2001 include a noncash charge of $269.2 million in
connection with the write-down of assets held for sale and other charges and a $9.1 million
charge for the loss on early extinguishment of debt. As a result of these charges, our
earnings for fiscal year 2001 were insufficient to cover our fixed charges, and an additional
$229.9 million in pretax earnings would have been required to eliminate the coverage
deficiency.
  Recent Accounting Standards
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  53




---



##### 



1.
    
    The Company did not maintain effective controls over revenue recognition related to
preneed cemetery merchandise and services contracts. Specifically, the Company did not
maintain effective controls over the reconciliation of recorded revenues to revenues based
on physical delivery of preneed cemetery merchandise to ensure completeness and accuracy of
recorded preneed cemetery merchandise revenue and deferred preneed cemetery revenue. This
control deficiency resulted in the restatement of the Companys consolidated financial
statements for all annual and interim periods beginning with fiscal year 2001, the period
in which the Company adopted Staff Accounting Bulletin No. 101 (SAB 101) Revenue
Recognition in Financial Statements, through fiscal year 2004 and the first three quarters
of fiscal year 2005. Prior to the adoption of SAB 101, the Company recognized preneed
cemetery merchandise revenues at the time a contract was entered into with a customer. This
control deficiency could result in the misstatement of cemetery merchandise revenues and of
deferred preneed cemetery revenues that would result in a material misstatement to annual
or interim financial statements that would not be prevented or detected. Accordingly,
management determined that this control deficiency represents a material weakness.2
    
    The Company did not maintain effective controls over recognition of realized trust
earnings on preneed cemetery and funeral contracts. Specifically, the Company did not
maintain effective controls to recognize realized net trust earnings upon the delivery of
the related preneed cemetery and funeral merchandise and performance of preneed funeral
services to ensure accuracy of recorded realized trust earnings and deferred trust
earnings. This control deficiency resulted in the restatement of the Companys consolidated
financial statements for all annual and interim periods from fiscal year 2001 through
fiscal year 2004 and the first three quarters of fiscal year 2005. This control deficiency
could result in the misstatement of cemetery and funeral revenues and of the deferred
revenue associated with preneed cemetery and preneed funeral contracts sold on a preneed
basis that would result in a material misstatement to annual or interim financial
statements that would not be prevented or detected. Accordingly management determined that
this control deficiency represents a material weakness.
  Plan for Remediation
  54




---



##### 



Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  Issuer Purchases of Equity Securities
 Total number of
    
    
    Maximum approximateshares purchased
    
    
    dollar value of sharesTotal number
    
    
    
    
    
    
    as part of
    
    
    that may yet beof shares
    
    
    Average price
    
    
    publicly-announced
    
    
    purchased under thePeriod
    
    purchased
    
    
    paid per share
    
    
    plans or programs(1)
    
    
    plans or programsFebruary 1,
2006 through
February 28, 2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    22,032,533March 1, 2006
through March 31,
2006
    
    
    970,000
    
    
    $
    5.60
    
    
    
    970,000
    
    
    $
    16,602,714April 1, 2006
through April 30,
2006
    
    
    531,500
    
    
    $
    5.83
    
    
    
    531,500
    
    
    $
    13,502,869Total
    
    
    1,501,500
    
    
    $
    5.68
    
    
    
    1,501,500
    
    
    $
    13,502,869
 55




---



##### 



(1)
    
    On March 28, 2005, we announced a new stock repurchase program, authorizing the
investment of up to $30.0 million in the repurchase of our common stock. Repurchases under the
new program will be limited to our Class A common stock, and will be made in the open market
or in privately negotiated transactions at such times and in such amounts as management deems
appropriate, depending upon market conditions and other factors.
 
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 6. Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
April 20, 20063.2
    
    By-laws of the Company, as amended and restated as of April 20, 20064.1
    
    See Exhibits 3.1 and 3.2 for provisions of the Companys Amended and Restated Articles of
Incorporation, as amended, and By-laws, as amended, defining the rights of holders of Class A
and Class B common stock4.2
    
    Specimen of Class A common stock certificate (incorporated by reference to Exhibit 4.2 to
Amendment No. 3 to the Companys Registration Statement on Form S-1 (Registration No.
33-42336) filed with the Commission on October 7, 1991)4.3
    
    Rights Agreement, dated as of October 28, 1999, between Stewart Enterprises, Inc. and
ChaseMellon Shareholder Services, L.L.C. as Rights Agent (incorporated by reference to Exhibit
1 to the Companys Form 8-A dated November 3, 1999)4.4
    
    Amended and Restated Credit Agreement dated November 19, 2004 by and among the Company,
Empresas Stewart-Cementerios and Empresas Stewart-Funerarias, as Borrowers, Bank of America,
N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer and The
Other Lenders party hereto (incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K dated November 22, 2004)4.5
    
    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 dated February 11, 2005)4.6
    
    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 dated February 11, 2005)4.7
    
    Registration Rights Agreement, dated as of February 11, 2005, by and among Stewart
Enterprises, Inc., the guarantors party thereto, and Banc of America Securities LLC, Bear,
Stearns & Co. Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Calyon Securities
(USA) Inc. and SunTrust Capital Markets, Inc. (incorporated by reference to Exhibit 10.1 to
the Companys Current Report on Form 8-K dated February 11, 2005)
 56




---



##### 



10.1
    
    Retirement Agreement by and between the Company and Kenneth C. Budde dated June 6, 2006
(incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated
June 6, 2006)10.2
    
    Amendment No. 10 to the Stewart Enterprises Employees Retirement Trust31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Kenneth C. Budde,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen,
Executive Vice President and Chief Financial Officer32
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of Kenneth C. Budde,
President and Chief Executive Officer, and Thomas M. Kitchen, Executive Vice President and
Chief Financial Officer
 57




---



##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.June 9, 2006
    /s/ THOMAS M. KITCHENThomas M. KitchenExecutive Vice President and
Chief Financial OfficerJune 9, 2006
    /s/ MICHAEL G. HYMELMichael G. HymelVice President
Corporate Controller
Chief Accounting Officer 58




---



##### 



Exhibit Index
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated April
20, 20063.2
    
    By-laws of the Company, as amended and restated as of April 20, 200610.2
    
    Amendment No. 10 to the Stewart Enterprises Employees Retirement Trust31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Kenneth C. Budde,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen,
Executive Vice President and Chief Financial Officer32
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of Kenneth C. Budde,
President and Chief Executive Officer, and Thomas M. Kitchen, Executive Vice President and
Chief Financial Officer
 59