##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended January 31, 2009
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 
 Commission File Number: 1-15449
 
 STEWART ENTERPRISES, INC.
  LOUISIANA
    
    72-0693290(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)1333 South Clearview ParkwayJefferson, Louisiana
    
    70121(Address of principal executive offices)
    
    (Zip Code)
 
 Registrants telephone number, including area code: (504) 729-1400
 
 þ o
  Large accelerated filer þ   
    Accelerated filer o
    Non-accelerated filer o
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 INDEX
 PagePart I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings 
Three Months Ended January 31, 2009 and 2008
    
    
    3Condensed Consolidated Balance Sheets 
January 31, 2009 and October 31, 2008
    
    
    4Condensed Consolidated Statement of Shareholders Equity 
Three Months Ended January 31, 2009
    
    
    6Condensed Consolidated Statements of Cash Flows 
Three Months Ended January 31, 2009 and 2008
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    35Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    45Item 4. Controls and Procedures
    
    
    45Part II. Other InformationItem 1. Legal Proceedings
    
    
    46Item 1A. Risk Factors
    
    
    46Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 6. Exhibits
    
    
    46Signatures
    
    
    48EX-10.1EX-10.2EX-10.3EX-31.1EX-31.2EX-32.1
  2




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended January 31,2009
    
    
    2008Revenues:Funeral
    
    $
    71,750
    
    
    $
    73,449Cemetery
    
    
    47,580
    
    
    
    56,824119,330
    
    
    
    130,273Costs and expenses:Funeral
    
    
    53,495
    
    
    
    55,447Cemetery
    
    
    42,752
    
    
    
    47,75696,247
    
    
    
    103,203Gross profit
    
    
    23,083
    
    
    
    27,070Corporate general and administrative expenses
    
    
    (7,506
    )
    
    
    (8,235
    )Hurricane related recoveries (charges), net
    
    
    (315
    )
    
    
    159Gains on dispositions and impairment (losses), net
    
    
    (63
    )
    
    
    147Other operating income, net
    
    
    259
    
    
    
    242Operating earnings
    
    
    15,458
    
    
    
    19,383Interest expense
    
    
    (5,910
    )
    
    
    (5,888
    )Investment and other income, net
    
    
    41
    
    
    
    720Earnings before income taxes
    
    
    9,589
    
    
    
    14,215Income taxes
    
    
    3,873
    
    
    
    5,330Net earnings
    
    $
    5,716
    
    
    $
    8,885Net earnings per common share:Basic
    
    $
    .06
    
    
    $
    .09Diluted
    
    $
    .06
    
    
    $
    .09Weighted average common shares outstanding (in thousands):Basic
    
    
    91,824
    
    
    
    96,784Diluted
    
    
    91,896
    
    
    
    97,019Dividends declared per common share
    
    $
    .025
    
    
    $
    .025
  3




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 January 31, 2009
    
    
    October 31, 2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    71,495
    
    
    $
    72,574Marketable securities
    
    
    61
    
    
    
    55Receivables, net of allowances
    
    
    58,299
    
    
    
    59,129Inventories
    
    
    36,806
    
    
    
    35,870Prepaid expenses
    
    
    12,367
    
    
    
    7,317Deferred income taxes, net
    
    
    8,050
    
    
    
    8,798Total current assets
    
    
    187,078
    
    
    
    183,743Receivables due beyond one year, net of allowances
    
    
    67,020
    
    
    
    70,671Preneed funeral receivables and trust investments
    
    
    338,740
    
    
    
    368,412Preneed cemetery receivables and trust investments
    
    
    170,049
    
    
    
    182,141Goodwill
    
    
    247,236
    
    
    
    247,236Cemetery property, at cost
    
    
    384,376
    
    
    
    375,832Property and equipment, at cost:Land
    
    
    42,343
    
    
    
    42,343Buildings
    
    
    321,446
    
    
    
    319,839Equipment and other
    
    
    181,160
    
    
    
    178,589544,949
    
    
    
    540,771Less accumulated depreciation
    
    
    242,563
    
    
    
    236,243Net property and equipment
    
    
    302,386
    
    
    
    304,528Deferred income taxes, net
    
    
    180,528
    
    
    
    179,515Cemetery perpetual care trust investments
    
    
    167,889
    
    
    
    173,090Non-current assets held for sale
    
    
    2,873
    
    
    
    2,873Other assets
    
    
    15,746
    
    
    
    16,474Total assets
    
    $
    2,063,921
    
    
    $
    2,104,515
  4




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 January 31, 2009
    
    
    October 31, 2008LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    12
    
    
    $
    20Accounts payable
    
    
    25,209
    
    
    
    27,652Accrued payroll and other benefits
    
    
    12,081
    
    
    
    14,133Accrued insurance
    
    
    21,129
    
    
    
    21,287Accrued interest
    
    
    6,294
    
    
    
    5,864Estimated obligation to fund cemetery perpetual care trust
    
    
    12,163
    
    
    
    13,281Other current liabilities
    
    
    11,291
    
    
    
    16,198Income taxes payable
    
    
    4,713
    
    
    
    2,061Total current liabilities
    
    
    92,892
    
    
    
    100,496Long-term debt, less current maturities
    
    
    450,094
    
    
    
    450,095Deferred preneed funeral revenue
    
    
    243,128
    
    
    
    245,182Deferred preneed cemetery revenue
    
    
    281,660
    
    
    
    275,835Deferred preneed funeral and cemetery receipts held in trust
    
    
    437,585
    
    
    
    475,420Perpetual care trusts corpus
    
    
    166,675
    
    
    
    171,371Other long-term liabilities
    
    
    21,959
    
    
    
    20,479Total liabilities
    
    
    1,693,993
    
    
    
    1,738,878Commitments and contingenciesShareholders equity:Preferred stock, $1.00 par value, 5,000,000 shares authorized;
no shares issued
    
    
    
    
    
    
    Common stock, $1.00 stated value:Class A authorized 200,000,000 shares; issued and
outstanding 89,164,401 and 88,693,127 shares at January
31, 2009 and October 31, 2008, respectively
    
    
    89,164
    
    
    
    88,693Class B authorized 5,000,000 shares; issued and
outstanding 3,555,020 shares at January 31, 2009 and
October 31, 2008; 10 votes per share convertible into
an equal number of Class A shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    535,003
    
    
    
    536,902Accumulated deficit
    
    
    (257,834
    )
    
    
    (263,550
    )Accumulated other comprehensive income:Unrealized appreciation of investments
    
    
    40
    
    
    
    37Total accumulated other comprehensive income
    
    
    40
    
    
    
    37Total shareholders equity
    
    
    369,928
    
    
    
    365,637Total liabilities and shareholders equity
    
    $
    2,063,921
    
    
    $
    2,104,515
  5




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
(Dollars in thousands, except per share amounts)
 Additional
    
    
    
    
    
    
    Unrealized
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Accumulated
    
    
    Appreciation
    
    
    ShareholdersStock(1)
    
    
    Capital
    
    
    Deficit
    
    
    of Investments
    
    
    EquityBalance October 31, 2008
    
    $
    92,248
    
    
    $
    536,902
    
    
    $
    (263,550
    )
    
    $
    37
    
    
    $
    365,637Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    5,716
    
    
    
    
    
    
    
    5,716Other comprehensive income:Unrealized appreciation
of investments, net of
deferred tax expense of
($2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3Total other comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    5,716
    
    
    
    3
    
    
    
    5,719Restricted stock activity
    
    
    348
    
    
    
    (193
    )
    
    
    
    
    
    
    
    
    
    
    155Issuance of common stock
    
    
    123
    
    
    
    265
    
    
    
    
    
    
    
    
    
    
    
    388Stock option expense
    
    
    
    
    
    
    324
    
    
    
    
    
    
    
    
    
    
    
    324Tax benefit associated
with stock activity
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    23Dividends ($.025 per share)
    
    
    
    
    
    
    (2,318
    )
    
    
    
    
    
    
    
    
    
    
    (2,318
    )Balance January 31, 2009
    
    $
    92,719
    
    
    $
    535,003
    
    
    $
    (257,834
    )
    
    $
    40
    
    
    $
    369,928
 
 (1)
    
    Amount includes 89,164 and 88,693 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of January 31, 2009 and October 31, 2008,
respectively, and includes 3,555 shares (in thousands) of Class B common stock.  6




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended January 31,2009
    
    
    2008Cash flows from operating activities:Net earnings
    
    $
    5,716
    
    
    $
    8,885Adjustments to reconcile net earnings to net cash provided by operating activities:(Gains) on dispositions and impairment losses, net
    
    
    63
    
    
    
    (147
    )Depreciation and amortization
    
    
    7,394
    
    
    
    6,962Provision for doubtful accounts
    
    
    2,215
    
    
    
    2,093Share-based compensation
    
    
    802
    
    
    
    1,198Excess tax benefits from share-based payment arrangements
    
    
    
    
    
    
    (165
    )Provision (benefit) for deferred income taxes
    
    
    (215
    )
    
    
    1,866Estimated obligation to fund cemetery perpetual care trust
    
    
    88
    
    
    
    Other
    
    
    66
    
    
    
    104Changes in assets and liabilities:(Increase) decrease in receivables
    
    
    2,993
    
    
    
    (2,030
    )Increase in prepaid expenses
    
    
    (5,050
    )
    
    
    (4,963
    )Increase in inventories and cemetery property
    
    
    (1,043
    )
    
    
    (2,576
    )Decrease in accounts payable and accrued expenses
    
    
    (7,629
    )
    
    
    (6,208
    )Net effect of preneed funeral production and maturities:Decrease in preneed funeral receivables and trust investments
    
    
    3,910
    
    
    
    2,758Decrease in deferred preneed funeral revenue
    
    
    (2,054
    )
    
    
    (2,329
    )Decrease in deferred preneed funeral receipts held in trust
    
    
    (1,996
    )
    
    
    (1,856
    )Net effect of preneed cemetery production and deliveries:Decrease in preneed cemetery receivables and trust investments
    
    
    1,934
    
    
    
    2,461Increase (decrease) in deferred preneed cemetery revenue
    
    
    (1,645
    )
    
    
    351Increase (decrease) in deferred preneed cemetery receipts held in trust
    
    
    81
    
    
    
    (1,919
    )Increase (decrease) in other
    
    
    1,654
    
    
    
    (387
    )Net cash provided by operating activities
    
    
    7,284
    
    
    
    4,098Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    
    
    
    
    4,984Purchases of marketable securities
    
    
    
    
    
    
    (19,802
    )Proceeds from sale of assets
    
    
    292
    
    
    
    338Purchase of subsidiaries and other investments, net of cash acquired
    
    
    (1,623
    )
    
    
    Additions to property and equipment
    
    
    (4,789
    )
    
    
    (7,056
    )Other
    
    
    1
    
    
    
    10Net cash used in investing activities
    
    
    (6,119
    )
    
    
    (21,526
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (9
    )
    
    
    (77
    )Issuance of common stock
    
    
    83
    
    
    
    1,380Purchase and retirement of common stock
    
    
    
    
    
    
    (22,807
    )Dividends
    
    
    (2,318
    )
    
    
    (2,403
    )Excess tax benefits from share-based payment arrangements
    
    
    
    
    
    
    165Net cash used in financing activities
    
    
    (2,244
    )
    
    
    (23,742
    )Net decrease in cash
    
    
    (1,079
    )
    
    
    (41,170
    )Cash and cash equivalents, beginning of period
    
    
    72,574
    
    
    
    71,545Cash and cash equivalents, end of period
    
    $
    71,495
    
    
    $
    30,375Supplemental cash flow information:Cash paid during the period for:Income taxes, net
    
    $
    874
    
    
    $
    3,262Interest
    
    $
    5,125
    
    
    $
    4,982Non-cash investing and financing activities:Issuance of common stock to executive officers and directors
    
    $
    305
    
    
    $
    921Issuance of restricted stock, net of forfeitures
    
    $
    312
    
    
    $
    304
  7




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##### Table of Contents



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




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1)
    
    Basis of Presentation(Continued)
   Number ofShares
    
    Exercise PriceGrant Type
    
    Granted
    
    per Share
    
    Vesting Period
    
    Vesting ConditionStock options
    
    
    586,750
    
    
    $
    2.65
    
    
    Equal one-fourth
portions over 4
years
    
    Service conditionStock options
    
    
    390,000
    
    
    $
    3.09
    
    
    Equal one-fourth
portions over 4
years
    
    Service conditionRestricted stock
    
    
    102,000
    
    
    $
    2.65
    
    
    Equal one-third
portions over 3
years
    
    Market conditionRestricted stock
    
    
    195,000
    
    
    $
    3.09
    
    
    Equal one-third
portions over 3
years
    
    Market conditionRestricted stock
    
    
    56,000
    
    
    $
    3.09
    
    
    Equal one-third
portions over 3
years
    
    Service condition
  (f)
    
    Reclassifications
   9




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1)
    
    Basis of Presentation(Continued)
  (2)
    
    New Accounting Principles
  
    
    Level 1inputs to the valuation methodology are quoted prices (unadjusted) for identical
assets or liabilities in active markets;
    
    Level 2inputs to the valuation methodology include quoted prices for similar assets or
liabilities in active markets, and inputs that are observable for the asset or liability,
either directly or indirectly, for substantially the full term of the financial instrument;
quoted prices for identical or similar assets or liabilities in markets that are not
active; inputs other than quoted prices that are observable; inputs that are derived
principally from or corroborated by observable market data by correlation or other means;
and
    
    Level 3inputs to the valuation methodology are unobservable and significant to the fair
value measurement.
   10




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##### Table of Contents



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




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2)
    
    New Accounting Principles(Continued)
   (3)
    
    Preneed Funeral Activities
  Preneed Funeral Receivables and Trust Investments
  January 31,
    
    
    October 31,2009
    
    
    2008Trust assets
    
    $
    307,946
    
    
    $
    336,782Receivables from customers
    
    
    42,376
    
    
    
    44,796350,322
    
    
    
    381,578Allowance for cancellations
    
    
    (11,582
    )
    
    
    (13,166
    )Preneed funeral receivables and trust investments
    
    $
    338,740
    
    
    $
    368,412
  12




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3)
    
    Preneed Funeral Activities(Continued)
 January 31, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    36,513
    
    
    $
    
    
    
    $
    
    
    
    $
    36,513U.S. Government, agencies and
municipalities
    
    
    9,685
    
    
    
    345
    
    
    
    (1
    )
    
    
    10,029Corporate bonds
    
    
    55,970
    
    
    
    533
    
    
    
    (6,372
    )
    
    
    50,131Preferred stocks
    
    
    63,933
    
    
    
    25
    
    
    
    (21,623
    )
    
    
    42,335Common stocks
    
    
    267,827
    
    
    
    1,119
    
    
    
    (139,846
    )
    
    
    129,100Mutual funds
    
    
    35,229
    
    
    
    2
    
    
    
    (13,880
    )
    
    
    21,351Insurance contracts and other long-
term investments
    
    
    19,127
    
    
    
    1
    
    
    
    (1,773
    )
    
    
    17,355Trust investments
    
    $
    488,284
    
    
    $
    2,025
    
    
    $
    (183,495
    )
    
    
    306,814Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62.8
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,132Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    307,946
  January 31, 2009Due in one year or less
    
    $
    7,003Due in one to five years
    
    
    27,460Due in five to ten years
    
    
    25,667Thereafter
    
    
    30$
    60,160
    13




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3)
    
    Preneed Funeral Activities(Continued)
  January 31, 2009SignificantQuoted Market
    
    Other
    
    SignificantPrices in Active
    
    Observable
    
    UnobservableMarkets
    
    Inputs
    
    Inputs
    
    Fair Market(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    ValueTrust investments
    
    $
    195,247
    
    
    $
    102,497
    
    
    $
    9,070
    
    
    $
    306,814
  Fair market value, November 1, 2008
    
    $
    11,299Total unrealized losses included in other comprehensive income (1)
    
    
    (1,714
    )Purchases, sales, contributions, and distributions, net
    
    
    (515
    )Fair market value, January 31, 2009
    
    $
    9,070
 
 (1)
    
    All gains (losses) recognized in other comprehensive income for funeral trust
investments are attributable to the Companys preneed customers and are offset by a
corresponding increase (decrease) in deferred preneed funeral receipts held in trust.  Three Months Ended January 31,2009
    
    2008Purchases
    
    $
    641
    
    
    $
    6,386Sales
    
    
    4,616
    
    
    
    9,620Realized gains from sales of investments
    
    
    508
    
    
    
    893Realized losses from sales of investments and other
    
    
    (8,501
    ) (1)
    
    
    (213
    )Deposits
    
    
    6,359
    
    
    
    8,393Withdrawals
    
    
    11,052
    
    
    
    11,928
 
 (1)
    
    Includes $195 in losses from the sale of investments and $8,306 in losses related to certain
investments that were rendered worthless or practically worthless and to certain investments
that the Company determined it did not have the intent to hold until they recover in value.  (4)
    
    Preneed Cemetery Merchandise and Service Activities
 Preneed Cemetery Receivables and Trust Investments
  14




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4)
    
    Preneed Cemetery Merchandise and Service Activities(Continued)
  January 31,
    
    
    October 31,2009
    
    
    2008Trust assets
    
    $
    138,186
    
    
    $
    148,533Receivables from customers
    
    
    37,896
    
    
    
    39,868176,082
    
    
    
    188,401Allowance for cancellations
    
    
    (6,033
    )
    
    
    (6,260
    )Preneed cemetery receivables and trust investments
    
    $
    170,049
    
    
    $
    182,141
  January 31, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    18,345
    
    
    $
    
    
    
    $
    
    
    
    $
    18,345U.S. Government, agencies and
municipalities
    
    
    11,596
    
    
    
    940
    
    
    
    
    
    
    
    12,536Corporate bonds
    
    
    11,962
    
    
    
    211
    
    
    
    (805
    )
    
    
    11,368Preferred stocks
    
    
    24,121
    
    
    
    
    
    
    
    (8,878
    )
    
    
    15,243Common stocks
    
    
    138,043
    
    
    
    196
    
    
    
    (73,438
    )
    
    
    64,801Mutual funds
    
    
    30,310
    
    
    
    
    
    
    
    (15,119
    )
    
    
    15,191Other long-term investments
    
    
    272
    
    
    
    
    
    
    
    (4
    )
    
    
    268Trust investments
    
    $
    234,649
    
    
    $
    1,347
    
    
    $
    (98,244
    )
    
    
    137,752Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58.7
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    434Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    138,186
  January 31, 2009Due in one year or less
    
    $
    4,883Due in one to five years
    
    
    11,948Due in five to ten years
    
    
    6,871Thereafter
    
    
    202$
    23,904
  15




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4)
    
    Preneed Cemetery Merchandise and Service Activities(Continued)
    January 31, 2009SignificantQuoted Market
    
    Other
    
    SignificantPrices in Active
    
    Observable
    
    UnobservableMarkets
    
    Inputs
    
    Inputs
    
    Fair Market(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    ValueTrust investments
    
    $
    98,814
    
    
    $
    38,938
    
    
    $
    
    
    
    $
    137,752
  Three Months Ended January 31,2009
    
    2008Purchases
    
    $
    1,153
    
    
    $
    2,911Sales
    
    
    2,456
    
    
    
    2,540Realized gains from sales of investments
    
    
    104
    
    
    
    353Realized losses from sales of investments and other
    
    
    (4,464
    ) (1)
    
    
    (29
    )Deposits
    
    
    4,033
    
    
    
    4,204Withdrawals
    
    
    3,768
    
    
    
    4,511
 
 (1)
    
    Includes $1,243 in losses from the sale of investments and $3,221 in losses related to
certain investments that were rendered worthless or practically worthless and to certain
investments that the Company determined it did not have the intent to hold until they recover
in value.  (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts
   16




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
 January 31, 2009Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    23,422
    
    
    $
    
    
    
    $
    
    
    
    $
    23,422U.S. Government, agencies and
municipalities
    
    
    7,610
    
    
    
    466
    
    
    
    (89
    )
    
    
    7,987Corporate bonds
    
    
    45,172
    
    
    
    635
    
    
    
    (2,871
    )
    
    
    42,936Preferred stocks
    
    
    67,499
    
    
    
    1
    
    
    
    (32,182
    )
    
    
    35,318Common stocks
    
    
    106,181
    
    
    
    2,234
    
    
    
    (56,939
    )
    
    
    51,476Mutual funds
    
    
    8,830
    
    
    
    
    
    
    
    (3,332
    )
    
    
    5,498Other long-term investments
    
    
    550
    
    
    
    
    
    
    
    (119
    )
    
    
    431Trust investments
    
    $
    259,264
    
    
    $
    3,336
    
    
    $
    (95,532
    )
    
    
    167,068Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64.4
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    821Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    167,889
  January 31, 2009Due in one year or less
    
    $
    1,959Due in one to five years
    
    
    28,963Due in five to ten years
    
    
    18,929Thereafter
    
    
    1,072$
    50,923
    17




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  January 31, 2009SignificantQuoted Market
    
    Other
    
    SignificantPrices in Active
    
    Observable
    
    UnobservableMarkets
    
    Inputs
    
    Inputs
    
    Fair market(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    valueTrust investments
    
    $
    80,585
    
    
    $
    86,240
    
    
    $
    243
    
    
    $
    167,068
  Fair market value, November 1, 2008
    
    $
    611Total unrealized losses included in other comprehensive income (1)
    
    
    (118
    )Transfers out of Level 3 category
    
    
    (250
    )Fair market value, January 31, 2009
    
    $
    243
 
 (1)
    
    All gains (losses) recognized in other comprehensive income for cemetery perpetual
care trust investments are attributable to the Companys customers and are offset by a
corresponding increase (decrease) in perpetual care trusts corpus.   Three Months Ended January 31,2009
    
    2008Purchases
    
    $
    329
    
    
    $
    13,617Sales
    
    
    1,806
    
    
    
    12,123Realized gains from sales of investments
    
    
    359
    
    
    
    1,252Realized losses from sales of investments and other
    
    
    (96
    ) (1)
    
    
    Deposits
    
    
    2,454
    (2)
    
    
    1,973Withdrawals
    
    
    1,587
    
    
    
    2,813
 
 (1)
    
    Includes $12 in losses from the sale of investments and $84 in losses related to certain
investments that were rendered worthless or practically worthless.(2)
    
    Includes $734 that the Company contributed to the cemetery perpetual care trusts in the first
quarter of 2009 as part of its funding obligation. 18




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5)
    
    Cemetery Interment Rights and Perpetual Care Trusts(Continued)
   (6)
    
    Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care
Trusts Corpus
  Deferred Receipts Held in TrustPreneed
    
    
    PreneedFuneral
    
    
    Cemetery
    
    
    TotalTrust assets at market value
    
    $
    307,946
    
    
    $
    138,186
    
    
    $
    446,132Less:Pending withdrawals
    
    
    (7,821
    )
    
    
    (4,269
    )
    
    
    (12,090
    )Pending deposits
    
    
    2,103
    
    
    
    1,440
    
    
    
    3,543Deferred receipts held in trust
    
    $
    302,228
    
    
    $
    135,357
    
    
    $
    437,585
  Perpetual CareTrusts CorpusTrust assets at market value
    
    $
    167,889Less:Pending withdrawals
    
    
    (1,901
    )Pending deposits
    
    
    687Perpetual care trusts corpus
    
    $
    166,675
 19




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (6)
    
    Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care Trusts Corpus(Continued)
 Investment and other income, net
  Three Months Ended January 31,2009
    
    
    2008Realized gains from sales of investments
    
    $
    971
    
    
    $
    2,498Realized losses from sales of investments and other
    
    
    (13,061
    )
    
    
    (242
    )Interest income, dividend and other ordinary income
    
    
    6,737
    
    
    
    8,095Trust expenses and income taxes
    
    
    (2,134
    )
    
    
    (2,706
    )Net trust investment income (loss)
    
    
    (7,487
    )
    
    
    7,645Investment income of deferred preneed funeral and
cemetery receipts held in trust
    
    
    9,273
    
    
    
    (4,597
    )Investment income of perpetual care trusts corpus
    
    
    (1,786
    )
    
    
    (3,048
    )Total deferred preneed funeral and cemetery
receipts held in trust and perpetual care trusts
corpus
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    41
    
    
    
    720Total investment and other income, net
    
    $
    41
    
    
    $
    720
 
 (1)
    
    Investment and other income, net consists of interest income primarily on the
Companys cash, cash equivalents and marketable securities not held in trust. (7)
    
    Commitments and Contingencies
 Litigation
 Henrietta Torres and Teresa Fiore, on behalf of themselves and all others similarly situated
and the General Public v. Stewart Enterprises, Inc., et al
   20




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7) Commitments and Contingencies(Continued)
   Funeral Consumers Alliance, Inc., et al. v. Service Corporation International, Alderwoods
Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville Casket Co.
     Pioneer Valley Casket Co., Inc., et al. v. Service Corporation International, Alderwoods
Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville Casket Co.,
 21




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7) Commitments and Contingencies(Continued)
     In Re: State Attorney General Civil Investigative Demands
 Other Litigation
  Securities and Exchange Commission Investigation
  22




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7) Commitments and Contingencies(Continued)
 Other Commitments and Contingencies
    (8) Reconciliation of Basic and Diluted Per Share Data
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended January 31, 2009Net earnings
    
    $
    5,716Basic earnings per common share:Net earnings available to common shareholders
    
    $
    5,716
    
    
    
    91,824
    
    
    $
    .06Effect of dilutive securities:Stock options assumed exercised and restricted stock
    
    
    
    
    
    
    72Diluted earnings per common share:Net earnings available to common shareholders plus
stock options assumed exercised and restricted
stock
    
    $
    5,716
    
    
    
    91,896
    
    
    $
    .06
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree Months Ended January 31, 2008Net earnings
    
    $
    8,885Basic earnings per common share:Net earnings available to common shareholders
    
    $
    8,885
    
    
    
    96,784
    
    
    $
    .09Effect of dilutive securities:Stock options assumed exercised and restricted stock
    
    
    
    
    
    
    235Diluted earnings per common share:Net earnings available to common shareholders plus
stock options assumed exercised and restricted
stock
    
    $
    8,885
    
    
    
    97,019
    
    
    $
    .09
 23




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8) Reconciliation of Basic and Diluted Per Share Data(Continued)
      (9) Segment Data
  Funeral Revenue
    
    

Cemetery
Revenue (1)
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJanuary 31, 2009
    
    
    January 31, 2008
    
    
    January 31, 2009
    
    
    January 31, 2008
    
    
    January 31, 2009
    
    
    January 31, 2008Eastern Division
    
    $
    30,134
    
    
    $
    30,482
    
    
    $
    26,069
    
    
    $
    32,169
    
    
    $
    56,203
    
    
    $
    62,651Western Division
    
    
    38,012
    
    
    
    38,431
    
    
    
    19,621
    
    
    
    22,362
    
    
    
    57,633
    
    
    
    60,793Corporate Trust
Management
(2)
    
    
    3,604
    
    
    
    4,536
    
    
    
    1,890
    
    
    
    2,293
    
    
    
    5,494
    
    
    
    6,829Total
    
    $
    71,750
    
    
    $
    73,449
    
    
    $
    47,580
    
    
    $
    56,824
    
    
    $
    119,330
    
    
    $
    130,273
 24




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9) Segment Data(Continued)
 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
    
    
    EndedJanuary 31, 2009
    
    
    January 31, 2008
    
    
    January 31, 2009
    
    
    January 31, 2008
    
    
    January 31, 2009
    
    
    January 31, 2008Eastern Division
    
    $
    5,837
    
    
    $
    5,339
    
    
    $
    847
    
    
    $
    3,288
    
    
    $
    6,684
    
    
    $
    8,627Western Division
    
    
    9,005
    
    
    
    8,364
    
    
    
    2,340
    
    
    
    3,761
    
    
    
    11,345
    
    
    
    12,125Corporate Trust
Management
(2)
    
    
    3,413
    
    
    
    4,299
    
    
    
    1,641
    
    
    
    2,019
    
    
    
    5,054
    
    
    
    6,318Total
    
    $
    18,255
    
    
    $
    18,002
    
    
    $
    4,828
    
    
    $
    9,068
    
    
    $
    23,083
    
    
    $
    27,070Net Preneed Funeral Merchandise
    
    
    Net Preneed Cemetery Merchandise
    
    
    Net Total Preneed Merchandise andand Service Sales (3)
    
    
    and Service Sales (3)
    
    
    Service Sales (3)Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJanuary 31, 2009
    
    
    January 31, 2008
    
    
    January 31, 2009
    
    
    January 31, 2008
    
    
    January 31, 2009
    
    
    January 31, 2008Eastern Division
    
    $
    7,682
    
    
    $
    9,353
    
    
    $
    7,452
    
    
    $
    8,229
    
    
    $
    15,134
    
    
    $
    17,582Western Division
    
    
    11,050
    
    
    
    12,559
    
    
    
    3,327
    
    
    
    3,760
    
    
    
    14,377
    
    
    
    16,319Total
    
    $
    18,732
    
    
    $
    21,912
    
    
    $
    10,779
    
    
    $
    11,989
    
    
    $
    29,511
    
    
    $
    33,901
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of the
related geographic segment and amounted to $1,722 and $2,592 for the three months ended
January 31, 2009 and 2008, respectively.(2)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and services trust earnings recognized with respect to preneed contracts
delivered during the period. Trust management fees are established by the Company at rates
consistent with industry norms based on the fair market value of the assets managed and are
paid by the trusts to the Companys subsidiary, Investors Trust, Inc. The trust earnings
represent earnings realized over the life of the preneed contracts delivered during the
relevant periods. Trust management fees included in funeral revenue for the three months
ended January 31, 2009 and 2008 were $937 and $1,378, respectively, and funeral trust earnings
for the three months ended January 31, 2009 and 2008 were $2,667 and $3,158, respectively.
Trust management fees included in cemetery revenue for the three months ended January 31, 2009
and 2008 were $952 and $1,299, respectively, and cemetery trust earnings for the three months
ended January 31, 2009 and 2008 were $938 and $994, respectively.(3)
    
    Preneed sales amounts represent total preneed funeral trust and insurance sales and
cemetery service and merchandise trust sales generated in the applicable period, net of
cancellations.  Three Months Ended January 31,2009
    
    
    2008Gross profit for reportable segments
    
    $
    23,083
    
    
    $
    27,070Corporate general and administrative expenses
    
    
    (7,506
    )
    
    
    (8,235
    )Hurricane related recoveries (charges), net
    
    
    (315
    )
    
    
    159Gains on dispositions and impairment (losses), net
    
    
    (63
    )
    
    
    147Other operating income, net
    
    
    259
    
    
    
    242Interest expense
    
    
    (5,910
    )
    
    
    (5,888
    )Investment and other income, net
    
    
    41
    
    
    
    720Earnings before income taxes
    
    $
    9,589
    
    
    $
    14,215
 25




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (10) Supplementary Information
  Three Months Ended January 31,2009
    
    
    2008Service revenueFuneral
    
    $
    45,306
    
    
    $
    45,436Cemetery
    
    
    15,101
    
    
    
    15,65960,407
    
    
    
    61,095Merchandise revenueFuneral
    
    
    24,917
    
    
    
    25,996Cemetery
    
    
    29,027
    
    
    
    37,20453,944
    
    
    
    63,200Other revenueFuneral
    
    
    1,527
    
    
    
    2,017Cemetery
    
    
    3,452
    
    
    
    3,9614,979
    
    
    
    5,978Total revenue
    
    $
    119,330
    
    
    $
    130,273Service costsFuneral
    
    $
    14,668
    
    
    $
    15,321Cemetery
    
    
    9,755
    
    
    
    10,11424,423
    
    
    
    25,435Merchandise costsFuneral
    
    
    15,006
    
    
    
    16,079Cemetery
    
    
    19,250
    
    
    
    23,91334,256
    
    
    
    39,992Facility expensesFuneral
    
    
    23,821
    
    
    
    24,047Cemetery
    
    
    13,747
    
    
    
    13,72937,568
    
    
    
    37,776Total costs
    
    $
    96,247
    
    
    $
    103,203
  26




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior
Convertible Notes
  Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended January 31, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    66,871
    
    
    $
    399
    
    
    $
    4,480
    
    
    $
    
    
    
    $
    71,750Cemetery
    
    
    
    
    
    
    43,025
    
    
    
    661
    
    
    
    3,894
    
    
    
    
    
    
    
    47,580
    
    
    
    109,896
    
    
    
    1,060
    
    
    
    8,374
    
    
    
    
    
    
    
    119,330Costs and expenses:Funeral
    
    
    
    
    
    
    50,000
    
    
    
    291
    
    
    
    3,204
    
    
    
    
    
    
    
    53,495Cemetery
    
    
    
    
    
    
    38,811
    
    
    
    636
    
    
    
    3,305
    
    
    
    
    
    
    
    42,752
    
    
    
    88,811
    
    
    
    927
    
    
    
    6,509
    
    
    
    
    
    
    
    96,247Gross profit
    
    
    
    
    
    
    21,085
    
    
    
    133
    
    
    
    1,865
    
    
    
    
    
    
    
    23,083Corporate general and administrative
expenses
    
    
    (7,506
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,506
    )Hurricane related charges, net
    
    
    (276
    )
    
    
    (39
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (315
    )Gains on dispositions and impairment
(losses), net
    
    
    (8
    )
    
    
    (55
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63
    )Other operating income (expense), net
    
    
    (2
    )
    
    
    244
    
    
    
    1
    
    
    
    16
    
    
    
    
    
    
    
    259Operating earnings (loss)
    
    
    (7,792
    )
    
    
    21,235
    
    
    
    134
    
    
    
    1,881
    
    
    
    
    
    
    
    15,458Interest expense
    
    
    819
    
    
    
    (6,165
    )
    
    
    (36
    )
    
    
    (528
    )
    
    
    
    
    
    
    (5,910
    )Investment and other income, net
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Equity in subsidiaries
    
    
    11,171
    
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    (11,306
    )
    
    
    Earnings before income taxes
    
    
    4,239
    
    
    
    15,205
    
    
    
    98
    
    
    
    1,353
    
    
    
    (11,306
    )
    
    
    9,589Income tax expense (benefit)
    
    
    (1,477
    )
    
    
    4,836
    
    
    
    19
    
    
    
    495
    
    
    
    
    
    
    
    3,873Net earnings
    
    
    5,716
    
    
    
    10,369
    
    
    
    79
    
    
    
    858
    
    
    
    (11,306
    )
    
    
    5,716Other comprehensive income, net
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (3
    )
    
    
    3Comprehensive income
    
    $
    5,719
    
    
    $
    10,369
    
    
    $
    79
    
    
    $
    861
    
    
    $
    (11,309
    )
    
    $
    5,719
 27




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended January 31, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Funeral
    
    $
    
    
    
    $
    68,047
    
    
    $
    494
    
    
    $
    4,908
    
    
    $
    
    
    
    $
    73,449Cemetery
    
    
    
    
    
    
    51,072
    
    
    
    827
    
    
    
    4,925
    
    
    
    
    
    
    
    56,824
    
    
    
    119,119
    
    
    
    1,321
    
    
    
    9,833
    
    
    
    
    
    
    
    130,273Costs and expenses:Funeral
    
    
    
    
    
    
    51,773
    
    
    
    308
    
    
    
    3,366
    
    
    
    
    
    
    
    55,447Cemetery
    
    
    
    
    
    
    42,895
    
    
    
    786
    
    
    
    4,075
    
    
    
    
    
    
    
    47,756
    
    
    
    94,668
    
    
    
    1,094
    
    
    
    7,441
    
    
    
    
    
    
    
    103,203Gross profit
    
    
    
    
    
    
    24,451
    
    
    
    227
    
    
    
    2,392
    
    
    
    
    
    
    
    27,070Corporate general and
administrative expenses
    
    
    (8,235
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,235
    )Hurricane related recoveries, net
    
    
    
    
    
    
    
    
    
    
    159
    
    
    
    
    
    
    
    
    
    
    
    159Gains on dispositions and
impairment (losses), net
    
    
    
    
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147Other operating income, net
    
    
    21
    
    
    
    159
    
    
    
    
    
    
    
    62
    
    
    
    
    
    
    
    242Operating earnings (loss)
    
    
    (8,214
    )
    
    
    24,757
    
    
    
    386
    
    
    
    2,454
    
    
    
    
    
    
    
    19,383Interest expense
    
    
    (700
    )
    
    
    (4,519
    )
    
    
    (29
    )
    
    
    (640
    )
    
    
    
    
    
    
    (5,888
    )Investment and other income, net
    
    
    702
    
    
    
    13
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    720Equity in subsidiaries
    
    
    16,326
    
    
    
    198
    
    
    
    
    
    
    
    
    
    
    
    (16,524
    )
    
    
    Earnings before income taxes
    
    
    8,114
    
    
    
    20,449
    
    
    
    357
    
    
    
    1,819
    
    
    
    (16,524
    )
    
    
    14,215Income tax expense (benefit)
    
    
    (771
    )
    
    
    5,550
    
    
    
    83
    
    
    
    468
    
    
    
    
    
    
    
    5,330Net earnings
    
    
    8,885
    
    
    
    14,899
    
    
    
    274
    
    
    
    1,351
    
    
    
    (16,524
    )
    
    
    8,885Other comprehensive income, net
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    (27
    )
    
    
    70Comprehensive income
    
    $
    8,955
    
    
    $
    14,899
    
    
    $
    274
    
    
    $
    1,378
    
    
    $
    (16,551
    )
    
    $
    8,955
 28




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 January 31, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    63,289
    
    
    $
    6,384
    
    
    $
    34
    
    
    $
    1,788
    
    
    $
    
    
    
    $
    71,495Marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    61Receivables, net of allowances
    
    
    1,722
    
    
    
    51,743
    
    
    
    451
    
    
    
    4,383
    
    
    
    
    
    
    
    58,299Inventories
    
    
    306
    
    
    
    33,752
    
    
    
    368
    
    
    
    2,380
    
    
    
    
    
    
    
    36,806Prepaid expenses
    
    
    1,602
    
    
    
    9,318
    
    
    
    53
    
    
    
    1,394
    
    
    
    
    
    
    
    12,367Deferred income taxes, net
    
    
    929
    
    
    
    5,610
    
    
    
    39
    
    
    
    1,472
    
    
    
    
    
    
    
    8,050Total current assets
    
    
    67,848
    
    
    
    106,807
    
    
    
    945
    
    
    
    11,478
    
    
    
    
    
    
    
    187,078Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    51,604
    
    
    
    411
    
    
    
    15,005
    
    
    
    
    
    
    
    67,020Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    329,642
    
    
    
    
    
    
    
    9,098
    
    
    
    
    
    
    
    338,740Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    162,093
    
    
    
    1,043
    
    
    
    6,913
    
    
    
    
    
    
    
    170,049Goodwill
    
    
    
    
    
    
    227,401
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,236Cemetery property, at cost
    
    
    
    
    
    
    347,438
    
    
    
    11,384
    
    
    
    25,554
    
    
    
    
    
    
    
    384,376Property and equipment, at cost
    
    
    51,415
    
    
    
    453,394
    
    
    
    1,934
    
    
    
    38,206
    
    
    
    
    
    
    
    544,949Less accumulated depreciation
    
    
    31,811
    
    
    
    195,433
    
    
    
    866
    
    
    
    14,453
    
    
    
    
    
    
    
    242,563Net property and equipment
    
    
    19,604
    
    
    
    257,961
    
    
    
    1,068
    
    
    
    23,753
    
    
    
    
    
    
    
    302,386Deferred income taxes, net
    
    
    26,188
    
    
    
    148,313
    
    
    
    
    
    
    
    9,183
    
    
    
    (3,156
    )
    
    
    180,528Cemetery perpetual care trust investments
    
    
    
    
    
    
    157,928
    
    
    
    6,711
    
    
    
    3,250
    
    
    
    
    
    
    
    167,889Non-current assets held for sale
    
    
    
    
    
    
    2,873
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,873Other assets
    
    
    8,936
    
    
    
    5,742
    
    
    
    3
    
    
    
    1,065
    
    
    
    
    
    
    
    15,746Intercompany receivables
    
    
    833,592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (833,592
    )
    
    
    Equity in subsidiaries
    
    
    28,887
    
    
    
    7,509
    
    
    
    
    
    
    
    
    
    
    
    (36,396
    )
    
    
    Total assets
    
    $
    985,055
    
    
    $
    1,805,311
    
    
    $
    21,613
    
    
    $
    125,086
    
    
    $
    (873,144
    )
    
    $
    2,063,921LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    12
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12Accounts payable
    
    
    2,170
    
    
    
    21,591
    
    
    
    108
    
    
    
    1,340
    
    
    
    
    
    
    
    25,209Accrued expenses and other current
liabilities
    
    
    15,186
    
    
    
    49,645
    
    
    
    17
    
    
    
    2,823
    
    
    
    
    
    
    
    67,671Total current liabilities
    
    
    17,368
    
    
    
    71,236
    
    
    
    125
    
    
    
    4,163
    
    
    
    
    
    
    
    92,892Long-term debt, less current maturities
    
    
    450,094
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,094Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    3,156
    
    
    
    
    
    
    
    (3,156
    )
    
    
    Intercompany payables
    
    
    
    
    
    
    818,947
    
    
    
    3,853
    
    
    
    10,792
    
    
    
    (833,592
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    197,661
    
    
    
    
    
    
    
    45,467
    
    
    
    
    
    
    
    243,128Deferred preneed cemetery revenue
    
    
    
    
    
    
    253,601
    
    
    
    333
    
    
    
    27,726
    
    
    
    
    
    
    
    281,660Deferred preneed funeral and cemetery
receipts held in trust
    
    
    
    
    
    
    432,976
    
    
    
    875
    
    
    
    3,734
    
    
    
    
    
    
    
    437,585Perpetual care trusts corpus
    
    
    
    
    
    
    156,720
    
    
    
    6,729
    
    
    
    3,226
    
    
    
    
    
    
    
    166,675Other long-term liabilities
    
    
    17,597
    
    
    
    4,238
    
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    21,959Negative equity in subsidiaries
    
    
    130,068
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (130,068
    )
    
    
    Total liabilities
    
    
    615,127
    
    
    
    1,935,379
    
    
    
    15,071
    
    
    
    95,232
    
    
    
    (966,816
    )
    
    
    1,693,993Common stock
    
    
    92,719
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    92,719Other
    
    
    277,169
    
    
    
    (130,170
    )
    
    
    6,218
    
    
    
    29,762
    
    
    
    94,190
    
    
    
    277,169Accumulated other comprehensive income
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    (40
    )
    
    
    40Total shareholders equity
    
    
    369,928
    
    
    
    (130,068
    )
    
    
    6,542
    
    
    
    29,854
    
    
    
    93,672
    
    
    
    369,928Total liabilities and shareholders equity
    
    $
    985,055
    
    
    $
    1,805,311
    
    
    $
    21,613
    
    
    $
    125,086
    
    
    $
    (873,144
    )
    
    $
    2,063,921
 29




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11) Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
 Condensed Consolidating Balance Sheets
 October 31, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    65,593
    
    
    $
    4,332
    
    
    $
    22
    
    
    $
    2,627
    
    
    $
    
    
    
    $
    72,574Marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    55Receivables, net of allowances
    
    
    2,987
    
    
    
    51,137
    
    
    
    546
    
    
    
    4,459
    
    
    
    
    
    
    
    59,129Inventories
    
    
    300
    
    
    
    32,821
    
    
    
    361
    
    
    
    2,388
    
    
    
    
    
    
    
    35,870Prepaid expenses
    
    
    1,282
    
    
    
    4,618
    
    
    
    37
    
    
    
    1,380
    
    
    
    
    
    
    
    7,317Deferred income taxes, net
    
    
    1,395
    
    
    
    6,117
    
    
    
    55
    
    
    
    1,231
    
    
    
    
    
    
    
    8,798Total current assets
    
    
    71,557
    
    
    
    99,025
    
    
    
    1,021
    
    
    
    12,140
    
    
    
    
    
    
    
    183,743Receivables due beyond one year, net of
allowances
    
    
    
    
    
    
    54,326
    
    
    
    404
    
    
    
    15,941
    
    
    
    
    
    
    
    70,671Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    358,891
    
    
    
    
    
    
    
    9,521
    
    
    
    
    
    
    
    368,412Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    173,484
    
    
    
    1,047
    
    
    
    7,610
    
    
    
    
    
    
    
    182,141Goodwill
    
    
    
    
    
    
    227,401
    
    
    
    48
    
    
    
    19,787
    
    
    
    
    
    
    
    247,236Cemetery property, at cost
    
    
    
    
    
    
    338,793
    
    
    
    11,424
    
    
    
    25,615
    
    
    
    
    
    
    
    375,832Property and equipment, at cost
    
    
    49,583
    
    
    
    451,147
    
    
    
    1,932
    
    
    
    38,109
    
    
    
    
    
    
    
    540,771Less accumulated depreciation
    
    
    30,479
    
    
    
    190,822
    
    
    
    824
    
    
    
    14,118
    
    
    
    
    
    
    
    236,243Net property and equipment
    
    
    19,104
    
    
    
    260,325
    
    
    
    1,108
    
    
    
    23,991
    
    
    
    
    
    
    
    304,528Deferred income taxes, net
    
    
    25,853
    
    
    
    148,403
    
    
    
    
    
    
    
    8,527
    
    
    
    (3,268
    )
    
    
    179,515Cemetery perpetual care trust investments
    
    
    
    
    
    
    162,789
    
    
    
    7,137
    
    
    
    3,164
    
    
    
    
    
    
    
    173,090Non-current assets held for sale
    
    
    
    
    
    
    2,873
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,873Other assets
    
    
    9,451
    
    
    
    5,937
    
    
    
    16
    
    
    
    1,070
    
    
    
    
    
    
    
    16,474Intercompany receivables
    
    
    837,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (837,282
    )
    
    
    Equity in subsidiaries
    
    
    28,082
    
    
    
    7,374
    
    
    
    
    
    
    
    
    
    
    
    (35,456
    )
    
    
    Total assets
    
    $
    991,329
    
    
    $
    1,839,621
    
    
    $
    22,205
    
    
    $
    127,366
    
    
    $
    (876,006
    )
    
    $
    2,104,515LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    20
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    20Accounts payable
    
    
    2,530
    
    
    
    23,237
    
    
    
    167
    
    
    
    1,718
    
    
    
    
    
    
    
    27,652Accrued expenses and other current
liabilities
    
    
    15,496
    
    
    
    54,683
    
    
    
    13
    
    
    
    2,632
    
    
    
    
    
    
    
    72,824Total current liabilities
    
    
    18,046
    
    
    
    77,920
    
    
    
    180
    
    
    
    4,350
    
    
    
    
    
    
    
    100,496Long-term debt, less current maturities
    
    
    450,095
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,095Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    3,268
    
    
    
    
    
    
    
    (3,268
    )
    
    
    Intercompany payables, net
    
    
    
    
    
    
    819,691
    
    
    
    3,939
    
    
    
    13,652
    
    
    
    (837,282
    )
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    199,867
    
    
    
    
    
    
    
    45,315
    
    
    
    
    
    
    
    245,182Deferred preneed cemetery revenue
    
    
    
    
    
    
    248,098
    
    
    
    324
    
    
    
    27,413
    
    
    
    
    
    
    
    275,835Deferred preneed funeral and cemetery
receipts held in trust
    
    
    
    
    
    
    470,167
    
    
    
    899
    
    
    
    4,354
    
    
    
    
    
    
    
    475,420Perpetual care trusts corpus
    
    
    
    
    
    
    161,074
    
    
    
    7,132
    
    
    
    3,165
    
    
    
    
    
    
    
    171,371Other long-term liabilities
    
    
    17,114
    
    
    
    3,241
    
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    20,479Negative equity in subsidiaries
    
    
    140,437
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140,437
    )
    
    
    Total liabilities
    
    
    625,692
    
    
    
    1,980,058
    
    
    
    15,742
    
    
    
    98,373
    
    
    
    (980,987
    )
    
    
    1,738,878Common stock
    
    
    92,248
    
    
    
    102
    
    
    
    324
    
    
    
    52
    
    
    
    (478
    )
    
    
    92,248Other
    
    
    273,352
    
    
    
    (140,539
    )
    
    
    6,139
    
    
    
    28,904
    
    
    
    105,496
    
    
    
    273,352Accumulated other comprehensive income
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    (37
    )
    
    
    37Total shareholders equity
    
    
    365,637
    
    
    
    (140,437
    )
    
    
    6,463
    
    
    
    28,993
    
    
    
    104,981
    
    
    
    365,637Total liabilities and shareholders equity
    
    $
    991,329
    
    
    $
    1,839,621
    
    
    $
    22,205
    
    
    $
    127,366
    
    
    $
    (876,006
    )
    
    $
    2,104,515
 30




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (11)	Condensed
Consolidating Financial Statements of Guarantors of Senior Notes and
Senior Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Three Months Ended January 31, 2009Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (2,134
    )
    
    $
    7,005
    
    
    $
    103
    
    
    $
    2,310
    
    
    $
    
    
    
    $
    7,284Cash flows from investing activities:Proceeds from sale of assets
    
    
    292
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    292Purchase of subsidiaries and other
investments, net of cash acquired
    
    
    
    
    
    
    (1,623
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,623
    )Additions to property and equipment
    
    
    (1,908
    )
    
    
    (2,587
    )
    
    
    (5
    )
    
    
    (289
    )
    
    
    
    
    
    
    (4,789
    )Other
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net cash used in investing activities
    
    
    (1,616
    )
    
    
    (4,209
    )
    
    
    (5
    )
    
    
    (289
    )
    
    
    
    
    
    
    (6,119
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )Intercompany receivables (payables)
    
    
    3,690
    
    
    
    (744
    )
    
    
    (86
    )
    
    
    (2,860
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    83
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83Dividends
    
    
    (2,318
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,318
    )Net cash provided by (used in)
financing activities
    
    
    1,446
    
    
    
    (744
    )
    
    
    (86
    )
    
    
    (2,860
    )
    
    
    
    
    
    
    (2,244
    )Net increase (decrease) in cash
    
    
    (2,304
    )
    
    
    2,052
    
    
    
    12
    
    
    
    (839
    )
    
    
    
    
    
    
    (1,079
    )Cash and cash equivalents, beginning of
period
    
    
    65,593
    
    
    
    4,332
    
    
    
    22
    
    
    
    2,627
    
    
    
    
    
    
    
    72,574Cash and cash equivalents, end of period
    
    $
    63,289
    
    
    $
    6,384
    
    
    $
    34
    
    
    $
    1,788
    
    
    $
    
    
    
    $
    71,495
 31




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts
 (11)	Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
 Condensed Consolidating Statements of Cash Flows
 Three Months Ended January 31, 2008Guarantor
    
    
    Guarantor
    
    
    Non-Subsidiaries-
    
    
    Subsidiaries-
    
    
    GuarantorParent
    
    
    Tier 1
    
    
    Tier 2
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating
activities
    
    $
    (2,343
    )
    
    $
    3,005
    
    
    $
    369
    
    
    $
    3,067
    
    
    $
    
    
    
    $
    4,098Cash flows from investing activities:Proceeds from sales of marketable
securities
    
    
    4,984
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,984Purchases of marketable securities
    
    
    (19,758
    )
    
    
    
    
    
    
    
    
    
    
    (44
    )
    
    
    
    
    
    
    (19,802
    )Proceeds from sale of assets
    
    
    
    
    
    
    338
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    338Additions to property and equipment
    
    
    (1,725
    )
    
    
    (4,770
    )
    
    
    (267
    )
    
    
    (294
    )
    
    
    
    
    
    
    (7,056
    )Other
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Net cash used in investing activities
    
    
    (16,499
    )
    
    
    (4,422
    )
    
    
    (267
    )
    
    
    (338
    )
    
    
    
    
    
    
    (21,526
    )Cash flows from financing activities:Repayments of long-term debt
    
    
    (77
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77
    )Intercompany receivables (payables)
    
    
    40
    
    
    
    3,286
    
    
    
    (86
    )
    
    
    (3,240
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    1,380
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,380Purchase and retirement of common stock
    
    
    (22,807
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,807
    )Dividends
    
    
    (2,403
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,403
    )Excess tax benefits from share-based
payment arrangements
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165Net cash provided by (used in)
financing activities
    
    
    (23,702
    )
    
    
    3,286
    
    
    
    (86
    )
    
    
    (3,240
    )
    
    
    
    
    
    
    (23,742
    )Net increase (decrease) in cash
    
    
    (42,544
    )
    
    
    1,869
    
    
    
    16
    
    
    
    (511
    )
    
    
    
    
    
    
    (41,170
    )Cash and cash equivalents, beginning of
period
    
    
    63,202
    
    
    
    6,685
    
    
    
    36
    
    
    
    1,622
    
    
    
    
    
    
    
    71,545Cash and cash equivalents, end of period
    
    $
    20,658
    
    
    $
    8,554
    
    
    $
    52
    
    
    $
    1,111
    
    
    $
    
    
    
    $
    30,375
 32




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12) Acquisitions
  (13) Consolidated Comprehensive Income
  Three Months Ended January 31,2009
    
    
    2008Net earnings
    
    $
    5,716
    
    
    $
    8,885Other comprehensive income:Unrealized appreciation of
investments, net of deferred
tax expense of ($2) and ($43),
respectively
    
    
    3
    
    
    
    70Increase in net unrealized
losses associated with
available-for-sale securities
of the trusts
    
    
    (35,915
    )
    
    
    (65,470
    )Reclassification of the net
unrealized losses activity
attributable to the deferred
preneed funeral and cemetery
receipts held in trust and
perpetual care trusts corpus
    
    
    35,915
    
    
    
    65,470Total other comprehensive income
    
    
    3
    
    
    
    70Total comprehensive income
    
    $
    5,719
    
    
    $
    8,955
 (14) Hurricane Related Charges
 
  33




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (15) Significant Risks and Uncertainties
   (16) Subsequent Events
   34




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
 General
  Financial Summary
   35




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##### Table of Contents



36




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##### Table of Contents



Funeral andCemeteryMerchandise and
    
    Cemetery PerpetualServices Trusts
    
    Care TrustsFor the quarter ended January 31, 2009
    
    
    (6.8
    )%
    
    
    (5.2
    )%For the last three years ended January 31, 2009
    
    
    (8.3
    )%
    
    
    (7.0
    )%For the last five years ended January 31, 2009
    
    
    (3.2
    )%
    
    
    (2.8
    )%
  Critical Accounting Policies
  Results of Operations
  37




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##### Table of Contents



Three Months Ended January 31, 2009 Compared to Three Months Ended January 31, 2008
 Funeral Operations
 Three Months Ended January 31,Increase2009
    
    
    2008
    
    
    (Decrease)(In millions)Funeral Revenue:Eastern Division
    
    $
    30.1
    
    
    $
    30.5
    
    
    $
    (.4
    )Western Division
    
    
    38.0
    
    
    
    38.4
    
    
    
    (.4
    )Corporate Trust Management (1)
    
    
    3.6
    
    
    
    4.5
    
    
    
    (.9
    )Total Funeral Revenue
    
    $
    71.7
    
    
    $
    73.4
    
    
    $
    (1.7
    )Funeral Costs:Eastern Division
    
    $
    24.2
    
    
    $
    25.1
    
    
    $
    (.9
    )Western Division
    
    
    29.0
    
    
    
    30.1
    
    
    
    (1.1
    )Corporate Trust Management (1)
    
    
    .2
    
    
    
    .2
    
    
    
    Total Funeral Costs
    
    $
    53.4
    
    
    $
    55.4
    
    
    $
    (2.0
    )Funeral Gross Profit:Eastern Division
    
    $
    5.9
    
    
    $
    5.4
    
    
    $
    .5Western Division
    
    
    9.0
    
    
    
    8.3
    
    
    
    .7Corporate Trust Management (1)
    
    
    3.4
    
    
    
    4.3
    
    
    
    (.9
    )Total Funeral Gross Profit
    
    $
    18.3
    
    
    $
    18.0
    
    
    $
    .3
 Same-Store Analysis
 Change in AverageRevenue Per
    
    Change in Same-Store
    
    Same-StoreFuneral Service
    
    Funeral Services
    
    Cremation Rate2009
    
    2008Eastern Division
    
    
    6.0
    %
    
    
    (3.6
    )%
    
    
    36.6
    %
    
    
    36.3
    %Western Division
    
    
    7.3
    %
    
    
    (8.3
    )%
    
    
    43.0
    %
    
    
    43.3
    %Total
    
    
    6.0
    % (1)
    
    
    (6.3
    )%
    
    
    40.3
    %
    
    
    40.3
    %
 
 (1)
    
    Corporate trust management consists of the trust management fees and funeral
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
earnings realized by the trusts over the life of the preneed contracts and allocated to those
products and services delivered during the relevant periods. See Notes 3 and 6 to the
condensed consolidated financial statements included herein for information regarding the cost
basis and market value of the trust assets and current performance of the trusts (i.e.,
current realized gains and losses, interest income and dividends). Trust management fees
included in funeral revenue for the three months ended January 31, 2009 and 2008 were $0.9
million and $1.4 million, respectively. As corporate trust management is considered a
separate operating segment, trust earnings are included in the total average revenue per
funeral service presented, but not in the Eastern or Western divisions average revenue per
funeral service. Funeral trust earnings recognized with respect to preneed contracts
delivered included in funeral revenue for the three months ended January 31, 2009 and 2008
were $2.7 million and $3.1 million, respectively. Consolidated OperationsFuneral
  38




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##### Table of Contents



Segment DiscussionFuneral
   Cemetery Operations
 Three Months Ended January 31,2009
    
    
    2008
    
    
    Decrease(In millions)Cemetery Revenue:Eastern Division
    
    $
    26.1
    
    
    $
    32.2
    
    
    $
    (6.1
    )Western Division
    
    
    19.6
    
    
    
    22.3
    
    
    
    (2.7
    )Corporate Trust Management (1)
    
    
    1.9
    
    
    
    2.3
    
    
    
    (.4
    )Total Cemetery Revenue
    
    $
    47.6
    
    
    $
    56.8
    
    
    $
    (9.2
    )Cemetery Costs:Eastern Division
    
    $
    25.2
    
    
    $
    28.9
    
    
    $
    (3.7
    )Western Division
    
    
    17.3
    
    
    
    18.6
    
    
    
    (1.3
    )Corporate Trust Management (1)
    
    
    .3
    
    
    
    .3
    
    
    
    Total Cemetery Costs
    
    $
    42.8
    
    
    $
    47.8
    
    
    $
    (5.0
    )Cemetery Gross Profit:Eastern Division
    
    $
    .9
    
    
    $
    3.3
    
    
    $
    (2.4
    )Western Division
    
    
    2.3
    
    
    
    3.7
    
    
    
    (1.4
    )Corporate Trust Management (1)
    
    
    1.6
    
    
    
    2.0
    
    
    
    (.4
    )Total Cemetery Gross Profit
    
    $
    4.8
    
    
    $
    9.0
    
    
    $
    (4.2
    )
 39




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##### Table of Contents



(1)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and services trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by the Company at rates consistent
with industry norms based on the fair market value of assets managed and are paid by the
trusts to our subsidiary, Investors Trust, Inc. The trust earnings represent the amount of
earnings realized by the trusts over the life of the preneed contracts and allocated to those
products and services delivered during the relevant periods. See Notes 4 and 6 to the
condensed consolidated financial statements included herein for information regarding the cost
basis and market value of the trust assets and current performance of the trusts (i.e.,
current realized gains and losses, interest income and dividends). Trust management fees
included in cemetery revenue for the three months ended January 31, 2009 and 2008 were $1.0
million and $1.3 million, respectively, and cemetery trust earnings recognized with respect to
preneed contracts delivered included in cemetery revenue for the three months ended January
31, 2009 and 2008 were $0.9 million and $1.0 million, respectively. Perpetual care trust
earnings are included in the revenues and gross profit of the related geographic segment. See
Notes 5 and 6 to the condensed consolidated financial statements included herein for
information regarding the cemetery perpetual care trusts. Consolidated OperationsCemetery
   Segment DiscussionCemetery
    40




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##### Table of Contents



Other
        Preneed Sales into the Backlog
  41




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##### Table of Contents



Liquidity and Capital Resources
 General
     42




---



##### Table of Contents



Cash Flow
    Contractual Obligations and Commercial Commitments
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 year
    
    
    1  3 years
    
    
    3  5 years
    
    
    5 yearsLong-term debt obligations (1)
    
    $
    450.1
    
    
    $
    
    
    
    $
    
    
    
    $
    200.0
    
    
    $
    250.1Interest on long-term debt (2)
    
    
    109.4
    
    
    
    20.6
    
    
    
    41.3
    
    
    
    35.0
    
    
    
    12.5Operating and capital lease obligations (3)
    
    
    29.4
    
    
    
    3.4
    
    
    
    6.0
    
    
    
    3.5
    
    
    
    16.5Non-competition and other agreements (4)
    
    
    .9
    
    
    
    .4
    
    
    
    .5
    
    
    
    
    
    
    
    $
    589.8
    
    
    $
    24.4
    
    
    $
    47.8
    
    
    $
    238.5
    
    
    $
    279.1
 
 (1)
    
    See below for a breakdown of our future scheduled principal payments and maturities
of our long-term debt by type as of January 31, 2009.(2)
    
    Includes contractual interest payments for our senior convertible notes, senior
notes and third-party debt.(3)
    
    Our noncancellable operating leases are primarily for land and buildings and expire
over the next one to 14 years, except for seven leases that expire between 2032 and 2039. Our
future minimum lease payments as of January 31, 2009 are $3.4 million, $3.5 million, $2.5
million, $2.0 million, $1.5 million and $16.5 million for the years ending October 31, 2009,
2010, 2011, 2012, 2013 and later years, respectively. 43




---



##### Table of Contents



(4)
    
    We have entered into non-competition agreements with prior owners and key employees
of acquired subsidiaries that expire at various times through 2012. During fiscal year 2001,
we decided to relieve some of the prior owners and key employees of their obligations not to
compete; however, we will continue to make the payments in accordance with the contract terms.
This category also includes separation pay related to former executive officers.  Expiration by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    
    More thanContingent Obligations
    
    Total
    
    
    year
    
    

1  3 years
    
    

3  5 years
    
    
    5 yearsCemetery perpetual
care trust funding
obligations
(1)
    
    $
    12.2
    
    
    $
    12.2
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term obligations
related to uncertain
tax positions
(2)
    
    
    5.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.1$
    17.3
    
    
    $
    12.2
    
    
    $
    
    
    
    $
    
    
    
    $
    5.1
 
 (1)
    
    In those states where we have withdrawn realized net capital gains in the past from
our cemetery perpetual care trusts, regulators may seek replenishment of the realized net
capital losses either by requiring a cash deposit to the trust or by prohibiting or
restricting withdrawals of future earnings until they cover the loss. The estimated probable
funding obligation in the cemetery perpetual care trusts in these states was $12.2 million as
of January 31, 2009. As of January 31, 2009, we had unrealized losses of $72.3 million in the
trusts in these states. Because all of these trusts currently have assets with a fair market
value less than the aggregate amounts required to be contributed to the trust, any additional
realized net capital losses in these trusts may result in a corresponding funding liability
and increase in cemetery costs. In those states where realized net capital gains have not
been withdrawn, we believe it is reasonably possible that additional funding obligations may
exist with an estimated range of up to approximately $1.2 million.(2)
    
    We adopted the provisions of FASB Interpretation No. 48, Accounting for Income
Taxes  an Interpretation of FASB Statement No. 109 (FIN 48), on November 1, 2007. In
accordance with the provisions of FIN 48, as of January 31, 2009, we have recorded $5.1
million of unrecognized tax benefits and related interest and penalties. Due to the
uncertainty regarding the timing and completion of audits and possible outcomes, it is not
possible to estimate the range of increase and decrease and the timing thereof of any
potential cash payments.  Other,PrincipallySellerRevolving
    
    
    Senior
    
    
    
    
    
    
    FinancingCredit
    
    
    Convertible
    
    
    Senior
    
    
    of AcquiredFiscal Years Ending October 31,
    
    Facility
    
    
    Notes
    
    
    Notes
    
    
    Operations
    
    
    Total2009
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2013
    
    
    
    
    
    
    
    
    
    
    200.0
    
    
    
    
    
    
    
    200.0Thereafter
    
    
    
    
    
    
    250.0
    
    
    
    
    
    
    
    .1
    
    
    
    250.1Total long-term debt
    
    $
    
    
    
    $
    250.0
    
    
    $
    200.0
    
    
    $
    .1
    
    
    $
    450.1
 44




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##### Table of Contents



Off-Balance Sheet Arrangements
  
 (1)
    
    the $28.9 million bond we are required to maintain to guarantee our obligations
relating to funds we withdrew in fiscal year 2001 from our preneed funeral trusts in
Florida, which is discussed above and in Note 20 to the consolidated financial
statements in our 2008 Form 10-K; and(2)
    
    the insurance-funded preneed funeral contracts, which will be funded by life
insurance or annuity contracts issued by third-party insurers, are not reflected in our
condensed consolidated balance sheets, and are discussed in Note 2(i) to the
consolidated financial statements in our 2008 Form 10-K. Recent Accounting Standards
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
   45




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  
 Item 6. Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
April 3, 2008 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended April 30, 2008)3.2
    
    By-laws of the Company, as amended and restated as of September 8, 2008 (incorporated by
reference to Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended
July 31, 2008)4.1
    
    See Exhibits 3.1 and 3.2 for provisions of the Companys Amended and Restated Articles of
Incorporation, as amended, and By-laws, as amended, defining the rights of holders of Class A
and Class B common stock4.2
    
    Specimen of Class A common stock certificate (incorporated by reference to Exhibit 4.2 to
Amendment No. 3 to the Companys Registration Statement on Form S-1 (Registration No.
33-42336) filed with the Commission on October 7, 1991)4.3
    
    Rights Agreement, dated as of October 28, 1999, between Stewart Enterprises, Inc. and
ChaseMellon Shareholder Services, L.L.C. as Rights Agent (incorporated by reference to Exhibit
1 to the Companys Form 8-A filed November 4, 1999)4.4
    
    Amendment No. 1 to the Rights Agreement dated June 26, 2007 between Stewart Enterprises, Inc.
and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.4 to the Companys
Current Report on Form 8-K filed June 27, 2007)
 46




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##### Table of Contents



4.5
    
    Amended and Restated Credit Agreement dated November 19, 2004 by and among the Company,
Empresas Stewart-Cementerios and Empresas Stewart-Funerarias, as Borrowers, Bank of America,
N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer and The
Other Lenders party hereto (incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K filed November 23, 2004)4.6
    
    Indenture dated as of February 11, 2005 by and among Stewart Enterprises, Inc., the
Guarantors thereunder and U.S. Bank National Association, as Trustee, with respect to the 6.25
percent Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K filed February 14, 2005)4.7
    
    Form of 6.25 percent Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed February 14, 2005)4.8
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.125 percent Senior
Convertible Notes due 2014 (including Form of 3.125 percent Senior Convertible Notes due 2014)
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed
June 27, 2007)4.9
    
    Indenture dated June 27, 2007 by and among Stewart Enterprises, Inc., the guarantors named
therein and U.S. Bank National Association, as Trustee, with respect to 3.375 percent Senior
Convertible Notes due 2016 (including Form of 3.375 percent Senior Convertible Notes due 2016)
(incorporated by reference to Exhibit 4.2 to the Companys Current Report on Form 8-K filed
June 27, 2007)4.10
    
    Registration Rights Agreement dated June 27, 2007 by and among Stewart Enterprises, Inc., the
guarantors named therein and the Initial Purchasers (incorporated by reference to Exhibit 4.3
to the Companys Current Report on Form 8-K filed June 27, 2007)10.1
    
    Amendment No. 1 to the Amended and Restated Stewart Enterprises, Inc. Supplemental Retirement
and Deferred Compensation Plan effective December 17, 200810.2
    
    Amended and Restated Stewart Enterprises, Inc. Executive Officer Annual Incentive Plan10.3
    
    Amendment No. 1 to the Amended and Restated Stewart Enterprises, Inc. Supplemental Executive
Retirement Plan effective January 26, 200931.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
 47




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.March 11, 2009
    /s/ THOMAS M. KITCHENThomas M. KitchenSenior Executive Vice President and
Chief Financial OfficerMarch 11, 2009
    /s/ ANGELA M. LACOURAngela M. LacourVice President
Corporate Controller
Chief Accounting Officer 48




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##### Table of Contents



Exhibit Index
 10.1
    
    Amendment No. 1 to the Amended and Restated Stewart Enterprises, Inc. Supplemental Retirement
and Deferred Compensation Plan effective December 17, 200810.2
    
    Amended and Restated Stewart Enterprises, Inc. Executive Officer Annual Incentive Plan10.3
    
    Amendment No. 1 to the Amended and Restated Stewart Enterprises, Inc. Supplemental Executive
Retirement Plan effective January 26, 200931.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen, Senior
Executive Vice President and Chief Financial Officer32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of Thomas J. Crawford,
President and Chief Executive Officer, and Thomas M. Kitchen, Senior Executive Vice President
and Chief Financial Officer
 49