##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q/A
 (Amendment No. 1)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 For the quarterly period ended April 30, 2005
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 
 Commission File Number: 1-15449
 
 STEWART ENTERPRISES, INC.
  LOUISIANA
(State or other jurisdiction of incorporation or organization)
    
    72-0693290
(I.R.S. Employer Identification No.)
 1333 South Clearview Parkway
Jefferson, Louisiana
(Address of principal executive offices)
    
    70121
(Zip Code)
 
 Registrants telephone number, including area code: (504) 729-1400
 
 þ o
  o þ o
 o
 No
o




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EXPLANATORY NOTE
  Segments and Reporting Units
      Deferred Revenue Project
  2




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Other Adjustments
   3




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##### 



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 INDEX
 PagePart I.
    
    Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Earnings  Three Months Ended April 30, 2005 and 2004
    
    5Condensed Consolidated Statements of Earnings  Six Months Ended April 30, 2005 and 2004
    
    6Condensed Consolidated Balance Sheets  April 30, 2005 and October 31, 2004
    
    7Condensed Consolidated Statement of Shareholders Equity  Six Months Ended April 30, 2005
    
    9Condensed Consolidated Statements of Cash Flows  Six Months Ended April 30, 2005 and 2004
    
    10Notes to Condensed Consolidated Financial Statements
    
    11Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    65Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    82Item 4. Controls and Procedures
    
    82Part II.
    
    Other InformationItem 1. Legal Proceedings
    
    85Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    85Item 4. Submission of Matters to a Vote of Security Holders
    
    85Item 5. Other Information
    
    86Item 6. Exhibits
    
    86Signatures
    
    88Calculation of Ratio of Earnings to Fixed ChargesCertification pursuant to Section 302Certification pursuant to Section 302Certifications pursuant to Section 906
  4




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended April 30,2005
    
    
    2004(Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)Revenues:Funeral
    
    $
    74,425
    
    
    $
    69,643Cemetery
    
    
    58,145
    
    
    
    54,795132,570
    
    
    
    124,438Costs and expenses:Funeral
    
    
    54,297
    
    
    
    50,433Cemetery
    
    
    45,048
    
    
    
    42,82199,345
    
    
    
    93,254Gross profit
    
    
    33,225
    
    
    
    31,184Corporate general and administrative expenses
    
    
    (4,582
    )
    
    
    (4,621
    )Separation charges (Note 14)
    
    
    
    
    
    
    (138
    )Gains on dispositions and impairment (losses), net (Note 13)
    
    
    359
    
    
    
    (853
    )Other operating income, net
    
    
    259
    
    
    
    511Operating earnings
    
    
    29,261
    
    
    
    26,083Interest expense
    
    
    (6,671
    )
    
    
    (11,953
    )Loss on early extinguishment of debt (Note 15)
    
    
    (30,057
    )
    
    
    Investment and other income, net
    
    
    112
    
    
    
    57Earnings (loss) from continuing operations before income taxes
    
    
    (7,355
    )
    
    
    14,187Income tax expense (benefit)
    
    
    (2,682
    )
    
    
    5,435Earnings (loss) from continuing operations
    
    
    (4,673
    )
    
    
    8,752Discontinued operations (Note 13):Earnings (loss) from discontinued operations before income taxes
    
    
    (151
    )
    
    
    1,440Income tax expense (benefit)
    
    
    93
    
    
    
    (236
    )Earnings (loss) from discontinued operations
    
    
    (244
    )
    
    
    1,676Net earnings (loss)
    
    $
    (4,917
    )
    
    $
    10,428Basic earnings (loss) per common share:Earnings (loss) from continuing operations
    
    $
    (.04
    )
    
    $
    .08Earnings from discontinued operations
    
    
    
    
    
    
    .02Net earnings (loss)
    
    $
    (.04
    )
    
    $
    .10Diluted earnings (loss) per common share:Earnings (loss) from continuing operations
    
    $
    (.04
    )
    
    $
    .08Earnings from discontinued operations
    
    
    
    
    
    
    .02Net earnings (loss)
    
    $
    (.04
    )
    
    $
    .10Weighted average common shares outstanding (in thousands):Basic
    
    
    109,506
    
    
    
    107,438Diluted
    
    
    109,506
    
    
    
    108,400Dividends declared per common share
    
    $
    .025
    
    
    $
    
  5




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Six Months Ended April 30,2005
    
    
    2004(Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)Revenues:Funeral
    
    $
    144,141
    
    
    $
    142,415Cemetery
    
    
    110,997
    
    
    
    107,193255,138
    
    
    
    249,608Costs and expenses:Funeral
    
    
    106,215
    
    
    
    102,767Cemetery
    
    
    88,456
    
    
    
    83,723194,671
    
    
    
    186,490Gross profit
    
    
    60,467
    
    
    
    63,118Corporate general and administrative expenses
    
    
    (8,798
    )
    
    
    (8,534
    )Separation charges (Note 14)
    
    
    
    
    
    
    (2,131
    )Gains on dispositions and impairment (losses), net (Note 13)
    
    
    1,237
    
    
    
    (550
    )Other operating income, net
    
    
    498
    
    
    
    948Operating earnings
    
    
    53,404
    
    
    
    52,851Interest expense
    
    
    (17,047
    )
    
    
    (24,474
    )Loss on early extinguishment of debt (Note 15)
    
    
    (32,708
    )
    
    
    Investment and other income, net
    
    
    220
    
    
    
    32Earnings from continuing operations before income taxes and
cumulative effect of change in accounting principle
    
    
    3,869
    
    
    
    28,409Income taxes
    
    
    1,153
    
    
    
    10,988Earnings from continuing operations before cumulative effect of
change in accounting principle
    
    
    2,716
    
    
    
    17,421Discontinued operations (Note 13):Earnings from discontinued operations before income taxes
    
    
    379
    
    
    
    2,090Income taxes
    
    
    109
    
    
    
    11Earnings from discontinued operations
    
    
    270
    
    
    
    2,079Earnings before cumulative effect of change in accounting principle
    
    
    2,986
    
    
    
    19,500Cumulative effect of change in accounting principle (net of
$101,061 income tax benefit) (Note 3)
    
    
    (153,180
    )
    
    
    Net earnings (loss)
    
    $
    (150,194
    )
    
    $
    19,500Basic earnings (loss) per common share:Earnings from continuing operations before cumulative effect of
change in accounting principle
    
    $
    .03
    
    
    $
    .16Earnings from discontinued operations
    
    
    
    
    
    
    .02Cumulative effect of change in accounting principle
    
    
    (1.40
    )
    
    
    Net earnings (loss)
    
    $
    (1.37
    )
    
    $
    .18Diluted earnings (loss) per common share:Earnings from continuing operations before cumulative effect of
change in accounting principle
    
    $
    .03
    
    
    $
    .16Earnings from discontinued operations
    
    
    
    
    
    
    .02Cumulative effect of change in accounting principle
    
    
    (1.40
    )
    
    
    Net earnings (loss)
    
    $
    (1.37
    )
    
    $
    .18Weighted average common shares outstanding (in thousands):Basic
    
    
    109,293
    
    
    
    107,660Diluted
    
    
    109,506
    
    
    
    108,177Dividends declared per common share
    
    $
    .025
    
    
    $
    
  6




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 April 30,
    
    
    October 31,2005
    
    
    2004(Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    18,450
    
    
    $
    21,514Marketable securities
    
    
    1,292
    
    
    
    1,297Receivables, net of allowances
    
    
    70,521
    
    
    
    69,133Inventories
    
    
    33,790
    
    
    
    36,174Prepaid expenses
    
    
    3,670
    
    
    
    2,953Deferred income taxes, net
    
    
    4,195
    
    
    
    7,674Assets held for sale
    
    
    5,278
    
    
    
    10,493Total current assets
    
    
    137,196
    
    
    
    149,238Receivables due beyond one year, net of allowances
    
    
    77,244
    
    
    
    78,692Preneed funeral receivables and trust investments
    
    
    498,594
    
    
    
    503,808Preneed cemetery receivables and trust investments
    
    
    258,659
    
    
    
    258,176Goodwill
    
    
    272,729
    
    
    
    272,729Deferred charges (Note 3)
    
    
    
    
    
    
    253,360Cemetery property, at cost
    
    
    366,219
    
    
    
    366,874Property and equipment, at cost:Land
    
    
    41,118
    
    
    
    39,527Buildings
    
    
    300,721
    
    
    
    295,567Equipment and other
    
    
    161,136
    
    
    
    156,205502,975
    
    
    
    491,299Less accumulated depreciation
    
    
    198,732
    
    
    
    189,552Net property and equipment
    
    
    304,243
    
    
    
    301,747Deferred income taxes, net
    
    
    198,509
    
    
    
    93,014Cemetery perpetual care trust investments
    
    
    211,503
    
    
    
    210,267Other assets
    
    
    21,097
    
    
    
    23,603Total assets
    
    $
    2,345,993
    
    
    $
    2,511,508
  7




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
 April 30,
    
    
    October 31,2005
    
    
    2004(Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    5,087
    
    
    $
    1,725Accounts payable
    
    
    9,000
    
    
    
    9,865Accrued payroll
    
    
    10,589
    
    
    
    13,005Accrued insurance
    
    
    22,697
    
    
    
    21,430Accrued interest
    
    
    4,708
    
    
    
    11,315Other current liabilities
    
    
    14,857
    
    
    
    17,889Income taxes payable
    
    
    1,723
    
    
    
    130Liabilities associated with assets held for sale
    
    
    3,484
    
    
    
    6,491Total current liabilities
    
    
    72,145
    
    
    
    81,850Long-term debt, less current maturities
    
    
    413,377
    
    
    
    415,080Deferred preneed funeral revenue
    
    
    290,424
    
    
    
    297,328Deferred preneed cemetery revenue
    
    
    277,945
    
    
    
    280,570Non-controlling interest in funeral and cemetery trusts
    
    
    627,040
    
    
    
    627,344Other long-term liabilities
    
    
    10,636
    
    
    
    12,465Total liabilities
    
    
    1,691,567
    
    
    
    1,714,637Commitments and contingencies
    
    
    
    
    
    
    Non-controlling interest in perpetual care trusts
    
    
    209,833
    
    
    
    208,893Shareholders equity:Preferred stock, $1.00 par value, 5,000,000 shares authorized;
no shares issued
    
    
    
    
    
    
    Common stock, $1.00 stated value:Class A authorized 150,000,000 shares; issued and outstanding
106,143,977 and 104,330,101 shares at April 30, 2005
and October 31, 2004, respectively
    
    
    106,144
    
    
    
    104,330Class B authorized 5,000,000 shares; issued and outstanding
3,555,020 shares at April 30, 2005 and October 31, 2004;
10 votes per share; convertible into an equal number of
Class A shares
    
    
    3,555
    
    
    
    3,555Additional paid-in capital
    
    
    679,098
    
    
    
    673,630Accumulated deficit
    
    
    (343,176
    )
    
    
    (192,982
    )Unearned restricted stock compensation
    
    
    (1,028
    )
    
    
    (222
    )Accumulated other comprehensive loss:Derivative financial instrument losses
    
    
    
    
    
    
    (333
    )Total accumulated other comprehensive losses
    
    
    
    
    
    
    (333
    )Total shareholders equity
    
    
    444,593
    
    
    
    587,978Total liabilities and shareholders equity
    
    $
    2,345,993
    
    
    $
    2,511,508
  8




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
(Dollars in thousands, except per share amounts)
 DerivativeRetained
    
    
    Unearned
    
    
    FinancialAdditional
    
    
    Earnings
    
    
    Restricted
    
    
    Instrument
    
    
    TotalCommon
    
    
    Paid-In
    
    
    (Accumulated
    
    
    Stock
    
    
    Gains
    
    
    ShareholdersStock(1)
    
    
    Capital
    
    
    Deficit)
    
    
    Compensation
    
    
    (Losses)
    
    
    Equity(Restated)
    
    
    
    
    
    
    
    
    
    
    (Restated)(Note 1)
    
    
    
    
    
    
    
    
    
    
    (Note 1)Balance October 31, 2004  as previously reported
    
    $
    107,885
    
    
    $
    673,630
    
    
    $
    3,298
    
    
    $
    (222
    )
    
    $
    (333
    )
    
    $
    784,258Prior period adjustments
    
    
    
    
    
    
    
    
    
    
    (196,280
    )
    
    
    
    
    
    
    
    
    
    
    (196,280
    )Balance October 31, 2004  Restated (Note 1)
    
    $
    107,885
    
    
    $
    673,630
    
    
    $
    (192,982
    )
    
    $
    (222
    )
    
    $
    (333
    )
    
    $
    587,978Comprehensive income (loss):Net loss-Restated (Note 1)
    
    
    
    
    
    
    
    
    
    
    (150,194
    )
    
    
    
    
    
    
    
    
    
    
    (150,194
    )Other comprehensive income:Unrealized appreciation on derivative
instrument designated and qualifying
as a cash flow hedging instrument, net
of deferred tax expense of ($204)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333
    
    
    
    333Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333
    
    
    
    333Total comprehensive income (loss)-Restated (Note 1)
    
    
    
    
    
    
    
    
    
    
    (150,194
    )
    
    
    
    
    
    
    333
    
    
    
    (149,861
    )Restricted stock activity
    
    
    166
    
    
    
    992
    
    
    
    
    
    
    
    (806
    )
    
    
    
    
    
    
    352Issuance of common stock
    
    
    37
    
    
    
    183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    220Stock options exercised
    
    
    2,511
    
    
    
    9,877
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,388Tax benefit associated with stock options exercised
    
    
    
    
    
    
    1,939
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,939Purchase and retirement of common stock
    
    
    (900
    )
    
    
    (4,781
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,681
    )Dividends ($.025 per share)
    
    
    
    
    
    
    (2,742
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,742
    )Balance April 30, 2005  Restated (Note 1)
    
    $
    109,699
    
    
    $
    679,098
    
    
    $
    (343,176
    )
    
    $
    (1,028
    )
    
    $
    
    
    
    $
    444,593
 
 (1)
    
    Amount includes 106,144 and 104,330 shares (in thousands) of Class A common stock
with a stated value of $1 per share as of April 30, 2005 and October 31, 2004, respectively,
and includes 3,555 shares (in thousands) of Class B common stock.  9




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands, except per share amounts)
 Six Months Ended April 30,2005
    
    
    2004(Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)Cash flows from operating activities:Net earnings (loss)
    
    $
    (150,194
    )
    
    $
    19,500Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:(Gains) on dispositions and impairment losses, net
    
    
    (1,682
    )
    
    
    (478
    )Cumulative effect of change in accounting principle
    
    
    153,180
    
    
    
    Loss on early extinguishment of debt
    
    
    32,708
    
    
    
    Premiums paid on early extinguishment of debt
    
    
    (25,369
    )
    
    
    Depreciation and amortization
    
    
    10,324
    
    
    
    11,725Amortization of preneed selling costs
    
    
    
    
    
    
    11,986Amortization of deferred financing costs
    
    
    739
    
    
    
    2,612Provision for doubtful accounts
    
    
    3,063
    
    
    
    4,197Net loss realized on marketable securities
    
    
    
    
    
    
    94Provision for deferred income taxes
    
    
    (681
    )
    
    
    5,046Tax benefit on stock options exercised
    
    
    1,939
    
    
    
    595Other
    
    
    771
    
    
    
    197Changes in assets and liabilities:(Increase) decrease in other receivables
    
    
    (6,066
    )
    
    
    25,649(Increase) decrease in inventories and cemetery property
    
    
    1,794
    
    
    
    (77
    )Increase (decrease) in accounts payable and accrued expenses
    
    
    (9,130
    )
    
    
    1,305Net effect of preneed funeral production and maturities
    
    
    (7,835
    )
    
    
    (12,813
    )Net effect of preneed cemetery production and deliveries
    
    
    2,266
    
    
    
    9,012Change in deferred charges  prearranged acquisition costs
    
    
    
    
    
    
    (16,763
    )Decrease in other
    
    
    (2,177
    )
    
    
    (908
    )Net cash provided by operating activities
    
    
    3,650
    
    
    
    60,879Cash flows from investing activities:Proceeds from sales of marketable securities
    
    
    16
    
    
    
    1,019Proceeds from sale of assets, net
    
    
    6,385
    
    
    
    8,938Additions to property and equipment
    
    
    (12,968
    )
    
    
    (8,333
    )Other
    
    
    (188
    )
    
    
    47Net cash provided by (used in) investing activities
    
    
    (6,755
    )
    
    
    1,671Cash flows from financing activities:Proceeds from long-term debt
    
    
    440,000
    
    
    
    Repayments of long-term debt
    
    
    (438,341
    )
    
    
    (48,158
    )Debt issue costs
    
    
    (5,811
    )
    
    
    Issuance of common stock
    
    
    12,608
    
    
    
    4,711Purchase and retirement of common stock
    
    
    (5,681
    )
    
    
    (10,692
    )Dividends
    
    
    (2,742
    )
    
    
    Other
    
    
    8
    
    
    
    Net cash provided by (used in) financing activities
    
    
    41
    
    
    
    (54,139
    )Net increase (decrease) in cash
    
    
    (3,064
    )
    
    
    8,411Cash and cash equivalents, beginning of period
    
    
    21,514
    
    
    
    18,585Cash and cash equivalents, end of period
    
    $
    18,450
    
    
    $
    26,996Supplemental cash flow information:Cash paid (received) during the period for:Income taxes
    
    $
    2,400
    
    
    $
    (29,800
    )Interest
    
    $
    22,500
    
    
    $
    21,500
  10




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Restatement
  (A)
    
    The incorrect determination of operating and reportable segments and reporting units
related to the application of FASB Statement No. 142, Goodwill and Other Intangible
Assets, (SFAS No. 142), which also had the effect of changing the charges recorded for
the assets sold as part of the Companys plan initiated in December 2003 (see Note 13) to
sell a number of businesses, and the net book value of assets held for sale on its balance
sheet.(B)
    
    Errors identified in revenue recognition of preneed cemetery merchandise and services
contracts and recognition of realized trust earnings on preneed cemetery and funeral
merchandise and services contracts.(C)
    
    Other miscellaneous adjustments, including adjustments for lease-related accounting
practices.
  Segments and Reporting Units
     11




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Restatement(Continued)
 Deferred Revenue Project
    Other Adjustments
   12




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Restatement(Continued)
 Effect of
    
    
    Effect ofrestating to
    
    
    restating to
    
    
    
    
    
    
    
    
    
    
    As Restated andAs Previously
    
    
    correct for
    
    
    correct for the
    
    
    
    
    
    
    As Restated-
    
    
    ReclassifiedReported- Three
    
    
    goodwill
    
    
    impact of the
    
    
    
    
    
    
    Three Months
    
    
    Three MonthsMonths Ended
    
    
    reporting
    
    
    deferred
    
    
    Other
    
    
    Ended
    
    
    EndedApril 30, 2005(1)
    
    
    unit errors
    
    
    revenue project
    
    
    Adjustments(2)
    
    
    April 30, 2005
    
    
    April 30, 2005(3)Consolidated Statements of Earnings:Revenues:Funeral
    
    $
    75,524
    
    
    $
    
    
    
    $
    (919
    )
    
    $
    
    
    
    $
    74,605
    
    
    $
    74,425Cemetery
    
    
    61,139
    
    
    
    
    
    
    
    (2,790
    )
    
    
    
    
    
    
    58,349
    
    
    
    58,145136,663
    
    
    
    
    
    
    
    (3,709
    )
    
    
    
    
    
    
    132,954
    
    
    
    132,570Costs and expenses:Funeral
    
    
    56,367
    
    
    
    
    
    
    
    
    
    
    
    (1,839
    )
    
    
    54,528
    
    
    
    54,297Cemetery
    
    
    45,196
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,196
    
    
    
    45,048101,563
    
    
    
    
    
    
    
    
    
    
    
    (1,839
    )
    
    
    99,724
    
    
    
    99,345Gross profit
    
    
    35,100
    
    
    
    
    
    
    
    (3,709
    )
    
    
    1,839
    
    
    
    33,230
    
    
    
    33,225Corporate general and administrative
expenses
    
    
    (4,582
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,582
    )
    
    
    (4,582
    )Gains on dispositions and impairment
(losses), net
    
    
    421
    
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    389
    
    
    
    359Other operating income, net
    
    
    261
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    261
    
    
    
    259Operating earnings
    
    
    31,200
    
    
    
    (32
    )
    
    
    (3,709
    )
    
    
    1,839
    
    
    
    29,298
    
    
    
    29,261Interest expense
    
    
    (6,671
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,671
    )
    
    
    (6,671
    )Loss on early extinguishment of debt
    
    
    (30,057
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,057
    )
    
    
    (30,057
    )Investment and other income, net
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    112Loss from continuing operations before
income taxes
    
    
    (5,417
    )
    
    
    (32
    )
    
    
    (3,709
    )
    
    
    1,839
    
    
    
    (7,319
    )
    
    
    (7,355
    )Income tax benefit
    
    
    (1,519
    )
    
    
    (42
    )
    
    
    (1,819
    )
    
    
    690
    
    
    
    (2,690
    )
    
    
    (2,682
    )Loss from continuing operations
    
    
    (3,898
    )
    
    
    10
    
    
    
    (1,890
    )
    
    
    1,149
    
    
    
    (4,629
    )
    
    
    (4,673
    )Loss from discontinued operations
before income taxes
    
    
    (186
    )
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (189
    )
    
    
    (151
    )Income tax expense (benefit)
    
    
    (94
    )
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    99
    
    
    
    93Loss from discontinued operations
    
    
    (92
    )
    
    
    (196
    )
    
    
    
    
    
    
    
    
    
    
    (288
    )
    
    
    (244
    )Net loss
    
    $
    (3,990
    )
    
    $
    (186
    )
    
    $
    (1,890
    )
    
    $
    1,149
    
    
    $
    (4,917
    )
    
    $
    (4,917
    )Basic loss per common share:Loss from continuing operations
    
    $
    (.04
    )
    
    $
    
    
    
    $
    (.01
    )
    
    $
    .01
    
    
    $
    (.04
    )
    
    $
    (.04
    )Earnings from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss per share
    
    $
    (.04
    )
    
    $
    
    
    
    $
    (.01
    )
    
    $
    .01
    
    
    $
    (.04
    )
    
    $
    (.04
    )Diluted loss per common share:Loss from continuing operations
    
    $
    (.04
    )
    
    $
    
    
    
    $
    (.01
    )
    
    $
    .01
    
    
    $
    (.04
    )
    
    $
    (.04
    )Earnings from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss per share
    
    $
    (.04
    )
    
    $
    
    
    
    $
    (.01
    )
    
    $
    .01
    
    
    $
    (.04
    )
    
    $
    (.04
    )
 
 (1)
    
    The previously reported amounts represent amounts reported in the Form 10-Q for
the quarter ended April 30, 2005 filed on June 9, 2005.(2)
    
    Represents adjustments which are immaterial individually and in the aggregate
relating to lease-related accounting practices and other miscellaneous adjustments.(3)
    
    Represents the October 2005 classification of continuing and discontinued
operations. 13




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Restatement(Continued)
 Effect of
    
    
    Effect ofrestating to
    
    
    restating toAs Previously
    
    
    correct for
    
    
    correct for the
    
    
    
    
    
    
    
    
    
    
    As Restated andReported-Six
    
    
    goodwill
    
    
    impact of the
    
    
    
    
    
    
    As Restated- Six
    
    
    Reclassified-SixMonths Ended
    
    
    reporting
    
    
    deferred
    
    
    Other
    
    
    Months Ended
    
    
    Months EndedApril 30, 2005 (1)
    
    
    unit errors
    
    
    revenue project
    
    
    Adjustments(2)
    
    
    April 30, 2005
    
    
    April 30, 2005(3)Consolidated Statements of Earnings:Revenues:Funeral
    
    $
    147,026
    
    
    $
    
    
    
    $
    (2,527
    )
    
    $
    
    
    
    $
    144,499
    
    
    $
    144,141Cemetery
    
    
    115,786
    
    
    
    
    
    
    
    (4,382
    )
    
    
    
    
    
    
    111,404
    
    
    
    110,997262,812
    
    
    
    
    
    
    
    (6,909
    )
    
    
    
    
    
    
    255,903
    
    
    
    255,138Costs and expenses:Funeral
    
    
    108,426
    
    
    
    
    
    
    
    
    
    
    
    (1,839
    )
    
    
    106,587
    
    
    
    106,215Cemetery
    
    
    88,703
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,703
    
    
    
    88,456197,129
    
    
    
    
    
    
    
    
    
    
    
    (1,839
    )
    
    
    195,290
    
    
    
    194,671Gross profit
    
    
    65,683
    
    
    
    
    
    
    
    (6,909
    )
    
    
    1,839
    
    
    
    60,613
    
    
    
    60,467Corporate general and administrative
expenses
    
    
    (8,798
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,798
    )
    
    
    (8,798
    )Gains on dispositions and impairment
(losses), net
    
    
    1,147
    
    
    
    138
    
    
    
    
    
    
    
    
    
    
    
    1,285
    
    
    
    1,237Other operating income, net
    
    
    505
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    505
    
    
    
    498Operating earnings
    
    
    58,537
    
    
    
    138
    
    
    
    (6,909
    )
    
    
    1,839
    
    
    
    53,605
    
    
    
    53,404Interest expense
    
    
    (17,047
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,047
    )
    
    
    (17,047
    )Loss on early extinguishment of debt
    
    
    (32,708
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,708
    )
    
    
    (32,708
    )Investment and other income, net
    
    
    219
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    219
    
    
    
    220Earnings from continuing operations
before income taxes
    
    
    9,001
    
    
    
    138
    
    
    
    (6,909
    )
    
    
    1,839
    
    
    
    4,069
    
    
    
    3,869Income taxes
    
    
    4,008
    
    
    
    (123
    )
    
    
    (3,321
    )
    
    
    690
    
    
    
    1,254
    
    
    
    1,153Earnings from continuing operations
before cumulative effect of change in
accounting principle
    
    
    4,993
    
    
    
    261
    
    
    
    (3,588
    )
    
    
    1,149
    
    
    
    2,815
    
    
    
    2,716Earnings from discontinued operations
before income taxes
    
    
    127
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    177
    
    
    
    379Income taxes
    
    
    125
    
    
    
    (119
    )
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    109Earnings from discontinued operations
    
    
    2
    
    
    
    169
    
    
    
    
    
    
    
    
    
    
    
    171
    
    
    
    270Earnings before cumulative effect of
change in accounting principle
    
    
    4,995
    
    
    
    430
    
    
    
    (3,588
    )
    
    
    1,149
    
    
    
    2,986
    
    
    
    2,986Cumulative effect of change in
accounting principle
    
    
    (141,318
    )
    
    
    
    
    
    
    (11,862
    )
    
    
    
    
    
    
    (153,180
    )
    
    
    (153,180
    )Net loss
    
    $
    (136,323
    )
    
    $
    430
    
    
    $
    (15,450
    )
    
    $
    1,149
    
    
    $
    (150,194
    )
    
    $
    (150,194
    )Basic earnings (loss) per common share:Earnings from continuing operations
    
    $
    .05
    
    
    $
    
    
    
    $
    (.03
    )
    
    $
    .01
    
    
    $
    .03
    
    
    $
    .03Earnings from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative effect of change in
accounting principle
    
    
    (1.30
    )
    
    
    
    
    
    
    (.10
    )
    
    
    
    
    
    
    (1.40
    )
    
    
    (1.40
    )Net loss per share
    
    $
    (1.25
    )
    
    $
    
    
    
    $
    (.13
    )
    
    $
    .01
    
    
    $
    (1.37
    )
    
    $
    (1.37
    )Diluted earnings (loss) per common
share:Earnings from continuing operations
    
    $
    .05
    
    
    $
    
    
    
    $
    (.03
    )
    
    $
    .01
    
    
    $
    .03
    
    
    $
    .03Earnings from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative effect of change in
accounting principle
    
    
    (1.29
    )
    
    
    
    
    
    
    (.11
    )
    
    
    
    
    
    
    (1.40
    )
    
    
    (1.40
    )Net loss per share
    
    $
    (1.24
    )
    
    $
    
    
    
    $
    (.14
    )
    
    $
    .01
    
    
    $
    (1.37
    )
    
    $
    (1.37
    )
 
 (1)
    
    The previously reported amounts represent amounts reported in the Form 10-Q for
the quarter ended April 30, 2005 filed on June 9, 2005.(2)
    
    Represents adjustments which are immaterial individually and in the aggregate
relating to lease-related accounting practices and other miscellaneous adjustments.(3)
    
    Represents the October 2005 classification of continuing and discontinued
operations. 14




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Restatement(Continued)
 Effect of
    
    
    Effect ofrestating to
    
    
    restating to
    
    
    
    
    
    
    
    
    
    
    As Restated andAs Previously
    
    
    correct for
    
    
    correct for the
    
    
    
    
    
    
    As Restated -
    
    
    Reclassified Reported-Three
    
    
    goodwill
    
    
    impact of the
    
    
    
    
    
    
    Three Months
    
    
    Three MonthsMonths Ended
    
    
    reporting
    
    
    deferred
    
    
    Other
    
    
    Ended
    
    
    EndedApril 30, 2005(1)
    
    
    unit errors
    
    
    revenue project
    
    
    Adjustments(2)
    
    
    April 30, 2004
    
    
    April 30, 2004(3)Consolidated Statements of Earnings:Revenues:Funeral
    
    $
    71,582
    
    
    $
    
    
    
    $
    (2,126
    )
    
    $
    
    
    
    $
    69,456
    
    
    $
    69,643Cemetery
    
    
    59,511
    
    
    
    
    
    
    
    (4,300
    )
    
    
    
    
    
    
    55,211
    
    
    
    54,795131,093
    
    
    
    
    
    
    
    (6,426
    )
    
    
    
    
    
    
    124,667
    
    
    
    124,438Costs and expenses:Funeral
    
    
    50,232
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    50,285
    
    
    
    50,433Cemetery
    
    
    44,043
    
    
    
    
    
    
    
    (1,022
    )
    
    
    
    
    
    
    43,021
    
    
    
    42,82194,275
    
    
    
    
    
    
    
    (1,022
    )
    
    
    53
    
    
    
    93,306
    
    
    
    93,254Gross profit
    
    
    36,818
    
    
    
    
    
    
    
    (5,404
    )
    
    
    (53
    )
    
    
    31,361
    
    
    
    31,184Corporate general and administrative
expenses
    
    
    (4,621
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,621
    )
    
    
    (4,621
    )Separation charges
    
    
    (138
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (138
    )
    
    
    (138
    )Gains on dispositions and impairment
(losses), net
    
    
    (315
    )
    
    
    (653
    )
    
    
    
    
    
    
    
    
    
    
    (968
    )
    
    
    (853
    )Other operating income, net
    
    
    504
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    504
    
    
    
    511Operating earnings
    
    
    32,248
    
    
    
    (653
    )
    
    
    (5,404
    )
    
    
    (53
    )
    
    
    26,138
    
    
    
    26,083Interest expense
    
    
    (11,953
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,953
    )
    
    
    (11,953
    )Investment and other income, net
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    57Earnings from continuing operations
before income taxes
    
    
    20,352
    
    
    
    (653
    )
    
    
    (5,404
    )
    
    
    (53
    )
    
    
    14,242
    
    
    
    14,187Income taxes
    
    
    7,615
    
    
    
    (350
    )
    
    
    (1,797
    )
    
    
    (20
    )
    
    
    5,448
    
    
    
    5,435Earnings from continuing operations
    
    
    12,737
    
    
    
    (303
    )
    
    
    (3,607
    )
    
    
    (33
    )
    
    
    8,794
    
    
    
    8,752Earnings from discontinued operations
before income taxes
    
    
    1,573
    
    
    
    (188
    )
    
    
    
    
    
    
    
    
    
    
    1,385
    
    
    
    1,440Income tax benefit
    
    
    (447
    )
    
    
    198
    
    
    
    
    
    
    
    
    
    
    
    (249
    )
    
    
    (236
    )Earnings from discontinued operations
    
    
    2,020
    
    
    
    (386
    )
    
    
    
    
    
    
    
    
    
    
    1,634
    
    
    
    1,676Net earnings
    
    $
    14,757
    
    
    $
    (689
    )
    
    $
    (3,607
    )
    
    $
    (33
    )
    
    $
    10,428
    
    
    $
    10,428Basic earnings per common share:Earnings from continuing operations
    
    $
    .12
    
    
    $
    (.01
    )
    
    $
    (.03
    )
    
    $
    
    
    
    $
    .08
    
    
    $
    .08Earnings from discontinued operations
    
    
    .02
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .02
    
    
    
    .02Net earnings per share
    
    $
    .14
    
    
    $
    (.01
    )
    
    $
    (.03
    )
    
    $
    
    
    
    $
    .10
    
    
    $
    .10Diluted earnings per common share:Earnings from continuing operations
    
    $
    .12
    
    
    $
    (.01
    )
    
    $
    (.03
    )
    
    $
    
    
    
    $
    .08
    
    
    $
    .08Earnings from discontinued operations
    
    
    .02
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .02
    
    
    
    .02Net earnings per share
    
    $
    .14
    
    
    $
    (.01
    )
    
    $
    (.03
    )
    
    $
    
    
    
    $
    .10
    
    
    $
    .10
 
 (1)
    
    The previously reported amounts represent amounts reported in the Form 10-Q for
the quarter ended April 30, 2005 filed on June 9, 2005.(2)
    
    Represents adjustments which are immaterial individually and in the aggregate
relating to lease-related accounting practices and other miscellaneous adjustments.(3)
    
    Represents the October 2005 classification of continuing and discontinued
operations. 15




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (1) Restatement(Continued)
 Effect ofrestating toEffect of
    
    
    correct forrestating to
    
    
    the impactAs Previously
    
    
    correct for
    
    
    of the
    
    
    
    
    
    
    As Restated -
    
    
    As Restated andReported- Six
    
    
    goodwill
    
    
    deferred
    
    
    
    
    
    
    Six Months
    
    
    Reclassified  SixMonths Ended
    
    
    reporting
    
    
    revenue
    
    
    Other
    
    
    Ended
    
    
    Months EndedApril 30, 2005 (1)
    
    
    unit errors
    
    
    project
    
    
    Adjustments(2)
    
    
    April 30, 2004
    
    
    April 30, 2004(3)Consolidated Statements of Earnings:Revenues:Funeral
    
    $
    146,309
    
    
    $
    
    
    
    $
    (4,086
    )
    
    $
    
    
    
    $
    142,223
    
    
    $
    142,415Cemetery
    
    
    115,526
    
    
    
    
    
    
    
    (7,629
    )
    
    
    
    
    
    
    107,897
    
    
    
    107,193261,835
    
    
    
    
    
    
    
    (11,715
    )
    
    
    
    
    
    
    250,120
    
    
    
    249,608Costs and expenses:Funeral
    
    
    102,128
    
    
    
    
    
    
    
    
    
    
    
    357
    
    
    
    102,485
    
    
    
    102,767Cemetery
    
    
    85,892
    
    
    
    
    
    
    
    (1,772
    )
    
    
    
    
    
    
    84,120
    
    
    
    83,723188,020
    
    
    
    
    
    
    
    (1,772
    )
    
    
    357
    
    
    
    186,605
    
    
    
    186,490Gross profit
    
    
    73,815
    
    
    
    
    
    
    
    (9,943
    )
    
    
    (357
    )
    
    
    63,515
    
    
    
    63,118Corporate general and administrative
expenses
    
    
    (8,534
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,534
    )
    
    
    (8,534
    )Separation charges
    
    
    (2,131
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,131
    )
    
    
    (2,131
    )Gains on dispositions and impairment
(losses), net
    
    
    288
    
    
    
    (653
    )
    
    
    
    
    
    
    (300
    )
    
    
    (665
    )
    
    
    (550
    )Other operating income, net
    
    
    943
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    943
    
    
    
    948Operating earnings
    
    
    64,381
    
    
    
    (653
    )
    
    
    (9,943
    )
    
    
    (657
    )
    
    
    53,128
    
    
    
    52,851Interest expense
    
    
    (24,474
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,474
    )
    
    
    (24,474
    )Investment and other income (expense),
net
    
    
    (1,068
    )
    
    
    
    
    
    
    
    
    
    
    1,100
    
    
    
    32
    
    
    
    32Earnings from continuing operations
before income taxes
    
    
    38,839
    
    
    
    (653
    )
    
    
    (9,943
    )
    
    
    443
    
    
    
    28,686
    
    
    
    28,409Income taxes
    
    
    14,640
    
    
    
    (350
    )
    
    
    (3,372
    )
    
    
    168
    
    
    
    11,086
    
    
    
    10,988Earnings from continuing operations
    
    
    24,199
    
    
    
    (303
    )
    
    
    (6,571
    )
    
    
    275
    
    
    
    17,600
    
    
    
    17,421Earnings from discontinued operations
before income taxes
    
    
    2,001
    
    
    
    (188
    )
    
    
    
    
    
    
    
    
    
    
    1,813
    
    
    
    2,090Income tax expense (benefit)
    
    
    (285
    )
    
    
    198
    
    
    
    
    
    
    
    
    
    
    
    (87
    )
    
    
    11Earnings from discontinued operations
    
    
    2,286
    
    
    
    (386
    )
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    2,079Net earnings
    
    $
    26,485
    
    
    $
    (689
    )
    
    $
    (6,571
    )
    
    $
    275
    
    
    $
    19,500
    
    
    $
    19,500Basic earnings per common share:Earnings from continuing operations
    
    $
    .22
    
    
    $
    
    
    
    $
    (.06
    )
    
    $
    
    
    
    $
    .16
    
    
    $
    .16Earnings from discontinued operations
    
    
    .03
    
    
    
    (.01
    )
    
    
    
    
    
    
    
    
    
    
    .02
    
    
    
    .02Net earnings per share
    
    $
    .25
    
    
    $
    (.01
    )
    
    $
    (.06
    )
    
    $
    
    
    
    $
    .18
    
    
    $
    .18Diluted earnings per common share:Earnings from continuing operations
    
    $
    .22
    
    
    $
    
    
    
    $
    (.06
    )
    
    $
    
    
    
    $
    .16
    
    
    $
    .16Earnings from discontinued operations
    
    
    .02
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .02
    
    
    
    .02Net earnings per share
    
    $
    .24
    
    
    $
    
    
    
    $
    (.06
    )
    
    $
    
    
    
    $
    .18
    
    
    $
    .18
 
 (1)
    
    The previously reported amounts represent amounts reported in the Form 10-Q
for the quarter ended April 30, 2005 filed on June 9, 2005.(2)
    
    Represents adjustments which are immaterial individually and in the aggregate
relating to lease-related accounting practices and other miscellaneous adjustments.(3)
    
    Represents the October 2005 classification of continuing and discontinued
operations. 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)
 (1) Restatement(Continued)
 Effect of
    
    Effect ofrestating to
    
    restating tocorrect for
    
    correct for theAs Previously
    
    goodwill
    
    impact of the
    
    
    
    
    
    
    
    
    
    As Restated andReported 
    
    reporting unit
    
    deferred revenue
    
    Other
    
    As Restated 
    
    Reclassified -April 30, 2005 (1)
    
    errors
    
    project
    
    adjustments(2)
    
    April 30, 2005
    

April 30, 2005 (3)Consolidated Balance Sheets:Assets held for sale
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,278Total current assets
    
    
    126,960
    
    
    
    
    
    
    
    8,966
    
    
    
    (2,681
    )
    
    
    133,245
    
    
    
    137,196Deferred income taxes
    
    
    134,106
    
    
    
    12,036
    
    
    
    48,740
    
    
    
    3,677
    
    
    
    198,559
    
    
    
    198,509Goodwill
    
    
    405,627
    
    
    
    (131,227
    )
    
    
    2,979
    
    
    
    (4,541
    )
    
    
    272,838
    
    
    
    272,729Total assets
    
    
    2,407,459
    
    
    
    (121,427
    )
    
    
    60,685
    
    
    
    (724
    )
    
    
    2,345,993
    
    
    
    2,345,993Liabilities associated with
assets held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,484Total current liabilities
    
    
    61,964
    
    
    
    
    
    
    
    790
    
    
    
    5,907
    
    
    
    68,661
    
    
    
    72,145Deferred preneed funeral revenue
    
    
    145,554
    
    
    
    
    
    
    
    150,861
    
    
    
    (4,800
    )
    
    
    291,615
    
    
    
    290,424Deferred preneed cemetery revenue
    
    
    282,736
    
    
    
    
    
    
    
    (4,068
    )
    
    
    (5
    )
    
    
    278,663
    
    
    
    277,945Accumulated deficit
    
    
    (133,025
    )
    
    
    (121,427
    )
    
    
    (86,898
    )
    
    
    (1,826
    )
    
    
    (343,176
    )
    
    
    (343,176
    )Total shareholders equity
    
    
    654,744
    
    
    
    (121,427
    )
    
    
    (86,898
    )
    
    
    (1,826
    )
    
    
    444,593
    
    
    
    444,593Total liabilities and
shareholders equity
    
    
    2,407,459
    
    
    
    (121,427
    )
    
    
    60,685
    
    
    
    (724
    )
    
    
    2,345,993
    
    
    
    2,345,993
 
 (1)
    
    The previously reported amounts represent amounts reported in the Form 10-Q for
the quarter ended April 30, 2005 filed on June 9, 2005.(2)
    
    Represents adjustments which are immaterial individually and in the aggregate
relating to lease-related accounting practices and other miscellaneous adjustments.(3)
    
    Represents the October 2005 classification of continuing and discontinued
operations. Effect ofrestating to
    
    
    
    
    
    
    
    
    
    As RestatedAs Previously
    
    Effect of restating
    
    correct for the
    
    
    
    
    
    
    
    
    
    andReported -
    
    to correct for
    
    impact of the
    
    
    
    
    
    As Restated -
    
    ReclassifiedOctober
    
    goodwill reporting
    
    deferred
    
    Other
    
    October
    
    October 31,31, 2004(1)
    
    unit errors
    
    revenue project
    
    adjustments(2)
    
    31, 2004
    
    2004(3)Consolidated Balance Sheets:Assets held for sale
    
    $
    3,590
    
    
    $
    (15
    )
    
    $
    
    
    
    $
    
    
    
    $
    3,575
    
    
    $
    10,493Total current assets
    
    
    134,491
    
    
    
    (15
    )
    
    
    8,966
    
    
    
    (1,597
    )
    
    
    141,845
    
    
    
    149,238Deferred income taxes
    
    
    43,124
    
    
    
    11,794
    
    
    
    37,593
    
    
    
    481
    
    
    
    92,992
    
    
    
    93,014Goodwill
    
    
    404,169
    
    
    
    (131,400
    )
    
    
    2,980
    
    
    
    (2,976
    )
    
    
    272,773
    
    
    
    272,729Total assets
    
    
    2,565,198
    
    
    
    (121,857
    )
    
    
    69,226
    
    
    
    (1,081
    )
    
    
    2,511,486
    
    
    
    2,511,508Liabilities associated with
assets held for sale
    
    
    2,388
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,388
    
    
    
    6,491Total current liabilities
    
    
    71,781
    
    
    
    
    
    
    
    790
    
    
    
    5,176
    
    
    
    77,747
    
    
    
    81,850Deferred preneed funeral revenue
    
    
    156,164
    
    
    
    
    
    
    
    145,161
    
    
    
    (2,653
    )
    
    
    298,672
    
    
    
    297,328Deferred preneed cemetery revenue
    
    
    288,516
    
    
    
    
    
    
    
    (5,278
    )
    
    
    (1,963
    )
    
    
    281,275
    
    
    
    280,570Retained earnings (accumulated
deficit)
    
    
    3,298
    
    
    
    (121,857
    )
    
    
    (71,447
    )
    
    
    (2,976
    )
    
    
    (192,982
    )
    
    
    (192,982
    )Total shareholders equity
    
    
    784,258
    
    
    
    (121,857
    )
    
    
    (71,447
    )
    
    
    (2,976
    )
    
    
    587,978
    
    
    
    587,978Total liabilities and
shareholders equity
    
    
    2,565,198
    
    
    
    (121,857
    )
    
    
    69,226
    
    
    
    (1,081
    )
    
    
    2,511,486
    
    
    
    2,511,508
 
 (1)
    
    The previously reported amounts represent amounts reported in the April 12, 2005
Form 8-K.(2)
    
    Represents adjustments which are immaterial individually and in the aggregate
relating to lease-related accounting practices and other miscellaneous adjustments.(3)
    
    Represents the October 2005 classification of continuing and discontinued
operations. 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)
 (1) Restatement(Continued)
  (2) Basis of Presentation
 The Company
  Principles of Consolidation
  Interim Disclosures
    Use of Estimates
  Fair Value of Financial Instruments
  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)
 (2) Basis of Presentation(Continued)
    Inventories
  Depreciation and Amortization
  Long-lived Assets
  Goodwill (Restated)
  19




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2) Basis of Presentation(Continued)
      Stock-Based Compensation
  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)
 (2) Basis of Presentation(Continued)
 Three Months Ended
    
    
    Six Months EndedApril 30,
    
    
    April 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Net earnings (loss)
    
    $
    (4,917
    )
    
    $
    10,428
    
    
    $
    (150,194
    )
    
    $
    19,500Stock-based employee compensation
expense included in reported net
earnings, net of tax
    
    
    129
    
    
    
    160
    
    
    
    218
    
    
    
    231Total stock-based employee
compensation expense determined
under fair value-based method, net
of tax
    
    
    (408
    )
    
    
    (554
    )
    
    
    (935
    )
    
    
    (971
    )Pro forma net earnings (loss)
    
    $
    (5,196
    )
    
    $
    10,034
    
    
    $
    (150,911
    )
    
    $
    18,760Net earnings (loss) per common share:Basic  as reported
    
    $
    (.04
    )
    
    $
    .10
    
    
    $
    (1.37
    )
    
    $
    .18Basic  pro forma
    
    $
    (.05
    )
    
    $
    .09
    
    
    $
    (1.38
    )
    
    $
    .17Diluted  as reported
    
    $
    (.04
    )
    
    $
    .10
    
    
    $
    (1.37
    )
    
    $
    .18Diluted  pro forma
    
    $
    (.05
    )
    
    $
    .09
    
    
    $
    (1.38
    )
    
    $
    .17
 Funeral Revenue
     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)
 (2) Basis of Presentation(Continued)
   Cemetery Revenue
     22




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (2) Basis of Presentation(Continued)
   Allowance for Doubtful Accounts
  Income Taxes
     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)
 (2) Basis of Presentation(Continued)
   Earnings Per Common Share
    Derivatives
  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)
 (2) Basis of Presentation(Continued)
  Estimated Insurance Loss Liabilities
     Dividends
 
 Leases
   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)
 (2) Basis of Presentation(Continued)
  Reclassifications
    (3) Change in Accounting Principles and New Accounting Principles
 Preneed Selling Costs
    26




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Change in Accounting Principles and New Accounting Principles(Continued)
 Three Months Ended
    
    
    Six Months EndedApril 30, 2004
    
    
    April 30, 2004As Reported
    
    
    
    
    
    
    
    
    
    
    As ReportedRestated (Note 1)
    
    
    Changes
    
    
    Pro Forma
    
    
    Restated (Note 1)
    
    
    Changes
    
    
    Pro FormaGross profit:Funeral
    
    $
    19,210
    
    
    $
    (1,575
    )
    
    $
    17,635
    
    
    $
    39,648
    
    
    $
    (2,154
    )
    
    $
    37,494Cemetery
    
    
    11,974
    
    
    
    (1,777
    )
    
    
    10,197
    
    
    
    23,470
    
    
    
    (2,774
    )
    
    
    20,696$
    31,184
    
    
    $
    (3,352
    )
    
    $
    27,832
    
    
    $
    63,118
    
    
    $
    (4,928
    )
    
    $
    58,190Earnings from continuing
operations
    
    $
    8,752
    
    
    $
    (2,045
    )
    
    $
    6,707
    
    
    $
    17,421
    
    
    $
    (2,981
    )
    
    $
    14,440Net earnings
    
    $
    10,428
    
    
    $
    (2,007
    )
    
    $
    8,421
    
    
    $
    19,500
    
    
    $
    (2,887
    )
    
    $
    16,613Basic earnings per
common share from
continuing operations
    
    $
    .08
    
    
    $
    (.02
    )
    
    $
    .06
    
    
    $
    .16
    
    
    $
    (.03
    )
    
    $
    .13Diluted earnings per
common share from
continuing operations
    
    $
    .08
    
    
    $
    (.02
    )
    
    $
    .06
    
    
    $
    .16
    
    
    $
    (.03
    )
    
    $
    .13Basic earnings per
common share
    
    $
    .10
    
    
    $
    (.02
    )
    
    $
    .08
    
    
    $
    .18
    
    
    $
    (.03
    )
    
    $
    .15Diluted earnings per
common share
    
    $
    .10
    
    
    $
    (.02
    )
    
    $
    .08
    
    
    $
    .18
    
    
    $
    (.03
    )
    
    $
    .15
    
  27




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Change in Accounting Principles and New Accounting Principles(Continued)
     Other Accounting Pronouncements
  28




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (3) Change in Accounting Principles and New Accounting Principles(Continued)
   (4) Preneed Funeral Activities
    29




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (4) Preneed Funeral Activities(Continued)
  Preneed Funeral Receivables and Trust Investments
  April 30, 2005
    
    
    October 31, 2004Trust assets
    
    $
    437,619
    
    
    $
    439,625Receivables from customers
    
    
    60,975
    
    
    
    64,183Preneed funeral receivables and trust
investments
    
    $
    498,594
    
    
    $
    503,808
    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)
 (4) Preneed Funeral Activities(Continued)
 April 30, 2005Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    56,930
    
    
    $
    
    
    
    $
    
    
    
    $
    56,930U.S. Government, agencies
and municipalities
    
    
    2,772
    
    
    
    86
    
    
    
    (21
    )
    
    
    2,837Corporate bonds
    
    
    22,858
    
    
    
    1,152
    
    
    
    (638
    )
    
    
    23,372Preferred stocks
    
    
    64,763
    
    
    
    940
    
    
    
    (1,239
    )
    
    
    64,464Common stocks
    
    
    240,286
    
    
    
    9,606
    
    
    
    (12,626
    )
    
    
    237,266Mutual funds
    
    
    28,292
    
    
    
    126
    
    
    
    (1,311
    )
    
    
    27,107Insurance contracts and other long-term investments
    
    
    23,651
    
    
    
    351
    
    
    
    
    
    
    
    24,002Trust investments
    
    $
    439,552
    
    
    $
    12,261
    
    
    $
    (15,835
    )
    
    $
    435,978Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99.2
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,821Less trust investments of assets
held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (180
    )Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    437,619
  April 30, 2005Due in one year or less
    
    $
    3,627Due in one to five years
    
    
    11,523Due in five to ten years
    
    
    10,601Thereafter
    
    
    458$
    26,209
   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)
 (4) Preneed Funeral Activities(Continued)
 October 31, 2004Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    133,205
    
    
    $
    9
    
    
    $
    
    
    
    $
    133,214U.S. Government, agencies
and municipalities
    
    
    1,971
    
    
    
    115
    
    
    
    (26
    )
    
    
    2,060Corporate bonds
    
    
    22,826
    
    
    
    1,938
    
    
    
    
    
    
    
    24,764Preferred stocks
    
    
    62,947
    
    
    
    1,703
    
    
    
    (422
    )
    
    
    64,228Common stocks
    
    
    188,298
    
    
    
    3,692
    
    
    
    (13,214
    )
    
    
    178,776Mutual funds
    
    
    12,431
    
    
    
    322
    
    
    
    (73
    )
    
    
    12,680Insurance contracts and other long-term investments
    
    
    23,631
    
    
    
    298
    
    
    
    
    
    
    
    23,929Trust investments
    
    $
    445,309
    
    
    $
    8,077
    
    
    $
    (13,735
    )
    
    $
    439,651Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98.7
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,002Less trust investments of assets
held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,028
    )Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    439,625
 Deferred Preneed Funeral Revenue
  Insurance-Funded Preneed Funeral Contracts
 
 (5) Preneed Cemetery Merchandise and Service Activities
  32




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (5) Preneed Cemetery Merchandise and Service Activities(Continued)
  Preneed Cemetery Receivables and Trust Investments
  April 30, 2005
    
    
    October 31, 2004Trust assets
    
    $
    197,490
    
    
    $
    194,008Receivables from customers
    
    
    61,169
    
    
    
    64,168Preneed cemetery receivables and trust investments
    
    $
    258,659
    
    
    $
    258,176
  April 30, 2005Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    31,959
    
    
    $
    
    
    
    $
    
    
    
    $
    31,959U.S. Government, agencies
and municipalities
    
    
    6,896
    
    
    
    131
    
    
    
    (14
    )
    
    
    7,013Corporate bonds
    
    
    10,562
    
    
    
    522
    
    
    
    (223
    )
    
    
    10,861Preferred stocks
    
    
    32,530
    
    
    
    573
    
    
    
    (640
    )
    
    
    32,463Common stocks
    
    
    106,204
    
    
    
    4,775
    
    
    
    (5,421
    )
    
    
    105,558Mutual funds
    
    
    9,705
    
    
    
    4
    
    
    
    (584
    )
    
    
    9,125Insurance contracts and other
long-term investments
    
    
    563
    
    
    
    1
    
    
    
    
    
    
    
    564Trust investments
    
    $
    198,419
    
    
    $
    6,006
    
    
    $
    (6,882
    )
    
    $
    197,543Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99.6
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,342Less trust investments of assets
held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,395
    )Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    197,490
 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)
 (5) Preneed Cemetery Merchandise and Service Activities(Continued)
  April 30, 2005Due in one year or less
    
    $
    1,583Due in one to five years
    
    
    8,806Due in five to ten years
    
    
    6,937Thereafter
    
    
    548$
    17,874
   October 31, 2004Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    50,646
    
    
    $
    4
    
    
    $
    
    
    
    $
    50,650U.S. Government, agencies
and municipalities
    
    
    1,050
    
    
    
    21
    
    
    
    (4
    )
    
    
    1,067Corporate bonds
    
    
    10,690
    
    
    
    1,086
    
    
    
    
    
    
    
    11,776Preferred stocks
    
    
    24,287
    
    
    
    869
    
    
    
    (158
    )
    
    
    24,998Common stocks
    
    
    104,788
    
    
    
    2,482
    
    
    
    (5,934
    )
    
    
    101,336Mutual funds
    
    
    3,774
    
    
    
    70
    
    
    
    (2
    )
    
    
    3,842Insurance contracts and other long-term
investments
    
    
    569
    
    
    
    
    
    
    
    
    
    
    
    569Trust investments
    
    $
    195,804
    
    
    $
    4,532
    
    
    $
    (6,098
    )
    
    $
    194,238Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99.2
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    956Less trust investments of assets
held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,186
    )Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    194,008
 Deferred Preneed Cemetery Revenue
  34




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (6) Cemetery Interment Rights and Perpetual Care Trusts
     April 30, 2005Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    22,125
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    22,123U.S. Government, agencies
and municipalities
    
    
    6,241
    
    
    
    123
    
    
    
    (78
    )
    
    
    6,286Corporate bonds
    
    
    18,821
    
    
    
    2,145
    
    
    
    (129
    )
    
    
    20,837Preferred stocks
    
    
    67,915
    
    
    
    1,182
    
    
    
    (2,721
    )
    
    
    66,376Common stocks
    
    
    84,766
    
    
    
    9,617
    
    
    
    (4,883
    )
    
    
    89,500Mutual funds
    
    
    4,007
    
    
    
    151
    
    
    
    (71
    )
    
    
    4,087Insurance contracts and other long-term
investments
    
    
    945
    
    
    
    74
    
    
    
    (4
    )
    
    
    1,015Trust investments
    
    $
    204,820
    
    
    $
    13,292
    
    
    $
    (7,888
    )
    
    $
    210,224Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102.6
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,279Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    211,503
 35




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (6) Cemetery Interment Rights and Perpetual Care Trusts(Continued)
  April 30, 2005Due in one year or less
    
    $
    1,589Due in one to five years
    
    
    6,898Due in five to ten years
    
    
    17,579Thereafter
    
    
    1,057$
    27,123
   October 31, 2004Adjusted
    
    
    Unrealized
    
    
    UnrealizedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    MarketCash, money market and other
short-term investments
    
    $
    29,154
    
    
    $
    
    
    
    $
    (3
    )
    
    $
    29,151U.S. Government, agencies
and municipalities
    
    
    3,173
    
    
    
    62
    
    
    
    (97
    )
    
    
    3,138Corporate bonds
    
    
    19,368
    
    
    
    2,731
    
    
    
    (23
    )
    
    
    22,076Preferred stocks
    
    
    65,176
    
    
    
    2,571
    
    
    
    (46
    )
    
    
    67,701Common stocks
    
    
    78,531
    
    
    
    8,406
    
    
    
    (5,797
    )
    
    
    81,140Mutual funds
    
    
    5,072
    
    
    
    193
    
    
    
    (51
    )
    
    
    5,214Insurance contracts and other long-term
investments
    
    
    841
    
    
    
    43
    
    
    
    
    
    
    
    884Trust investments
    
    $
    201,315
    
    
    $
    14,006
    
    
    $
    (6,017
    )
    
    $
    209,304Market value as a percentage of cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104.0
    %Accrued investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    963Trust assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    210,267
 (7) Non-Controlling Interest in Funeral and Cemetery Trusts and in Perpetual Care Trusts
  Non-controlling InterestNon-controllingInterest inPreneed
    
    
    Preneed
    
    
    
    
    
    
    PerpetualFuneral
    
    
    Cemetery
    
    
    Total
    
    
    Care TrustsTrust assets at market value
    
    $
    437,619
    
    
    $
    197,490
    
    
    $
    635,109
    
    
    $
    211,503Less:Pending withdrawals
    
    
    (7,659
    )
    
    
    (3,675
    )
    
    
    (11,334
    )
    
    
    (2,351
    )Pending deposits
    
    
    1,755
    
    
    
    1,510
    
    
    
    3,265
    
    
    
    681Non-controlling interest
    
    $
    431,715
    
    
    $
    195,325
    
    
    $
    627,040
    
    
    $
    209,833
 36




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (7)
    
    Non-Controlling Interest in Funeral and Cemetery Trusts and in Perpetual Care Trusts(Continued)
  Non-controlling InterestNon-controllingInterest inPreneed
    
    
    Preneed
    
    
    
    
    
    
    PerpetualFuneral
    
    
    Cemetery
    
    
    Total
    
    
    Care TrustsTrust assets at market value
    
    $
    439,625
    
    
    $
    194,008
    
    
    $
    633,633
    
    
    $
    210,267Less:Pending withdrawals
    
    
    (6,847
    )
    
    
    (2,797
    )
    
    
    (9,644
    )
    
    
    (1,951
    )Pending deposits
    
    
    1,788
    
    
    
    1,567
    
    
    
    3,355
    
    
    
    577Non-controlling interest
    
    $
    434,566
    
    
    $
    192,778
    
    
    $
    627,344
    
    
    $
    208,893
 Investment and other income, net
  Three Months Ended
    
    
    Six Months EndedApril 30, 2005
    
    
    April 30, 2005Non-controlling interest:Realized gains
    
    $
    6,523
    
    
    $
    10,107Realized losses
    
    
    (5,571
    )
    
    
    (9,640
    )Interest income, dividend and other ordinary income
    
    
    6,029
    
    
    
    12,880Trust expenses and income taxes
    
    
    (3,448
    )
    
    
    (6,312
    )Net trust investment income
    
    
    3,533
    
    
    
    7,035Interest expense related to non-controlling
interest in funeral and cemetery trust investments
    
    
    (2,655
    )
    
    
    (4,668
    )Interest expense related to non-controlling
interest in perpetual care trust investments
    
    
    (878
    )
    
    
    (2,367
    )Total non-controlling interest
    
    
    
    
    
    
    Investment and other income, net (1)
    
    
    112
    
    
    
    220Total investment and other income, net
    
    $
    112
    
    
    $
    220
 
 (1)
    
    Investment and other income, net consists of interest income primarily on the
Companys cash, cash equivalents and marketable securities not held in trust. (8) Commitments and Contingencies
 Henrietta Torres and Teresa Fiore, on behalf of themselves and all others similarly situated
and the General Public v. Stewart Enterprises, Inc., et al.
  37




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (8) 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.;
  Ralph Lee Fancher, on behalf of himself and all others similarly situated v. Service
Corporation International, Alderwoods Group, Inc., Stewart Enterprises, Inc., Hillenbrand
Industries, Inc., Aurora Casket Co., York Group, Inc., and Batesville Casket Co. Funeral Consumers Alliance, Inc. v Service Corporation International
   38




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9) Reconciliation of Basic and Diluted Per Share Data
 Loss
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree
Months Ended April 30, 2005  Restated (Note 1)Loss from continuing operations
    
    $
    (4,673
    )Basic earnings per common share:Loss from continuing operations available to
common shareholders
    
    $
    (4,673
    )
    
    
    109,506
    
    
    $
    (.04
    )Effect of dilutive securities:Time-vest stock options assumed exercised and
restricted stock
    
    
    
    
    
    
    Diluted loss per common share:Loss from continuing operations available to
common shareholders plus time-vest stock
options assumed exercised and restricted stock
    
    $
    (4,673
    )
    
    
    109,506
    
    
    $
    (.04
    )
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataThree
Months Ended April 30, 2004  Restated (Note 1)Earnings from continuing operations
    
    $
    8,752Basic earnings per common share:Earnings from continuing operations available to
common shareholders
    
    $
    8,752
    
    
    
    107,438
    
    
    $
    .08Effect of dilutive securities:Time-vest stock options assumed exercised and
restricted stock
    
    
    
    
    
    
    962Diluted earnings per common share:Earnings from continuing operations available to
common shareholders plus time-vest stock options
assumed exercised and restricted stock
    
    $
    8,752
    
    
    
    108,400
    
    
    $
    .08
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataSix
Months Ended April 30, 2005  Restated (Note 1)Earnings from continuing operations before cumulative
effect of change in accounting principle
    
    $
    2,716Basic earnings per common share:Earnings from continuing operations before cumulative
effect of change in accounting principle available to
common shareholders
    
    $
    2,716
    
    
    
    109,293
    
    
    $
    .03Time-vest stock options assumed exercised and
restricted stock
    
    
    
    
    
    
    213Diluted earnings per common share:Earnings from continuing operations before cumulative
effect of change in accounting principle available to
common shareholders plus time-vest stock options
assumed exercised and restricted stock
    
    $
    2,716
    
    
    
    109,506
    
    
    $
    .03
 39




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (9) Reconciliation of Basic and Diluted Per Share Data(Continued)
 Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    DataSix
Months Ended April 30, 2004 Restated (Note 1)Earnings from continuing operations
    
    $
    17,421Basic earnings per common share:Earnings from continuing operations available to
common shareholders
    
    $
    17,421
    
    
    
    107,660
    
    
    $
    .16Effect of dilutive securities:Time-vest stock options assumed exercised and
restricted stock
    
    
    
    
    
    
    517Diluted earnings per common share:Earnings from continuing operations available to
common shareholders plus time-vest stock options
assumed exercised and restricted stock
    
    $
    17,421
    
    
    
    108,177
    
    
    $
    .16
    (10) Segment Data (Restated)
   40




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (10) Segment Data (Restated)(Continued)
          41




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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) Segment Data (Restated)(Continued)
      Funeral Revenue
    
    

Cemetery Revenue (1)
    
    
    Total RevenueThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2005
    
    
    April 30, 2004
    
    
    April 30, 2005
    
    
    April 30, 2004
    
    
    April 30, 2005
    
    
    April 30, 2004(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Central Division
    
    $
    23,632
    
    
    $
    21,368
    
    
    $
    18,534
    
    
    $
    22,081
    
    
    $
    42,166
    
    
    $
    43,449Western Division
    
    
    15,750
    
    
    
    15,742
    
    
    
    3,086
    
    
    
    3,339
    
    
    
    18,836
    
    
    
    19,081Eastern Division
    
    
    14,509
    
    
    
    13,784
    
    
    
    18,143
    
    
    
    15,617
    
    
    
    32,652
    
    
    
    29,401Southern
Division 
Florida
    
    
    11,871
    
    
    
    10,672
    
    
    
    11,061
    
    
    
    10,516
    
    
    
    22,932
    
    
    
    21,188All Other (2)
    
    
    3,285
    
    
    
    3,363
    
    
    
    4,325
    
    
    
    738
    
    
    
    7,610
    
    
    
    4,101Corporate Trust
Management
(3)
    
    
    5,378
    
    
    
    4,714
    
    
    
    2,996
    
    
    
    2,504
    
    
    
    8,374
    
    
    
    7,218Total
    
    $
    74,425
    
    
    $
    69,643
    
    
    $
    58,145
    
    
    $
    54,795
    
    
    $
    132,570
    
    
    $
    124,438
 42




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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) Segment Data (Restated)(Continued)
 Funeral Revenue
    
    
    Cemetery Revenue(1)
    
    
    Total RevenueSix Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2005
    
    
    April 30, 2004
    
    
    April 30, 2005
    
    
    April 30, 2004
    
    
    April 30, 2005
    
    
    April 30, 2004(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Central Division
    
    $
    44,693
    
    
    $
    44,151
    
    
    $
    36,027
    
    
    $
    39,904
    
    
    $
    80,720
    
    
    $
    84,055Western Division
    
    
    31,324
    
    
    
    31,775
    
    
    
    6,315
    
    
    
    6,085
    
    
    
    37,639
    
    
    
    37,860Eastern Division
    
    
    28,158
    
    
    
    27,707
    
    
    
    32,725
    
    
    
    30,853
    
    
    
    60,883
    
    
    
    58,560Southern
Division 
Florida
    
    
    23,049
    
    
    
    22,319
    
    
    
    22,089
    
    
    
    20,847
    
    
    
    45,138
    
    
    
    43,166All Other (2)
    
    
    7,060
    
    
    
    6,749
    
    
    
    8,140
    
    
    
    4,480
    
    
    
    15,200
    
    
    
    11,229Corporate Trust
Management
(3)
    
    
    9,857
    
    
    
    9,714
    
    
    
    5,701
    
    
    
    5,024
    
    
    
    15,558
    
    
    
    14,738Total
    
    $
    144,141
    
    
    $
    142,415
    
    
    $
    110,997
    
    
    $
    107,193
    
    
    $
    255,138
    
    
    $
    249,608
 Funeral Gross Profit
    
    
    Cemetery Gross Profit(1)
    
    
    Total Gross ProfitThree Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2005
    
    
    April 30, 2004(4)
    
    
    April 30, 2005
    
    
    April 30, 2004(4)
    
    
    April 30, 2005
    
    
    April 30, 2004(4)(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Central Division
    
    $
    7,056
    
    
    $
    6,184
    
    
    $
    4,524
    
    
    $
    5,093
    
    
    $
    11,580
    
    
    $
    11,277Western Division
    
    
    2,083
    
    
    
    2,950
    
    
    
    373
    
    
    
    663
    
    
    
    2,456
    
    
    
    3,613Eastern Division
    
    
    3,272
    
    
    
    3,445
    
    
    
    2,368
    
    
    
    2,872
    
    
    
    5,640
    
    
    
    6,317Southern
Division 
Florida
    
    
    1,978
    
    
    
    1,449
    
    
    
    2,128
    
    
    
    2,159
    
    
    
    4,106
    
    
    
    3,608All Other (2)
    
    
    518
    
    
    
    610
    
    
    
    848
    
    
    
    (1,164
    )
    
    
    1,366
    
    
    
    (554
    )Corporate Trust
Management
(3)
    
    
    5,221
    
    
    
    4,572
    
    
    
    2,856
    
    
    
    2,351
    
    
    
    8,077
    
    
    
    6,923Total
    
    $
    20,128
    
    
    $
    19,210
    
    
    $
    13,097
    
    
    $
    11,974
    
    
    $
    33,225
    
    
    $
    31,184
 Funeral Gross Profit
    
    
    Cemetery Gross Profit(1)
    
    
    Total Gross ProfitSix Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2005
    
    
    April 30, 2004(4)
    
    
    April 30, 2005
    
    
    April 30, 2004(4)
    
    
    April 30, 2005
    
    
    April 30, 2004(4)(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Central Division
    
    $
    12,515
    
    
    $
    12,912
    
    
    $
    8,019
    
    
    $
    9,557
    
    
    $
    20,534
    
    
    $
    22,469Western Division
    
    
    4,388
    
    
    
    5,756
    
    
    
    885
    
    
    
    1,505
    
    
    
    5,273
    
    
    
    7,261Eastern Division
    
    
    6,274
    
    
    
    6,994
    
    
    
    2,830
    
    
    
    4,660
    
    
    
    9,104
    
    
    
    11,654Southern
Division 
Florida
    
    
    3,769
    
    
    
    3,427
    
    
    
    4,268
    
    
    
    4,115
    
    
    
    8,037
    
    
    
    7,542All Other (2)
    
    
    1,426
    
    
    
    1,133
    
    
    
    1,107
    
    
    
    (1,083
    )
    
    
    2,533
    
    
    
    50Corporate Trust
Management
(3)
    
    
    9,554
    
    
    
    9,426
    
    
    
    5,432
    
    
    
    4,716
    
    
    
    14,986
    
    
    
    14,142Total
    
    $
    37,926
    
    
    $
    39,648
    
    
    $
    22,541
    
    
    $
    23,470
    
    
    $
    60,467
    
    
    $
    63,118
 43




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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) Segment Data (Restated)(Continued)
 Preneed Funeral Merchandise
    
    
    Preneed Cemetery Merchandise
    
    
    Total Preneed Merchandiseand Service Sales(5)
    
    
    and Service Sales(5)
    
    
    and Service Sales(5)Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2005
    
    
    April 30, 2004
    
    
    April 30, 2005
    
    
    April 30, 2004
    
    
    April 30, 2005
    
    
    April 30, 2004(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Central Division
    
    $
    6,667
    
    
    $
    5,301
    
    
    $
    3,585
    
    
    $
    3,521
    
    
    $
    10,252
    
    
    $
    8,822Western Division
    
    
    6,079
    
    
    
    5,812
    
    
    
    914
    
    
    
    1,009
    
    
    
    6,993
    
    
    
    6,821Eastern Division
    
    
    4,455
    
    
    
    4,280
    
    
    
    7,112
    
    
    
    7,340
    
    
    
    11,567
    
    
    
    11,620Southern Division 
Florida
    
    
    5,675
    
    
    
    5,004
    
    
    
    3,284
    
    
    
    3,960
    
    
    
    8,959
    
    
    
    8,964All Other (2)
    
    
    1,278
    
    
    
    1,373
    
    
    
    1,006
    
    
    
    1,124
    
    
    
    2,284
    
    
    
    2,497Total
    
    $
    24,154
    
    
    $
    21,770
    
    
    $
    15,901
    
    
    $
    16,954
    
    
    $
    40,055
    
    
    $
    38,724
 Preneed Funeral Merchandise
    
    
    Preneed Cemetery Merchandise
    
    
    Total Preneed Merchandiseand Service Sales(5)
    
    
    and Service Sales(5)
    
    
    and Service Sales(5)Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedApril 30, 2005
    
    
    April 30, 2004
    
    
    April 30, 2005
    
    
    April 30, 2004
    
    
    April 30, 2005
    
    
    April 30, 2004(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Central Division
    
    $
    11,560
    
    
    $
    10,277
    
    
    $
    6,548
    
    
    $
    6,611
    
    
    $
    18,108
    
    
    $
    16,888Western Division
    
    
    12,403
    
    
    
    11,744
    
    
    
    1,859
    
    
    
    1,857
    
    
    
    14,262
    
    
    
    13,601Eastern Division
    
    
    8,494
    
    
    
    8,160
    
    
    
    13,255
    
    
    
    13,033
    
    
    
    21,749
    
    
    
    21,193Southern Division 
Florida
    
    
    9,728
    
    
    
    9,320
    
    
    
    6,191
    
    
    
    6,552
    
    
    
    15,919
    
    
    
    15,872All Other (2)
    
    
    2,168
    
    
    
    2,434
    
    
    
    1,720
    
    
    
    2,005
    
    
    
    3,888
    
    
    
    4,439Total
    
    $
    44,353
    
    
    $
    41,935
    
    
    $
    29,573
    
    
    $
    30,058
    
    
    $
    73,926
    
    
    $
    71,993
 Total Funeral Assets
    
    
    Total Cemetery Assets
    
    
    Total AssetsApril 30,
    
    
    October 31,
    
    
    April 30,
    
    
    October 31,
    
    
    April 30,
    
    
    October 31,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Central Division
    
    $
    237,289
    
    
    $
    274,029
    
    
    $
    325,301
    
    
    $
    340,994
    
    
    $
    562,590
    
    
    $
    615,023Western Division
    
    
    73,083
    
    
    
    91,579
    
    
    
    56,737
    
    
    
    56,837
    
    
    
    129,820
    
    
    
    148,416Eastern Division
    
    
    65,245
    
    
    
    78,333
    
    
    
    325,070
    
    
    
    347,286
    
    
    
    390,315
    
    
    
    425,619Southern Division   Florida
    
    
    139,231
    
    
    
    158,725
    
    
    
    261,120
    
    
    
    297,157
    
    
    
    400,351
    
    
    
    455,882All Other (2)
    
    
    57,830
    
    
    
    60,921
    
    
    
    74,660
    
    
    
    75,318
    
    
    
    132,490
    
    
    
    136,239Corporate Trust Management
(3)
    
    
    437,619
    
    
    
    439,625
    
    
    
    197,490
    
    
    
    194,008
    
    
    
    635,109
    
    
    
    633,633Reconciling Items (6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,318
    
    
    
    96,696Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,345,993
    
    
    $
    2,511,508
 44




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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) Segment Data (Restated)(Continued)
 Funeral Goodwill
    
    
    Cemetery Goodwill
    
    
    Total GoodwillApril 30,
    
    
    October 31,
    
    
    April 30,
    
    
    October 31,
    
    
    April 30,
    
    
    October 31,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Central Division
    
    $
    116,881
    
    
    $
    116,881
    
    
    $
    49,787
    
    
    $
    49,787
    
    
    $
    166,668
    
    
    $
    166,668Western Division
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Eastern Division
    
    
    17,052
    
    
    
    17,052
    
    
    
    25,239
    
    
    
    25,239
    
    
    
    42,291
    
    
    
    42,291Southern Division -
Florida
    
    
    46,199
    
    
    
    46,199
    
    
    
    
    
    
    
    
    
    
    
    46,199
    
    
    
    46,199All Other (2)
    
    
    17,571
    
    
    
    17,571
    
    
    
    
    
    
    
    
    
    
    
    17,571
    
    
    
    17,571Total
    
    $
    197,703
    
    
    $
    197,703
    
    
    $
    75,026
    
    
    $
    75,026
    
    
    $
    272,729
    
    
    $
    272,729
 
 (1)
    
    Perpetual care trust earnings are included in the revenues and gross profit of
the related geographic segment and amounted to $1,578 and $2,240 for the three months ended
April 30, 2005 and 2004, respectively, and $2,700 and $4,636 for the six months ended April
30, 2005 and 2004, respectively.(2)
    
    All Other represents the Companys operations in Puerto Rico.(3)
    
    Corporate trust management consists of trust management fees and funeral and
cemetery merchandise and service trust earnings recognized with respect to preneed contracts
delivered during the period. Trust management fees are established by the Company at rates
consistent with industry norms and are paid by the trusts to the Companys subsidiary,
Investors Trust, Inc. The trust earnings represent earnings realized over the life of the
preneed contracts delivered during the relevant periods. Trust management fees included in
funeral revenue for the three months ended April 30, 2005 and 2004 were $1,524 and $1,438,
respectively, and funeral trust earnings for the three months ended April 30, 2005 and 2004
were $3,854 and $3,276, respectively. Trust management fees included in cemetery revenue for
the three months ended April 30, 2005 and 2004 were $1,233 and $1,207, respectively, and
cemetery trust earnings for the three months ended April 30, 2005 and 2004 were $1,763 and
$1,297, respectively. Trust management fees included in funeral revenue for the six months
ended April 30, 2005 and 2004 were $2,678 and $2,876, respectively, and funeral trust earnings
for the six months ended April 30, 2005 and 2004 were $7,179 and $6,838, respectively. Trust
management fees included in cemetery revenue for the six months ended April 30, 2005 and 2004
were $2,464 and $2,396, respectively, and cemetery trust earnings for the six months ended
April 30, 2005 and 2004 were $3,237 and $2,628, respectively.(4)
    
    Funeral and cemetery gross profit for the three and six months ended April 30, 2004
do not include net preneed selling costs which would have been expensed if the accounting
change described in Note 3(a) had been implemented in fiscal year 2004. The effect of net
preneed selling costs is calculated by removing the amortization of deferred selling costs and
including in expense the preneed selling costs incurred during 2004. The result of that
calculation is the net preneed selling costs that would have reduced 2004 gross profit if the
accounting change had been implemented in fiscal year 2004. Net preneed funeral selling costs
amounted to $1,575 and $2,154 for the three and six months ended April 30, 2004, respectively.
Net preneed cemetery selling costs amounted to $1,777 and $2,774 for the three and six months
ended April 30, 2004, respectively.(5)
    
    Preneed sales amounts represent total preneed funeral and cemetery service and
merchandise sales generated in the applicable period, net of cancellations.(6)
    
    Reconciling items consist of unallocated corporate assets.  45




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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) Segment Data (Restated)(Continued)
 Three Months Ended
    
    
    Six Months EndedApril 30,
    
    
    April 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Gross profit for reportable segments
    
    $
    33,225
    
    
    $
    31,184
    
    
    $
    60,467
    
    
    $
    63,118Corporate general and administrative expenses
    
    
    (4,582
    )
    
    
    (4,621
    )
    
    
    (8,798
    )
    
    
    (8,534
    )Separation charges
    
    
    
    
    
    
    (138
    )
    
    
    
    
    
    
    (2,131
    )Gains on dispositions and impairment (losses), net
    
    
    359
    
    
    
    (853
    )
    
    
    1,237
    
    
    
    (550
    )Other operating income, net
    
    
    259
    
    
    
    511
    
    
    
    498
    
    
    
    948Interest expense
    
    
    (6,671
    )
    
    
    (11,953
    )
    
    
    (17,047
    )
    
    
    (24,474
    )Loss on early extinguishment of debt
    
    
    (30,057
    )
    
    
    
    
    
    
    (32,708
    )
    
    
    Investment and other income, net
    
    
    112
    
    
    
    57
    
    
    
    220
    
    
    
    32Earnings (loss) from continuing operations
before income taxes and cumulative effect of
change in accounting principle
    
    $
    (7,355
    )
    
    $
    14,187
    
    
    $
    3,869
    
    
    $
    28,409
 (11) Supplementary Information (Restated)
  Three Months Ended
    
    
    Six Months EndedApril 30,
    
    
    April 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Service revenueFuneral
    
    $
    42,137
    
    
    $
    39,501
    
    
    $
    81,757
    
    
    $
    80,329Cemetery
    
    
    15,290
    
    
    
    14,716
    
    
    
    28,751
    
    
    
    29,80757,427
    
    
    
    54,217
    
    
    
    110,508
    
    
    
    110,136Merchandise revenueFuneral
    
    
    30,100
    
    
    
    27,832
    
    
    
    58,391
    
    
    
    57,471Cemetery
    
    
    38,896
    
    
    
    35,700
    
    
    
    74,611
    
    
    
    68,51368,996
    
    
    
    63,532
    
    
    
    133,002
    
    
    
    125,984Other revenueFuneral
    
    
    2,188
    
    
    
    2,310
    
    
    
    3,993
    
    
    
    4,615Cemetery
    
    
    3,959
    
    
    
    4,379
    
    
    
    7,635
    
    
    
    8,8736,147
    
    
    
    6,689
    
    
    
    11,628
    
    
    
    13,488Total revenue
    
    $
    132,570
    
    
    $
    124,438
    
    
    $
    255,138
    
    
    $
    249,608Service costsFuneral
    
    $
    12,851
    
    
    $
    12,123
    
    
    $
    25,188
    
    
    $
    24,333Cemetery
    
    
    9,869
    
    
    
    9,768
    
    
    
    19,395
    
    
    
    18,71222,720
    
    
    
    21,891
    
    
    
    44,583
    
    
    
    43,045Merchandise costsFuneral
    
    
    17,702
    
    
    
    15,964
    
    
    
    33,809
    
    
    
    32,111Cemetery
    
    
    22,445
    
    
    
    20,237
    
    
    
    42,971
    
    
    
    39,00840,147
    
    
    
    36,201
    
    
    
    76,780
    
    
    
    71,119General and administrative expensesFuneral
    
    
    23,744
    
    
    
    22,346
    
    
    
    47,218
    
    
    
    46,323Cemetery
    
    
    12,734
    
    
    
    12,816
    
    
    
    26,090
    
    
    
    26,00336,478
    
    
    
    35,162
    
    
    
    73,308
    
    
    
    72,326Total costs
    
    $
    99,345
    
    
    $
    93,254
    
    
    $
    194,671
    
    
    $
    186,490
 46




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and
Senior Notes (Restated)
  Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended April 30, 2005Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Revenues:Funeral
    
    $
    
    
    
    $
    69,371
    
    
    $
    5,054
    
    
    $
    
    
    
    $
    74,425Cemetery
    
    
    
    
    
    
    52,071
    
    
    
    6,074
    
    
    
    
    
    
    
    58,145
    
    
    
    121,442
    
    
    
    11,128
    
    
    
    
    
    
    
    132,570Costs and expenses:Funeral
    
    
    
    
    
    
    51,147
    
    
    
    3,150
    
    
    
    
    
    
    
    54,297Cemetery
    
    
    
    
    
    
    41,386
    
    
    
    3,662
    
    
    
    
    
    
    
    45,048
    
    
    
    92,533
    
    
    
    6,812
    
    
    
    
    
    
    
    99,345Gross profit
    
    
    
    
    
    
    28,909
    
    
    
    4,316
    
    
    
    
    
    
    
    33,225Corporate general and
administrative expenses
    
    
    (4,582
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,582
    )Gains on dispositions and
impairment (losses), net
    
    
    
    
    
    
    373
    
    
    
    (14
    )
    
    
    
    
    
    
    359Other operating income, net
    
    
    44
    
    
    
    207
    
    
    
    8
    
    
    
    
    
    
    
    259Operating earnings (loss)
    
    
    (4,538
    )
    
    
    29,489
    
    
    
    4,310
    
    
    
    
    
    
    
    29,261Interest income (expense)
    
    
    14,276
    
    
    
    (19,136
    )
    
    
    (1,811
    )
    
    
    
    
    
    
    (6,671
    )Loss on early extinguishment of debt
    
    
    (30,057
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,057
    )Investment and other income, net
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112Equity in subsidiaries
    
    
    7,755
    
    
    
    
    
    
    
    
    
    
    
    (7,755
    )
    
    
    Earnings (loss) from continuing
operations before income taxes
    
    
    (12,452
    )
    
    
    10,353
    
    
    
    2,499
    
    
    
    (7,755
    )
    
    
    (7,355
    )Income tax expense (benefit)
    
    
    (7,535
    )
    
    
    3,759
    
    
    
    1,094
    
    
    
    
    
    
    
    (2,682
    )Earnings (loss) from continuing
operations
    
    
    (4,917
    )
    
    
    6,594
    
    
    
    1,405
    
    
    
    (7,755
    )
    
    
    (4,673
    )Discontinued operations:Earnings (loss) from
discontinued operations before
income taxes
    
    
    
    
    
    
    (211
    )
    
    
    60
    
    
    
    
    
    
    
    (151
    )Income taxes
    
    
    
    
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    93Earnings (loss) from
discontinued operations
    
    
    
    
    
    
    (304
    )
    
    
    60
    
    
    
    
    
    
    
    (244
    )Net earnings (loss)
    
    
    (4,917
    )
    
    
    6,290
    
    
    
    1,465
    
    
    
    (7,755
    )
    
    
    (4,917
    )Other comprehensive income, net
    
    
    140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140Comprehensive income (loss)
    
    $
    (4,777
    )
    
    $
    6,290
    
    
    $
    1,465
    
    
    $
    (7,755
    )
    
    $
    (4,777
    )
 47




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and
Senior Notes (Restated)(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Three Months Ended April 30, 2004Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Revenues:Funeral
    
    $
    
    
    
    $
    64,326
    
    
    $
    5,317
    
    
    $
    
    
    
    $
    69,643Cemetery
    
    
    
    
    
    
    48,461
    
    
    
    6,334
    
    
    
    
    
    
    
    54,795
    
    
    
    112,787
    
    
    
    11,651
    
    
    
    
    
    
    
    124,438Costs and expenses:Funeral
    
    
    
    
    
    
    47,197
    
    
    
    3,236
    
    
    
    
    
    
    
    50,433Cemetery
    
    
    
    
    
    
    38,028
    
    
    
    4,793
    
    
    
    
    
    
    
    42,821
    
    
    
    85,225
    
    
    
    8,029
    
    
    
    
    
    
    
    93,254Gross profit
    
    
    
    
    
    
    27,562
    
    
    
    3,622
    
    
    
    
    
    
    
    31,184Corporate general and administrative
expenses
    
    
    (4,621
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,621
    )Separation charges
    
    
    (119
    )
    
    
    (15
    )
    
    
    (4
    )
    
    
    
    
    
    
    (138
    )Gains on dispositions and impairment
(losses), net
    
    
    (395
    )
    
    
    (506
    )
    
    
    48
    
    
    
    
    
    
    
    (853
    )Other operating income (expense), net
    
    
    (351
    )
    
    
    449
    
    
    
    413
    
    
    
    
    
    
    
    511Operating earnings (loss)
    
    
    (5,486
    )
    
    
    27,490
    
    
    
    4,079
    
    
    
    
    
    
    
    26,083Interest income (expense)
    
    
    9,799
    
    
    
    (19,548
    )
    
    
    (2,204
    )
    
    
    
    
    
    
    (11,953
    )Investment and other income, net
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57Equity in subsidiaries
    
    
    7,976
    
    
    
    
    
    
    
    
    
    
    
    (7,976
    )
    
    
    Earnings from continuing operations
before income taxes
    
    
    12,346
    
    
    
    7,942
    
    
    
    1,875
    
    
    
    (7,976
    )
    
    
    14,187Income taxes
    
    
    1,918
    
    
    
    2,823
    
    
    
    694
    
    
    
    
    
    
    
    5,435Earnings from continuing operations
    
    
    10,428
    
    
    
    5,119
    
    
    
    1,181
    
    
    
    (7,976
    )
    
    
    8,752Discontinued operations:Earnings from discontinued
operations before income taxes
    
    
    
    
    
    
    1,384
    
    
    
    56
    
    
    
    
    
    
    
    1,440Income tax benefit
    
    
    
    
    
    
    (236
    )
    
    
    
    
    
    
    
    
    
    
    (236
    )Earnings from discontinued operations
    
    
    
    
    
    
    1,620
    
    
    
    56
    
    
    
    
    
    
    
    1,676Net earnings
    
    
    10,428
    
    
    
    6,739
    
    
    
    1,237
    
    
    
    (7,976
    )
    
    
    10,428Other comprehensive income, net
    
    
    262
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    262Comprehensive income
    
    $
    10,690
    
    
    $
    6,739
    
    
    $
    1,237
    
    
    $
    (7,976
    )
    
    $
    10,690
 48




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and
Senior Notes (Restated)(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Six Months Ended April 30, 2005Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Revenues:Funeral
    
    $
    
    
    
    $
    133,646
    
    
    $
    10,495
    
    
    $
    
    
    
    $
    144,141Cemetery
    
    
    
    
    
    
    99,487
    
    
    
    11,510
    
    
    
    
    
    
    
    110,997
    
    
    
    233,133
    
    
    
    22,005
    
    
    
    
    
    
    
    255,138Costs and expenses:Funeral
    
    
    
    
    
    
    99,774
    
    
    
    6,441
    
    
    
    
    
    
    
    106,215Cemetery
    
    
    
    
    
    
    80,629
    
    
    
    7,827
    
    
    
    
    
    
    
    88,456
    
    
    
    180,403
    
    
    
    14,268
    
    
    
    
    
    
    
    194,671Gross profit
    
    
    
    
    
    
    52,730
    
    
    
    7,737
    
    
    
    
    
    
    
    60,467Corporate general and
administrative expenses
    
    
    (8,798
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,798
    )Gains on dispositions and
impairment (losses), net
    
    
    
    
    
    
    987
    
    
    
    250
    
    
    
    
    
    
    
    1,237Other operating income, net
    
    
    161
    
    
    
    250
    
    
    
    87
    
    
    
    
    
    
    
    498Operating earnings (loss)
    
    
    (8,637
    )
    
    
    53,967
    
    
    
    8,074
    
    
    
    
    
    
    
    53,404Interest income (expense)
    
    
    25,560
    
    
    
    (38,813
    )
    
    
    (3,794
    )
    
    
    
    
    
    
    (17,047
    )Loss on early extinguishment of debt
    
    
    (32,708
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,708
    )Investment and other income, net
    
    
    220
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    220Equity (loss) in subsidiaries
    
    
    (140,465
    )
    
    
    
    
    
    
    
    
    
    
    140,465
    
    
    
    Earnings (loss) from continuing
operations before income taxes
    
    
    (156,030
    )
    
    
    15,154
    
    
    
    4,280
    
    
    
    140,465
    
    
    
    3,869Income tax expense (benefit)
    
    
    (5,836
    )
    
    
    5,349
    
    
    
    1,640
    
    
    
    
    
    
    
    1,153Earnings (loss) from continuing
operations
    
    
    (150,194
    )
    
    
    9,805
    
    
    
    2,640
    
    
    
    140,465
    
    
    
    2,716Discontinued operations:Earnings from discontinued
operations before income taxes
    
    
    
    
    
    
    35
    
    
    
    344
    
    
    
    
    
    
    
    379Income taxes
    
    
    
    
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    109Earnings (loss) from discontinued
operations
    
    
    
    
    
    
    (74
    )
    
    
    344
    
    
    
    
    
    
    
    270Earnings (loss) before
cumulative effect of change in
accounting principle
    
    
    (150,194
    )
    
    
    9,731
    
    
    
    2,984
    
    
    
    140,465
    
    
    
    2,986Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    (145,276
    )
    
    
    (7,904
    )
    
    
    
    
    
    
    (153,180
    )Net loss
    
    
    (150,194
    )
    
    
    (135,545
    )
    
    
    (4,920
    )
    
    
    140,465
    
    
    
    (150,194
    )Other comprehensive income, net
    
    
    333
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333Comprehensive loss
    
    $
    (149,861
    )
    
    $
    (135,545
    )
    
    $
    (4,920
    )
    
    $
    140,465
    
    
    $
    (149,861
    )
 49




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and
Senior Notes (Restated)(Continued)
 Condensed Consolidating Statements of Earnings and Other Comprehensive Income
 Six Months Ended April 30, 2004Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Revenues:Funeral
    
    $
    
    
    
    $
    131,874
    
    
    $
    10,541
    
    
    $
    
    
    
    $
    142,415Cemetery
    
    
    
    
    
    
    95,257
    
    
    
    11,936
    
    
    
    
    
    
    
    107,193
    
    
    
    227,131
    
    
    
    22,477
    
    
    
    
    
    
    
    249,608Costs and expenses:Funeral
    
    
    
    
    
    
    96,241
    
    
    
    6,526
    
    
    
    
    
    
    
    102,767Cemetery
    
    
    
    
    
    
    74,626
    
    
    
    9,097
    
    
    
    
    
    
    
    83,723
    
    
    
    170,867
    
    
    
    15,623
    
    
    
    
    
    
    
    186,490Gross profit
    
    
    
    
    
    
    56,264
    
    
    
    6,854
    
    
    
    
    
    
    
    63,118Corporate general and administrative
expenses
    
    
    (8,534
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,534
    )Separation charges
    
    
    (482
    )
    
    
    (1,629
    )
    
    
    (20
    )
    
    
    
    
    
    
    (2,131
    )Gains on dispositions and impairment
(losses), net
    
    
    (300
    )
    
    
    (506
    )
    
    
    256
    
    
    
    
    
    
    
    (550
    )Other operating income (expense), net
    
    
    269
    
    
    
    803
    
    
    
    (124
    )
    
    
    
    
    
    
    948Operating earnings (loss)
    
    
    (9,047
    )
    
    
    54,932
    
    
    
    6,966
    
    
    
    
    
    
    
    52,851Interest income (expense)
    
    
    19,424
    
    
    
    (39,667
    )
    
    
    (4,231
    )
    
    
    
    
    
    
    (24,474
    )Investment and other income, net
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32Equity in subsidiaries
    
    
    12,239
    
    
    
    
    
    
    
    
    
    
    
    (12,239
    )
    
    
    Earnings from continuing operations
before income taxes
    
    
    22,648
    
    
    
    15,265
    
    
    
    2,735
    
    
    
    (12,239
    )
    
    
    28,409Income taxes
    
    
    3,148
    
    
    
    5,881
    
    
    
    1,959
    
    
    
    
    
    
    
    10,988Earnings from continuing operations
    
    
    19,500
    
    
    
    9,384
    
    
    
    776
    
    
    
    (12,239
    )
    
    
    17,421Discontinued operations:Earnings from discontinued
operations before income taxes
    
    
    
    
    
    
    2,023
    
    
    
    67
    
    
    
    
    
    
    
    2,090Income taxes
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Earnings from discontinued operations
    
    
    
    
    
    
    2,012
    
    
    
    67
    
    
    
    
    
    
    
    2,079Net earnings
    
    
    19,500
    
    
    
    11,396
    
    
    
    843
    
    
    
    (12,239
    )
    
    
    19,500Other comprehensive income, net
    
    
    919
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    919Comprehensive income
    
    $
    20,419
    
    
    $
    11,396
    
    
    $
    843
    
    
    $
    (12,239
    )
    
    $
    20,419
 50




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and
Senior Notes (Restated)(Continued)
 Condensed Consolidating Balance Sheets
 April 30, 2005Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    15,003
    
    
    $
    2,693
    
    
    $
    754
    
    
    $
    
    
    
    $
    18,450Marketable securities
    
    
    
    
    
    
    
    
    
    
    1,292
    
    
    
    
    
    
    
    1,292Receivables, net of allowances
    
    
    15,900
    
    
    
    49,616
    
    
    
    5,005
    
    
    
    
    
    
    
    70,521Inventories
    
    
    367
    
    
    
    26,875
    
    
    
    6,548
    
    
    
    
    
    
    
    33,790Prepaid expenses
    
    
    664
    
    
    
    2,989
    
    
    
    17
    
    
    
    
    
    
    
    3,670Deferred income taxes, net
    
    
    2,145
    
    
    
    2,050
    
    
    
    
    
    
    
    
    
    
    
    4,195Assets held for sale
    
    
    
    
    
    
    3,489
    
    
    
    1,789
    
    
    
    
    
    
    
    5,278Total current assets
    
    
    34,079
    
    
    
    87,712
    
    
    
    15,405
    
    
    
    
    
    
    
    137,196Receivables due beyond one year, net of
allowances
    
    
    38
    
    
    
    54,631
    
    
    
    22,575
    
    
    
    
    
    
    
    77,244Preneed funeral receivables and trust
investments
    
    
    
    
    
    
    486,994
    
    
    
    11,600
    
    
    
    
    
    
    
    498,594Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    239,397
    
    
    
    19,262
    
    
    
    
    
    
    
    258,659Goodwill
    
    
    
    
    
    
    247,567
    
    
    
    25,162
    
    
    
    
    
    
    
    272,729Cemetery property, at cost
    
    
    
    
    
    
    345,906
    
    
    
    20,313
    
    
    
    
    
    
    
    366,219Property and equipment, at cost
    
    
    32,988
    
    
    
    434,141
    
    
    
    35,846
    
    
    
    
    
    
    
    502,975Less accumulated depreciation
    
    
    18,236
    
    
    
    170,074
    
    
    
    10,422
    
    
    
    
    
    
    
    198,732Net property and equipment
    
    
    14,752
    
    
    
    264,067
    
    
    
    25,424
    
    
    
    
    
    
    
    304,243Deferred income taxes, net
    
    
    12,574
    
    
    
    166,322
    
    
    
    19,613
    
    
    
    
    
    
    
    198,509Cemetery perpetual care trust investments
    
    
    
    
    
    
    211,503
    
    
    
    
    
    
    
    
    
    
    
    211,503Other assets
    
    
    6,612
    
    
    
    13,576
    
    
    
    909
    
    
    
    
    
    
    
    21,097Equity in subsidiaries
    
    
    6,841
    
    
    
    5,353
    
    
    
    
    
    
    
    (12,194
    )
    
    
    Total assets
    
    $
    74,896
    
    
    $
    2,123,028
    
    
    $
    160,263
    
    
    $
    (12,194
    )
    
    $
    2,345,993Current liabilities:Current maturities of long-term debt
    
    $
    5,087
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,087Accounts payable
    
    
    327
    
    
    
    8,425
    
    
    
    248
    
    
    
    
    
    
    
    9,000Accrued expenses and other current
liabilities
    
    
    12,300
    
    
    
    36,270
    
    
    
    6,004
    
    
    
    
    
    
    
    54,574Liabilities associated with assets
held for sale
    
    
    
    
    
    
    2,405
    
    
    
    1,079
    
    
    
    
    
    
    
    3,484Total current liabilities
    
    
    17,714
    
    
    
    47,100
    
    
    
    7,331
    
    
    
    
    
    
    
    72,145Long-term debt, less current maturities
    
    
    383,377
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    413,377Intercompany payables, net
    
    
    (1,017,677
    )
    
    
    981,596
    
    
    
    36,081
    
    
    
    
    
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    243,608
    
    
    
    46,816
    
    
    
    
    
    
    
    290,424Deferred preneed cemetery revenue
    
    
    
    
    
    
    250,104
    
    
    
    27,841
    
    
    
    
    
    
    
    277,945Non-controlling interest in funeral and
cemetery trusts
    
    
    
    
    
    
    627,040
    
    
    
    
    
    
    
    
    
    
    
    627,040Other long-term liabilities
    
    
    8,340
    
    
    
    2,296
    
    
    
    
    
    
    
    
    
    
    
    10,636Negative equity in subsidiaries
    
    
    238,549
    
    
    
    
    
    
    
    
    
    
    
    (238,549
    )
    
    
    Total liabilities
    
    
    (369,697
    )
    
    
    2,151,744
    
    
    
    148,069
    
    
    
    (238,549
    )
    
    
    1,691,567Non-controlling interest in perpetual
care trusts
    
    
    
    
    
    
    209,833
    
    
    
    
    
    
    
    
    
    
    
    209,833Common stock
    
    
    109,699
    
    
    
    426
    
    
    
    52
    
    
    
    (478
    )
    
    
    109,699Other
    
    
    334,894
    
    
    
    (238,975
    )
    
    
    12,142
    
    
    
    226,833
    
    
    
    334,894Total shareholders equity
    
    
    444,593
    
    
    
    (238,549
    )
    
    
    12,194
    
    
    
    226,355
    
    
    
    444,593Total liabilities and shareholders equity
    
    $
    74,896
    
    
    $
    2,123,028
    
    
    $
    160,263
    
    
    $
    (12,194
    )
    
    $
    2,345,993
 51




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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)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and
Senior Notes (Restated)(Continued)
 Condensed Consolidating Balance Sheets
 October 31, 2004Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    13,553
    
    
    $
    7,625
    
    
    $
    336
    
    
    $
    
    
    
    $
    21,514Marketable securities
    
    
    
    
    
    
    16
    
    
    
    1,281
    
    
    
    
    
    
    
    1,297Receivables, net of allowances
    
    
    19,207
    
    
    
    42,450
    
    
    
    7,476
    
    
    
    
    
    
    
    69,133Inventories
    
    
    389
    
    
    
    29,362
    
    
    
    6,423
    
    
    
    
    
    
    
    36,174Prepaid expenses
    
    
    822
    
    
    
    2,117
    
    
    
    14
    
    
    
    
    
    
    
    2,953Deferred income taxes, net
    
    
    2,263
    
    
    
    5,411
    
    
    
    
    
    
    
    
    
    
    
    7,674Assets held for sale
    
    
    
    
    
    
    7,393
    
    
    
    3,100
    
    
    
    
    
    
    
    10,493Total current assets
    
    
    36,234
    
    
    
    94,374
    
    
    
    18,630
    
    
    
    
    
    
    
    149,238Receivables due beyond one year, net of
allowances
    
    
    98
    
    
    
    57,086
    
    
    
    21,508
    
    
    
    
    
    
    
    78,692Preneed funeral receivables and trust investments
    
    
    
    
    
    
    487,840
    
    
    
    15,968
    
    
    
    
    
    
    
    503,808Preneed cemetery receivables and trust
investments
    
    
    
    
    
    
    232,493
    
    
    
    25,683
    
    
    
    
    
    
    
    258,176Goodwill
    
    
    
    
    
    
    247,567
    
    
    
    25,162
    
    
    
    
    
    
    
    272,729Deferred charges
    
    
    
    
    
    
    237,825
    
    
    
    15,535
    
    
    
    -
    
    
    
    253,360Cemetery property, at cost
    
    
    
    
    
    
    341,233
    
    
    
    25,641
    
    
    
    
    
    
    
    366,874Property and equipment, at cost
    
    
    31,845
    
    
    
    426,969
    
    
    
    32,485
    
    
    
    
    
    
    
    491,299Less accumulated depreciation
    
    
    17,273
    
    
    
    162,434
    
    
    
    9,845
    
    
    
    
    
    
    
    189,552Net property and equipment
    
    
    14,572
    
    
    
    264,535
    
    
    
    22,640
    
    
    
    
    
    
    
    301,747Deferred income taxes, net
    
    
    12,808
    
    
    
    67,198
    
    
    
    13,008
    
    
    
    
    
    
    
    93,014Cemetery perpetual care trust investments
    
    
    
    
    
    
    210,267
    
    
    
    
    
    
    
    
    
    
    
    210,267Other assets
    
    
    8,835
    
    
    
    13,560
    
    
    
    1,208
    
    
    
    
    
    
    
    23,603Equity in subsidiaries
    
    
    11,761
    
    
    
    5,353
    
    
    
    
    
    
    
    (17,114
    )
    
    
    Total assets
    
    $
    84,308
    
    
    $
    2,259,331
    
    
    $
    184,983
    
    
    $
    (17,114
    )
    
    $
    2,511,508LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    1,725
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,725Accounts payable
    
    
    1,090
    
    
    
    8,452
    
    
    
    323
    
    
    
    
    
    
    
    9,865Accrued expenses and other current liabilities
    
    
    17,992
    
    
    
    39,680
    
    
    
    6,097
    
    
    
    
    
    
    
    63,769Liabilities associated with assets held for
sale
    
    
    
    
    
    
    4,777
    
    
    
    1,714
    
    
    
    
    
    
    
    6,491Total current liabilities
    
    
    20,807
    
    
    
    52,909
    
    
    
    8,134
    
    
    
    
    
    
    
    81,850Long-term debt, less current maturities
    
    
    385,080
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    415,080Intercompany payables, net
    
    
    (1,022,830
    )
    
    
    973,226
    
    
    
    49,604
    
    
    
    
    
    
    
    Deferred preneed funeral revenue
    
    
    
    
    
    
    250,556
    
    
    
    46,772
    
    
    
    
    
    
    
    297,328Deferred preneed cemetery revenue
    
    
    
    
    
    
    247,211
    
    
    
    33,359
    
    
    
    
    
    
    
    280,570Non-controlling interest in funeral and cemetery
trusts
    
    
    
    
    
    
    627,344
    
    
    
    
    
    
    
    
    
    
    
    627,344Other long-term liabilities
    
    
    10,269
    
    
    
    2,196
    
    
    
    
    
    
    
    
    
    
    
    12,465Negative equity in subsidiaries
    
    
    103,004
    
    
    
    
    
    
    
    
    
    
    
    (103,004
    )
    
    
    Total liabilities
    
    
    (503,670
    )
    
    
    2,153,442
    
    
    
    167,869
    
    
    
    (103,004
    )
    
    
    1,714,637Non-controlling interest in perpetual care trusts
    
    
    
    
    
    
    208,893
    
    
    
    
    
    
    
    
    
    
    
    208,893Common stock
    
    
    107,885
    
    
    
    426
    
    
    
    52
    
    
    
    (478
    )
    
    
    107,885Other
    
    
    480,426
    
    
    
    (103,430
    )
    
    
    17,062
    
    
    
    86,368
    
    
    
    480,426Accumulated other comprehensive loss
    
    
    (333
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (333
    )Total shareholders equity
    
    
    587,978
    
    
    
    (103,004
    )
    
    
    17,114
    
    
    
    85,890
    
    
    
    587,978Total liabilities and shareholders equity
    
    $
    84,308
    
    
    $
    2,259,331
    
    
    $
    184,983
    
    
    $
    (17,114
    )
    
    $
    2,511,508
 52




---



##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (12)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and
Senior Notes (Restated)(Continued)
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended April 30, 2005Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Net cash provided by (used in)
operating activities
    
    $
    (10,701
    )
    
    $
    7,311
    
    
    $
    7,040
    
    
    $
    
    
    
    $
    3,650Cash flows from investing activities:Proceeds from sales of marketable
securities
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16Proceeds from sale of assets, net
    
    
    (205
    )
    
    
    5,915
    
    
    
    675
    
    
    
    
    
    
    
    6,385Additions to property and equipment
    
    
    (1,636
    )
    
    
    (7,988
    )
    
    
    (3,344
    )
    
    
    
    
    
    
    (12,968
    )Other
    
    
    
    
    
    
    (188
    )
    
    
    
    
    
    
    
    
    
    
    (188
    )Net cash used in investing activities
    
    
    (1,841
    )
    
    
    (2,245
    )
    
    
    (2,669
    )
    
    
    
    
    
    
    (6,755
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    440,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    440,000Repayments of long-term debt
    
    
    (438,341
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (438,341
    )Intercompany receivables (payables)
    
    
    13,951
    
    
    
    (9,998
    )
    
    
    (3,953
    )
    
    
    
    
    
    
    Debt issue costs
    
    
    (5,811
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,811
    )Issuance of common stock
    
    
    12,608
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,608Purchase and retirement of common
stock
    
    
    (5,681
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,681
    )Dividends
    
    
    (2,742
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,742
    )Other
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Net cash provided by (used in)
financing activities
    
    
    13,992
    
    
    
    (9,998
    )
    
    
    (3,953
    )
    
    
    
    
    
    
    41Net increase (decrease) in cash
    
    
    1,450
    
    
    
    (4,932
    )
    
    
    418
    
    
    
    
    
    
    
    (3,064
    )Cash and cash equivalents, beginning of
period
    
    
    13,553
    
    
    
    7,625
    
    
    
    336
    
    
    
    
    
    
    
    21,514Cash and cash equivalents, end of period
    
    $
    15,003
    
    
    $
    2,693
    
    
    $
    754
    
    
    $
    
    
    
    $
    18,450
 53




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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)
    
    Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes and
Senior Notes (Restated)(Continued)
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended April 30, 2004Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Net cash provided by operating activities
    
    $
    51,664
    
    
    $
    7,045
    
    
    $
    2,170
    
    
    $
    
    
    
    $
    60,879Cash flows from investing activities:Proceeds from sales of marketable
securities
    
    
    1,019
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,019Proceeds from sale of assets, net
    
    
    (922
    )
    
    
    9,860
    
    
    
    
    
    
    
    
    
    
    
    8,938Additions to property and equipment
    
    
    (569
    )
    
    
    (7,596
    )
    
    
    (168
    )
    
    
    
    
    
    
    (8,333
    )Other
    
    
    
    
    
    
    41
    
    
    
    6
    
    
    
    
    
    
    
    47Net cash provided by (used in) investing
activities
    
    
    (472
    )
    
    
    2,305
    
    
    
    (162
    )
    
    
    
    
    
    
    1,671Cash flows from financing activities:Repayments of long-term debt
    
    
    (48,158
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,158
    )Intercompany receivables (payables)
    
    
    12,002
    
    
    
    (9,238
    )
    
    
    (2,764
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    4,711
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,711Purchase and retirement of common stock
    
    
    (10,692
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,692
    )Net cash used in financing activities
    
    
    (42,137
    )
    
    
    (9,238
    )
    
    
    (2,764
    )
    
    
    
    
    
    
    (54,139
    )Net increase (decrease) in cash
    
    
    9,055
    
    
    
    112
    
    
    
    (756
    )
    
    
    
    
    
    
    8,411Cash and cash equivalents, beginning of period
    
    
    18,975
    
    
    
    (478
    )
    
    
    88
    
    
    
    
    
    
    
    18,585Cash and cash equivalents, end of period
    
    $
    28,030
    
    
    $
    (366
    )
    
    $
    (668
    )
    
    $
    
    
    
    $
    26,996
 (13) Discontinued Operations, Assets Held for Sale and Impairment Charges
   54




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (13) Discontinued Operations, Assets Held for Sale and Impairment Charges(Continued)
   April 30, 2005
    
    
    October 31, 2004(Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)AssetsReceivables, net of allowances
    
    $
    431
    
    
    $
    519Inventories and other current assets
    
    
    896
    
    
    
    1,093Net property and equipment
    
    
    1,988
    
    
    
    3,851Preneed funeral receivables and trust investments
    
    
    304
    
    
    
    2,433Preneed cemetery receivables and trust investments
    
    
    1,484
    
    
    
    1,283Deferred charges and other assets
    
    
    125
    
    
    
    1,314Deferred income taxes, net
    
    
    50
    
    
    
    Assets held for sale
    
    $
    5,278
    
    
    $
    10,493LiabilitiesDeferred income taxes, net
    
    $
    
    
    
    $
    188Deferred preneed funeral revenue
    
    
    1,191
    
    
    
    2,384Deferred preneed cemetery revenue
    
    
    718
    
    
    
    705Non-controlling interest in funeral and cemetery
trusts
    
    
    1,575
    
    
    
    3,214Liabilities associated with assets held for sale
    
    $
    3,484
    
    
    $
    6,491
 Three Months Ended
    
    
    Six Months EndedApril 30,
    
    
    April 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)
    
    
    (Note 1)
    
    
    (Note 1)Revenue:Funeral
    
    $
    215
    
    
    $
    3,505
    
    
    $
    546
    
    
    $
    7,766Cemetery
    
    
    208
    
    
    
    442
    
    
    
    411
    
    
    
    765$
    423
    
    
    $
    3,947
    
    
    $
    957
    
    
    $
    8,531Gross profit:Funeral
    
    $
    (107
    )
    
    $
    167
    
    
    $
    (212
    )
    
    $
    710Cemetery
    
    
    60
    
    
    
    224
    
    
    
    147
    
    
    
    322(47
    )
    
    
    391
    
    
    
    (65
    )
    
    
    1,032Gains on dispositions and impairment (losses), net
    
    
    (97
    )
    
    
    1,028
    
    
    
    446
    
    
    
    1,028Other operating income (expense), net
    
    
    (7
    )
    
    
    21
    
    
    
    (2
    )
    
    
    30Earnings (loss) from discontinued operations
before income taxes
    
    $
    (151
    )
    
    $
    1,440
    
    
    $
    379
    
    
    $
    2,090
 55




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (14) Separation Charges
  (15) Long-term Debt
 April 30, 2005
    
    
    October 31, 2004Long-term debt:Senior secured credit facility:Revolving credit facility
    
    $
    
    
    
    $
    59,000Term Loan B
    
    
    214,201
    
    
    
    54,0056.25% senior notes due 2013
    
    
    200,000
    
    
    
    10.75% senior subordinated notes due 2008
    
    
    1,750
    
    
    
    300,000Other, principally seller financing of acquired operations
or assumption upon acquisition, weighted average
interest rates of 3.7% and 4.6% as of April 30, 2005
and October 31, 2004, respectively, partially secured
by assets of subsidiaries, with maturities through 2022
    
    
    2,513
    
    
    
    3,800Total long-term debt
    
    
    418,464
    
    
    
    416,805Less current maturities
    
    
    5,087
    
    
    
    1,725$
    413,377
    
    
    $
    415,080
    56




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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) Long-term Debt(Continued)
         57




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (15) Long-term Debt(Continued)
     (16) Consolidated Comprehensive Income (Loss)
  Six Months Ended April 30,2005
    
    
    2004(Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)Net earnings (loss)
    
    $
    (150,194
    )
    
    $
    19,500Other comprehensive income:Unrealized appreciation of investments, net of deferred tax expense of ($50)
    
    
    
    
    
    
    115Termination of derivative instrument designated and qualifying as a cash
flow hedging instrument, net of deferred tax expense of ($119)
    
    
    
    
    
    
    194Unrealized appreciation on derivative instrument designated and qualifying
as a cash flow hedging instrument, net of deferred tax expense of ($204)
and ($332), respectively
    
    
    333
    
    
    
    610Reduction in net unrealized losses associated with available- for-sale
securities of the trusts
    
    
    954
    
    
    
    Reclassification of the net unrealized losses activity attributable to the
non-controlling interest holders
    
    
    (954
    )
    
    
    Total other comprehensive income
    
    
    333
    
    
    
    919Total comprehensive income (loss)
    
    $
    (149,861
    )
    
    $
    20,419
 (17) Guarantees
  58




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (17) Guarantees(Continued)
    (18) Related Party Transactions
     59




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 (18) Related Party Transactions(Continued)
  (19) Subsequent Events
 Litigation Update
 Henrietta Torres and Teresa Fiore, on behalf of themselves and all others similarly situated
and the General Public v. Stewart Enterprises, Inc., et al.
     In
re: Funeral Consumer Antitrust Litigation  Funeral Consumers Alliance, Inc, et al. v. Service Corporation International,
Alderwoods Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville
Casket Co.
  60




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousand, except per share amounts)
 (19)
    
    Subsequent Events(Continued)
  FCA Case
 Pioneer Valley Casket Co., Inc., et al. v. Service Corporation International, Alderwoods
Group, Inc., Stewart Enterprises, Inc., Hillenbrand Industries, Inc., and Batesville Casket Co. Pioneer Valley
    Ralph Lee Fancher, on behalf of himself and all others similarly
situated v. Service Corporation International, Alderwoods Group, Inc,. Stewart Enterprises, Inc.,
Hillenbrand Industries, Inc., Aurora Casket Co., York Group, Inc., and Batesville Casket Co., ,
 State Attorney General Civil Investigative Demands
 61




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousand, except per share amounts)
 (19)
    
    Subsequent Events(Continued)
  Commitments
  Reorganization of Operating Divisions
  Hurricanes
    62




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousand, except per share amounts)
 (19)
    
    Subsequent Events(Continued)
  Late Filings
     63




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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousand, except per share amounts)
 (19)
    
    Subsequent Events(Continued)
   64




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Restatement of Historical Financial Statements
  (A)
    
    The incorrect determination of operating and reportable segments and reporting units
related to the application of FASB Statement No. 142, Goodwill and Other Intangible
Assets, (SFAS No. 142), which also had the effect of changing the charges recorded for
the assets sold as part of our plan initiated in December 2003 to sell a number of
businesses, and the net book value of assets held for sale on our balance sheet.(B)
    
    Errors identified in revenue recognition of preneed cemetery merchandise and services
contracts and recognition of realized trust earnings on preneed cemetery and funeral
merchandise and services contracts.(C)
    
    Other miscellaneous adjustments, including adjustments for lease-related accounting
practices.
  Segments and Reporting Units
     Deferred Revenue Project
 65




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Other Adjustments
   General
   66




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67




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Critical Accounting Policies
  Preneed Selling Costs
   Results of Operations
   68




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##### Table of Contents



Three Months Ended April 30, 2005 Compared to Three Months Ended April 30, 2004Continuing Operations
 Funeral Operations
 Three Months EndedApril 30,
    
    
    Increase2005
    
    
    2004
    
    
    (Decrease)(In millions)(Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)Funeral RevenueCentral Division
    
    $
    23.6
    
    
    $
    21.4
    
    
    $
    2.2Western Division
    
    
    15.7
    
    
    
    15.7
    
    
    
    Eastern Division
    
    
    14.5
    
    
    
    13.8
    
    
    
    .7Southern Division  Florida
    
    
    11.9
    
    
    
    10.7
    
    
    
    1.2All Other (1)
    
    
    3.3
    
    
    
    3.3
    
    
    
    Corporate Trust Management (2)
    
    
    5.4
    
    
    
    4.7
    
    
    
    .7Total Funeral Revenue
    
    $
    74.4
    
    
    $
    69.6
    
    
    $
    4.8Funeral Costs:Central Division
    
    $
    16.6
    
    
    $
    15.2
    
    
    $
    1.4Western Division
    
    
    13.7
    
    
    
    12.8
    
    
    
    .9Eastern Division
    
    
    11.2
    
    
    
    10.4
    
    
    
    .8Southern Division  Florida
    
    
    9.9
    
    
    
    9.2
    
    
    
    .7All Other (1)
    
    
    2.7
    
    
    
    2.7
    
    
    
    Corporate Trust Management (2)
    
    
    .2
    
    
    
    .1
    
    
    
    .1Total Funeral Costs
    
    $
    54.3
    
    
    $
    50.4
    (3)
    
    $
    3.9
    (3)Funeral Gross Profit:Central Division
    
    $
    7.0
    
    
    $
    6.2
    
    
    $
    .8Western Division
    
    
    2.0
    
    
    
    2.9
    
    
    
    (.9
    )Eastern Division
    
    
    3.3
    
    
    
    3.4
    
    
    
    (.1
    )Southern
Division  Florida
    
    
    2.0
    
    
    
    1.5
    
    
    
    .5All Other (1)
    
    
    .6
    
    
    
    .6
    
    
    
    Corporate Trust Management (2)
    
    
    5.2
    
    
    
    4.6
    
    
    
    .6Total Funeral Gross Profit
    
    $
    20.1
    
    
    $
    19.2
    (3)
    
    $
    .9
    (3)
 Same-Store Analysis
 Change in Average
    
    Change in Same-Store
    
    Cremation RateRevenue Per Call
    
    Funeral Services
    
    2005
    
    2004Central Division
    
    
    5.9
    %
    
    
    7.0
    %
    
    
    21.8
    %
    
    
    22.4
    %Western Division
    
    
    .6
    %
    
    
    (1.2
    )%
    
    
    58.9
    %
    
    
    57.9
    %Eastern Division
    
    
    (1.1
    )%
    
    
    8.0
    %
    
    
    25.4
    %
    
    
    25.3
    %Southern Division  Florida
    
    
    4.4
    %
    
    
    10.5
    %
    
    
    39.7
    %
    
    
    38.9
    %All Other (1)
    
    
    8.9
    %
    
    
    (5.7
    )%
    
    
    16.5
    %
    
    
    14.5
    %Total
    
    
    4.1
    %
    
    
    4.4
    %
    
    
    36.7
    %
    
    
    36.7
    %
 
 (1)
    
    All Other represents our operations in Puerto Rico.(2)
    
    Corporate trust management consists of trust management fees and funeral merchandise
and service trust earnings recognized with respect to preneed contracts delivered during the
period. Trust management fees are established by us at rates consistent with industry norms
and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust earnings
represent earnings realized over the life of the preneed contracts delivered during the
relevant periods. See Notes 4 and 7 to the consolidated financial statements included herein
for information regarding the cost basis and market value of the trust assets and current performance of the trusts (i.e., current 69




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realized gains and losses, interest income and dividends). Trust management fees included in funeral revenue for the three months ended April 30, 2005 and
2004 were $1.5 million and $1.4 million, respectively, and funeral trust earnings for the three months ended April 30, 2005 and 2004
were $3.9 million and $3.3 million, respectively.(3)
    
    Funeral costs from continuing operations for the three months ended April 30, 2004 do
not include net preneed selling costs of $1.6 million, which would have been
expensed if the accounting change described above had been implemented in fiscal year 2004. Had we included
these costs in 2004, funeral gross profit from continuing operations for the three months ended April
30, 2005 would have increased $2.5 million from $17.6 million for the three months ended April 30, 2004. Consolidated
Operations - Funeral
    Segment
Discussion - Funeral
   Cemetery Operations
 70




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##### Table of Contents



Three Months EndedApril 30,
    
    
    Increase2005
    
    
    2004
    
    
    (Decrease)(In millions)(Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)Cemetery Revenue:Central Division
    
    $
    18.5
    
    
    $
    22.1
    
    
    $
    (3.6
    )Western Division
    
    
    3.1
    
    
    
    3.4
    
    
    
    (.3
    )Eastern Division
    
    
    18.1
    
    
    
    15.6
    
    
    
    2.5Southern
Division - Florida
    
    
    11.1
    
    
    
    10.5
    
    
    
    .6All Other (1)
    
    
    4.3
    
    
    
    .7
    
    
    
    3.6Corporate Trust Management (2)
    
    
    3.0
    
    
    
    2.5
    
    
    
    .5Total Cemetery Revenue
    
    $
    58.1
    
    
    $
    54.8
    
    
    $
    3.3Cemetery Costs:Central Division
    
    $
    14.0
    
    
    $
    17.0
    
    
    $
    (3.0
    )Western Division
    
    
    2.7
    
    
    
    2.7
    
    
    
    Eastern Division
    
    
    15.7
    
    
    
    12.7
    
    
    
    3.0Southern Division  Florida
    
    
    9.0
    
    
    
    8.4
    
    
    
    .6All Other (1)
    
    
    3.5
    
    
    
    1.9
    
    
    
    1.6Corporate Trust Management (2)
    
    
    .1
    
    
    
    .1
    
    
    
    Total Cemetery Costs
    
    $
    45.0
    
    
    $
    42.8
    (3)
    
    $
    2.2
    (3)Cemetery Gross Profit:Central Division
    
    $
    4.5
    
    
    $
    5.1
    
    
    $
    (.6
    )Western Division
    
    
    .4
    
    
    
    .7
    
    
    
    (.3
    )Eastern Division
    
    
    2.4
    
    
    
    2.9
    
    
    
    (.5
    )Southern Division  Florida
    
    
    2.1
    
    
    
    2.1
    
    
    
    All Other (1)
    
    
    .8
    
    
    
    (1.2
    )
    
    
    2.0Corporate Trust Management (2)
    
    
    2.9
    
    
    
    2.4
    
    
    
    .5Total Cemetery Gross Profit
    
    $
    13.1
    
    
    $
    12.0
    (3)
    
    $
    1.1
    (3)
 
 (1)
    
    All Other represents our operations in Puerto Rico.(2)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and service trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by us at rates consistent with
industry norms and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust
earnings represent earnings realized over the life of the preneed contracts delivered during
the relevant periods. See Notes 5 and 7 to the consolidated financial statements included
herein for information regarding the cost basis and market value of the trust assets and
current performance of the trusts (i.e., current realized gains and losses, interest income
and dividends). Trust management fees included in cemetery revenue for the three months ended
April 30, 2005 and 2004 were $1.2 million and $1.2 million, respectively, and cemetery trust
earnings for the three months ended April 30, 2005 and 2004 were $1.8 million and $1.3
million, respectively. Perpetual care trust earnings are included in the revenues and gross
profit of the related geographic segment.(3)
    
    Cemetery costs from continuing operations for the three months ended April 30, 2004
do not include net preneed selling costs of $1.8 million, which would have been expensed if
the accounting change described above had been implemented in fiscal year 2004. Had we
included these costs in 2004, cemetery gross profit from continuing operations for the three
months ended April 30, 2005 would have increased $2.9 million from $10.2 million for the three
months ended April 30, 2004. Consolidated
Operations - Cemetery
  71




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##### Table of Contents



Segment
Discussion - Cemetery
   Discontinued Operations
  Other
    72




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##### Table of Contents



Preneed Sales into and Deliveries out of the Backlog
   Six Months Ended April 30, 2005 Compared to Six Months Ended April 30, 2004  Continuing Operations
 Funeral Operations
 73




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##### Table of Contents



Six Months EndedApril 30,
    
    
    Increase2005
    
    
    2004
    
    
    (Decrease)(In millions)(Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)Funeral Revenue:Central Division
    
    $
    44.7
    
    
    $
    44.2
    
    
    $
    .5Western Division
    
    
    31.3
    
    
    
    31.8
    
    
    
    (.5
    )Eastern Division
    
    
    28.1
    
    
    
    27.7
    
    
    
    .4Southern Division  Florida
    
    
    23.0
    
    
    
    22.3
    
    
    
    .7All Other (1)
    
    
    7.1
    
    
    
    6.7
    
    
    
    .4Corporate Trust Management (2)
    
    
    9.9
    
    
    
    9.7
    
    
    
    .2Total Funeral Revenue
    
    $
    144.1
    
    
    $
    142.4
    
    
    $
    1.7Funeral Costs:Central Division
    
    $
    32.2
    
    
    $
    31.3
    
    
    $
    .9Western Division
    
    
    26.9
    
    
    
    26.0
    
    
    
    .9Eastern Division
    
    
    21.9
    
    
    
    20.7
    
    
    
    1.2Southern Division  Florida
    
    
    19.3
    
    
    
    18.9
    
    
    
    .4All Other (1)
    
    
    5.6
    
    
    
    5.6
    
    
    
    Corporate Trust Management (2)
    
    
    .3
    
    
    
    .3
    
    
    
    Total Funeral Costs
    
    $
    106.2
    
    
    $
    102.8
    (3)
    
    $
    3.4
    (3)Funeral Gross Profit:Central Division
    
    $
    12.5
    
    
    $
    12.9
    
    
    $
    (.4
    )Western Division
    
    
    4.4
    
    
    
    5.8
    
    
    
    (1.4
    )Eastern Division
    
    
    6.2
    
    
    
    7.0
    
    
    
    (.8
    )Southern
Division  Florida
    
    
    3.7
    
    
    
    3.4
    
    
    
    .3All Other (1)
    
    
    1.5
    
    
    
    1.1
    
    
    
    .4Corporate Trust Management (2)
    
    
    9.6
    
    
    
    9.4
    
    
    
    .2Total Funeral Gross Profit
    
    $
    37.9
    
    
    $
    39.6
    (3)
    
    $
    (1.7
    ) (3)
 Same-Store Analysis
 Change in Average
    
    Change in Same-Store
    
    Cremation RateRevenue Per Call
    
    Funeral Services
    
    2005
    
    2004Central Division
    
    
    3.8
    %
    
    
    (.8
    )%
    
    
    22.4
    %
    
    
    21.6
    %Western Division
    
    
    2.8
    %
    
    
    (4.0
    )%
    
    
    59.2
    %
    
    
    57.9
    %Eastern Division
    
    
    .3
    %
    
    
    1.2
    %
    
    
    25.1
    %
    
    
    26.0
    %Southern Division  Florida
    
    
    4.5
    %
    
    
    2.7
    %
    
    
    39.4
    %
    
    
    38.8
    %All Other (1)
    
    
    5.6
    %
    
    
    1.9
    %
    
    
    15.4
    %
    
    
    13.8
    %Total
    
    
    3.3
    %
    
    
    (.7
    )%
    
    
    36.9
    %
    
    
    36.5
    %
 
 (1)
    
    All Other represents our operations in Puerto Rico.(2)
    
    Corporate trust management consists of trust management fees and funeral merchandise
and service trust earnings recognized with respect to preneed contracts delivered during the
period. Trust management fees are established by us at rates consistent with industry norms
and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust earnings
represent earnings realized over the life of the preneed contracts delivered during the
relevant periods. See Notes 4 and 7 to the consolidated financial statements included herein
for information regarding the cost basis and market value of the trust assets and current
performance of the trusts (i.e., current realized gains and losses, interest income and
dividends). Trust management fees included in funeral revenue for the six months ended April
30, 2005 and 2004 were $2.7 million and $2.9 million, respectively, and funeral trust earnings
for the six months ended April 30, 2005 and 2004 were $7.2 million and $6.8 million,
respectively.(3)
    
    Funeral costs from continuing operations for the six months ended April 30, 2004 do
not include net preneed selling costs of $2.1 million, which would have been expensed if the
accounting change described above had been implemented in fiscal year 2004. Had we included
these costs in 2004, funeral gross profit from 74




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##### Table of Contents



continuing operations for the six months ended
April 30, 2005 would have increased $0.4 million from $37.5 million for the six months ended
April 30, 2004. Consolidated Operations - Funeral
    Segment Discussion - Funeral
 
  75




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##### Table of Contents



Cemetery Operations
 Six Months EndedApril 30,
    
    
    Increase2005
    
    
    2004
    
    
    (Decrease)(In millions)(Restated)
    
    
    (Restated)(Note 1)
    
    
    (Note 1)Cemetery Revenue:Central Division
    
    $
    36.0
    
    
    $
    39.9
    
    
    $
    (3.9
    )Western Division
    
    
    6.3
    
    
    
    6.1
    
    
    
    .2Eastern Division
    
    
    32.7
    
    
    
    30.9
    
    
    
    1.8Southern Division  Florida
    
    
    22.1
    
    
    
    20.8
    
    
    
    1.3All Other (1)
    
    
    8.2
    
    
    
    4.5
    
    
    
    3.7Corporate Trust Management (2)
    
    
    5.7
    
    
    
    5.0
    
    
    
    .7Total Cemetery Revenue
    
    $
    111.0
    
    
    $
    107.2
    
    
    $
    3.8Cemetery Costs:Central Division
    
    $
    28.0
    
    
    $
    30.3
    
    
    $
    (2.3
    )Western Division
    
    
    5.4
    
    
    
    4.6
    
    
    
    .8Eastern Division
    
    
    29.9
    
    
    
    26.2
    
    
    
    3.7Southern Division  Florida
    
    
    17.8
    
    
    
    16.7
    
    
    
    1.1All Other (1)
    
    
    7.1
    
    
    
    5.6
    
    
    
    1.5Corporate Trust Management (2)
    
    
    .3
    
    
    
    .3
    
    
    
    Total Cemetery Costs
    
    $
    88.5
    
    
    $
    83.7
    (3)
    
    $
    4.8
    (3)Cemetery Gross Profit:Central Division
    
    $
    8.0
    
    
    $
    9.6
    
    
    $
    (1.6
    )Western Division
    
    
    .9
    
    
    
    1.5
    
    
    
    (.6
    )Eastern Division
    
    
    2.8
    
    
    
    4.7
    
    
    
    (1.9
    )Southern Division  Florida
    
    
    4.3
    
    
    
    4.1
    
    
    
    .2All Other (1)
    
    
    1.1
    
    
    
    (1.1
    )
    
    
    2.2Corporate Trust Management (2)
    
    
    5.4
    
    
    
    4.7
    
    
    
    .7Total Cemetery Gross Profit
    
    $
    22.5
    
    
    $
    23.5
    (3)
    
    $
    (1.0
    ) (3)
 
 (1)
    
    All Other represents our operations in Puerto Rico.(2)
    
    Corporate trust management consists of trust management fees and cemetery
merchandise and service trust earnings recognized with respect to preneed contracts delivered
during the period. Trust management fees are established by us at rates consistent with
industry norms and are paid by the trusts to our subsidiary, Investors Trust, Inc. The trust
earnings represent earnings realized over the life of the preneed contracts delivered during
the relevant periods. See Notes 5 and 7 to the consolidated financial statements included
herein for information regarding the cost basis and market value of the trust assets and
current performance of the trusts (i.e., current realized gains and losses, interest income
and dividends). Trust management fees included in cemetery revenue for the six months ended
April 30, 2005 and 2004 were $2.5 million and $2.4 million, respectively, and cemetery trust
earnings for the six months ended April 30, 2005 and 2004 were $3.2 million and $2.6 million,
respectively. Perpetual care trust earnings are included in the revenues and gross profit of
the related geographic segment.(3)
    
    Cemetery costs from continuing operations for the six months ended April 30, 2004 do
not include net preneed selling costs of $2.8 million which would have been expensed if the
accounting change described above had been implemented in fiscal year 2004. Had we included
these costs in 2004, cemetery gross profit from continuing operations for the six months ended
April 30, 2005 would have increased $1.8 million from $20.7 million for the six months ended
April 30, 2004. 76




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##### Table of Contents



Consolidated Operations - Cemetery
    Segment Discussion - Cemetery
   Discontinued Operations
  Other
   77




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Preneed Sales into and Deliveries out of the Backlog
   78




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##### Table of Contents



Liquidity and Capital Resources
 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)
    
    $
    418.5
    
    
    $
    5.1
    
    
    $
    5.6
    
    
    $
    4.5
    
    
    $
    403.3Interest on long-term debt (2)
    
    
    164.3
    
    
    
    22.9
    
    
    
    45.0
    
    
    
    44.4
    
    
    
    52.0Operating lease obligations (3)
    
    
    36.6
    
    
    
    2.3
    
    
    
    7.9
    
    
    
    6.8
    
    
    
    19.6Non-competition and other agreements (4)
    
    
    8.2
    
    
    
    2.1
    
    
    
    4.0
    
    
    
    1.5
    
    
    
    .6$
    627.6
    
    
    $
    32.4
    
    
    $
    62.5
    
    
    $
    57.2
    
    
    $
    475.5
 
 (1)
    
    See below for a breakdown of our future scheduled principal payments and maturities
of our long-term debt by type as of May 31, 2005.(2)
    
    Includes contractual interest payments for our revolving credit facility, Term Loan
B, senior subordinated notes, senior notes and third-party debt. The interest on the
revolving credit facility and Term Loan B was calculated based on interest rates in effect as
of April 30, 2005.(3)
    
    Our noncancellable operating leases are primarily for land and buildings and expire
over the next one to 15 years, except for six leases that expire between 2032 and 2039. Our
future minimum lease payments as of April 30, 2005 are $2.3 million, $4.2 million, $3.7
million, $2.9 million, $3.9 million and $19.6 million for the years ending October 31, 2005,
2006, 2007, 2008, 2009 and later years, respectively. 79




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##### Table of Contents



(4)
    
    We have entered into non-competition agreements with prior owners and key employees
of acquired subsidiaries that expire through 2012. This category also includes separation pay
related to three former executive officers.   Other,PrincipallySellerFiscal
    
    Revolving
    
    
    
    
    
    
    Senior
    
    
    
    
    
    
    Financing ofYear Ending
    
    Credit
    
    
    Term
    
    
    Subordinated
    
    
    Senior
    
    
    AcquiredOctober 31,
    
    Facility
    
    
    Loan B
    
    
    Notes
    
    
    Notes
    
    
    Operations
    
    
    Total2005
    
    $
    
    
    
    $
    1.1
    
    
    $
    1.8
    (1)
    
    $
    
    
    
    $
    .5
    
    
    $
    3.42006
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    1.0
    
    
    
    3.22007
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    .6
    
    
    
    2.82008
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    .2
    
    
    
    2.42009
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.2Thereafter
    
    
    
    
    
    
    204.3
    
    
    
    
    
    
    
    200.0
    
    
    
    .1
    
    
    
    404.4Total long-term debt
    
    $
    
    
    
    $
    214.2
    
    
    $
    1.8
    
    
    $
    200.0
    
    
    $
    2.4
    
    
    $
    418.4
 
 (1)
    
    The first call date on our remaining senior subordinated notes is July 1, 2005 at a
price of 105.375 percent of the notes principal amount. On May 31, 2005, we gave notice to
the remaining holders of the senior subordinated notes of our intention to call the remaining
$1.8 million principal amount. As such, this amount has been classified as a short-term
obligation in the April 30, 2005 condensed consolidated balance sheet. In the third quarter
of fiscal year 2005, we will record a charge for the early extinguishment of debt of
approximately $0.1 million including the call premium and write-off of the remaining
unamortized fees on the senior subordinated notes. We intend to fund the call of the
remaining notes using excess cash on hand.     80




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##### Table of Contents



Off-Balance Sheet Arrangements
 Our off-balance sheet arrangements as of April 30, 2005 consist of the following items:
 (1)
    
    the $41.1 million bond we are required to maintain to guarantee our obligations
relating to funds we withdrew in fiscal year 2001 from our preneed funeral trusts in
Florida, which is discussed above; and(2)
    
    the insurance-funded preneed funeral contracts, which will be funded by life
insurance or annuity contracts issued by third-party insurers, are not reflected in our
consolidated balance sheets, and are discussed in Note 4 to the condensed consolidated
financial statements included herein.
 Ratio of Earnings to Fixed Charges
  Six MonthsEnded
    
    Years Ended October 31,April 30, 2005
    
    2004
    
    2003
    
    2002
    
    2001
    
    2000(Restated)
    
    (Restated)
    
    (Restated)
    
    (Restated)
    
    (Restated)
    
    (Restated)(Note 1)
    
    (Note 1)
    
    (Note 1)
    
    (Note 1)
    
    (Note 1)
    
    (Note 1)1.21 (1)(5)
    
    
    1.98
    (2)
    
    
    1.08
    (3)
    
    
    1.27
    (4)(5)
    
    
    
    (5)(6)
    
    
    2.33
 
 (1)
    
    Pretax earnings for the six months ended April 30, 2005 include $1.2 million of
gains on dispositions and impairment (losses), net and a charge of $32.7 million for the loss
on early extinguishment of debt.(2)
    
    Pretax earnings for fiscal year 2004 includes separation charges of $3.4 million for
costs related to workforce reductions and separation pay to a former executive officer and
($0.2) million in gains on dispositions and impairment (losses), net.(3)
    
    Pretax earnings for fiscal year 2003 include a charge of $11.3 million for the loss
on early extinguishment of debt in connection with redemption of the ROARS, a noncash charge
of $10.2 million for long-lived asset impairment and a charge of $2.5 million for separation
payments to former executive officers.(4)
    
    Pretax earnings for fiscal year 2002 include a noncash charge of $18.5 million in
connection with the write-down of assets held for sale.(5)
    
    Excludes the cumulative effect of change in accounting principles.(6)
    
    Pretax earnings for fiscal year 2001 include a noncash charge of $269.2 million in
connection with the write-down of assets held for sale and other charges and a $9.1 million
charge for the loss on early extinguishment of debt. As a result of these charges, our
earnings for fiscal year 2001 were insufficient to cover our fixed charges, and an additional
$229.9 million in pretax earnings would have been required to eliminate the coverage
deficiency.  Inflation
  Recent Accounting Standards
  81




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
   Interest
     
 Item 4. Controls and Procedures
 Restatement
  82




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##### Table of Contents



Evaluation of Disclosure Controls and Procedures
       83




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##### Table of Contents



Managements Remediation Initiatives
   Changes in Internal Control Over Financial Reporting
  84




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  Issuer Purchases of Equity Securities
 Total number of
    
    
    Maximum approximateshares purchased
    
    
    dollar value of sharesTotal number
    
    
    
    
    
    
    as part of
    
    
    that may yet beof shares
    
    
    Average price
    
    
    publicly-announced
    
    
    purchased under thePeriod
    
    purchased(1)
    
    
    paid per share
    
    
    plans or programs(2)
    
    
    plans or programsFebruary 1, 2005 through
February 28, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    5,783,509March 1, 2005
through March 31, 2005
    
    
    900,669
    
    
    $
    6.28
    
    
    
    900,000
    
    
    $
    30,129,265April 1, 2005 through
April 30, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    30,129,265Total
    
    
    900,669
    
    
    $
    6.28
    
    
    
    900,000
    
    
    $
    30,129,265
 
 (1)
    
    Consists of shares repurchased from employees to satisfy the exercise price and tax
withholding of certain stock option exercises and share repurchases under our stock repurchase
program.(2)
    
    On June 26, 2003, we announced that our Board of Directors had approved a stock
repurchase program that allows us to invest up to $25.0 million in repurchases of our Class A
common stock. In June 2004, the Board of Directors increased the program limit by an
additional $3.0 million to $28.0 million. On March 17, 2005, we substantially completed our
$28.0 million stock repurchase program, having repurchased 4,400,000 shares since its
inception. On March 28, 2005, we announced a new $30.0 million stock repurchase program.
Repurchases under the new program are limited to our Class A common stock and are made in the
open market or in privately negotiated transactions at such times and in such amounts as
management deems appropriate, depending on market conditions and other factors. Since the
inception of the new program through April 30, 2005, we have not repurchased any shares. 
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
 85




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##### Table of Contents



Item 6. Exhibits
 (a)
    
    Exhibits3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
May 7, 2003 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended April 30, 2003)3.2
    
    By-laws of the Company, as amended and restated as of November 19, 2004 (incorporated by
reference to Exhibit 3.1 to the Companys Current Report on Form 8-K dated November 22, 2004)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 dated November 3, 1999)4.4
    
    Credit Agreement dated June 29, 2001 by and among the Company, Empresas Stewart-Cementerios
and Empresas Stewart-Funerarias, as Borrowers, Bank of America, N.A., as Administrative Agent,
Collateral Agent and as a Lender, Deutsche Banc Alex. Brown, Inc., as Syndication Agent,
Bankers Trust Company, as a Lender and the other Lenders party thereto from time to time
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K dated
June 29, 2001) and Amendment No. 1 to the Credit Agreement dated April 25, 2003 (incorporated
by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K dated May 1, 2003) and
Amendment No. 2 to the Credit Agreement dated February 18, 2004 (incorporated by reference to
Exhibit 4.4 to the Companys Quarterly Report on Form 10-Q for the quarter ended January 31,
2004)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 dated November 22, 2004)4.6
    
    Indenture dated June 29, 2001 by and among Stewart, the Guarantors named therein and Firstar
Bank, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Companys Form S-4
dated August 14, 2001) and First Supplemental Indenture, dated as of February 2, 2005 by and
among Stewart Enterprises, Inc., the Guarantors thereunder and U.S. Bank National Association,
as Trustee, supplementing the Indenture (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K dated February 2, 2005) and Second Supplemental
Indenture, dated as of February 28, 2005 by and among The Lincoln Memorial Park Cemetery
Association, a subsidiary of Stewart Enterprises, Inc., Stewart Enterprises, Inc., the
 86




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##### Table of Contents



other Guarantors and U.S. National Bank Association, as trustee (incorporated by reference to
Exhibit 4.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended April 30,
2005)4.7
    
    Form of 10.75 percent Senior Subordinated Note due 2008 (incorporated by reference to Exhibit
4.2 to the Companys Form S-4 dated August 14, 2001)4.8
    
    Indenture dated as of February 11, 2005 by and among Stewart Enterprises, Inc., the
Guarantors thereunder and U.S. Bank National Association, as Trustee, with respect to the 6.25
percent Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K dated February 11, 2005)4.9
    
    Form of 6.25 percent Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K dated February 11, 2005)12
    
    Calculation of Ratio of Earnings to Fixed Charges18
    
    Preferability Letter from Independent Registered Public Accounting Firm regarding change in
accounting principle (incorporated by reference to Exhibit 18 to the Companys original
Quarterly Report on Form 10-Q for the quarter ended April 30, 2005)31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Kenneth C. Budde,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen,
Executive Vice President and Chief Financial Officer32
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of Kenneth C. Budde,
President and Chief Executive Officer, and Thomas M. Kitchen, Executive Vice President and
Chief Financial Officer
 87




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##### Table of Contents



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
 
 SIGNATURES
  STEWART ENTERPRISES, INC.May 4, 2006
    
    /s/ THOMAS M. KITCHENThomas M. KitchenExecutive Vice President andChief Financial OfficerMay 4, 2006
    
    /s/ MICHAEL G. HYMELMichael G. HymelVice PresidentCorporate ControllerChief Accounting Officer
 88




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##### Table of Contents



Index to Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company, as amended and restated as of
May 7, 2003 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended April 30, 2003)3.2
    
    By-laws of the Company, as amended and restated as of November 19, 2004 (incorporated by
reference to Exhibit 3.1 to the Companys Current Report on Form 8-K dated November 22, 2004)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 dated November 3, 1999)4.4
    
    Credit Agreement dated June 29, 2001 by and among the Company, Empresas Stewart-Cementerios
and Empresas Stewart-Funerarias, as Borrowers, Bank of America, N.A., as Administrative Agent,
Collateral Agent and as a Lender, Deutsche Banc Alex. Brown, Inc., as Syndication Agent,
Bankers Trust Company, as a Lender and the other Lenders party thereto from time to time
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K dated
June 29, 2001) and Amendment No. 1 to the Credit Agreement dated April 25, 2003 (incorporated
by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K dated May 1, 2003) and
Amendment No. 2 to the Credit Agreement dated February 18, 2004 (incorporated by reference to
Exhibit 4.4 to the Companys Quarterly Report on Form 10-Q for the quarter ended January 31,
2004)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 dated November 22, 2004)4.6
    
    Indenture dated June 29, 2001 by and among Stewart, the Guarantors named therein and Firstar
Bank, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Companys Form S-4
dated August 14, 2001) and First Supplemental Indenture, dated as of February 2, 2005 by and
among Stewart Enterprises, Inc., the Guarantors thereunder and U.S. Bank National Association,
as Trustee, supplementing the Indenture (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K dated February 2, 2005) and Second Supplemental
Indenture, dated as of February 28, 2005 by and among The Lincoln Memorial Park Cemetery
Association, a subsidiary of Stewart Enterprises, Inc., Stewart Enterprises, Inc., the




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##### Table of Contents



other Guarantors and U.S. National Bank Association, as trustee (incorporated by reference to
Exhibit 4.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended April 30,
2005)4.7
    
    Form of 10.75 percent Senior Subordinated Note due 2008 (incorporated by reference to Exhibit
4.2 to the Companys Form S-4 dated August 14, 2001)4.8
    
    Indenture dated as of February 11, 2005 by and among Stewart Enterprises, Inc., the
Guarantors thereunder and U.S. Bank National Association, as Trustee, with respect to the 6.25
percent Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K dated February 11, 2005)4.9
    
    Form of 6.25 percent Senior Note due 2013 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K dated February 11, 2005)12
    
    Calculation of Ratio of Earnings to Fixed Charges18
    
    Preferability Letter from Independent Registered Public Accounting Firm regarding change in
accounting principle (incorporated by reference to Exhibit 18 to the Companys original
Quarterly Report on Form 10-Q for the quarter ended April 30, 2005)31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Kenneth C. Budde,
President and Chief Executive Officer31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Thomas M. Kitchen,
Executive Vice President and Chief Financial Officer32
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of Kenneth C. Budde,
President and Chief Executive Officer, and Thomas M. Kitchen, Executive Vice President and
Chief Financial Officer