STEWART ENTERPRISES INC - 10-Q Quarterly Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(X)		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the quarterly period ended January 31, 2003
OR
( )		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: 0-19508

STEWART ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)


LOUISIANA		72-0693290
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

110 Veterans Memorial Boulevard
Metairie, Louisiana		70005
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (504) 837-5880

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the Registrant is an accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes [X] No [ ]

The number of shares of the Registrant’s Class A common stock, no par value per share, and Class B common stock, no par value per share, outstanding as of March 6, 2003, was 104,797,103 and 3,555,020, respectively.

TABLE OF CONTENTS


		CONSOLIDATED STATEMENTS OF EARNINGS
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Certifications Required by Rule 13a-14 under the Securities Exchange Act of 1934
Certifications Required by Rule 13a-14 under the Securities Exchange Act of 1934
EX-12 Ratio of Earnings to Fixed Charges

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

INDEX


		Page
Part I.	Financial Information
	Item 1. Financial Statements (Unaudited)
	Consolidated Statements of Earnings — Three Months Ended January 31, 2003 and 2002		3
	Consolidated Balance Sheets — January 31, 2003 and October 31, 2002		4
	Consolidated Statement of Shareholders’ Equity — Three Months Ended January 31, 2003		6
	Consolidated Statements of Cash Flows — Three Months Ended January 31, 2003 and 2002		7
	Notes to Consolidated Financial Statements		8
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		40
	Item 4. Controls and Procedures		41
Part II.	Other Information
	Item 1. Legal Proceedings		42
	Item 5. Other Information		42
	Item 6. Exhibits and Reports on Form 8-K		50
	Signatures		52
	Certifications		53

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)


		Three Months Ended January 31,

		2003			2002

Revenues:
	Funeral	$	76,736		$	95,083
	Cemetery		54,481			58,486

			131,217			153,569

Costs and expenses:
	Funeral		57,626			68,625
	Cemetery		42,208			43,968

			99,834			112,593

	Gross profit		31,383			40,976
Corporate general and administrative expenses			4,300			3,770

	Operating earnings		27,083			37,206
Interest expense			(13,577	)		(16,970	)
Investment income			87			124
Other income, net			1,685			80

	Earnings before income taxes		15,278			20,440
Income taxes			5,805			7,767

	Net earnings	$	9,473		$	12,673

Net earnings per common share:
	Basic	$	.09		$	.12

	Diluted	$	.09		$	.12

Weighted average common shares outstanding (in thousands):
	Basic		108,043			107,639

	Diluted		108,320			108,258

See accompanying notes to consolidated financial statements.

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)


			January 31,		October 31,
ASSETS			2003		2002

Current assets:
	Cash and cash equivalent investments		$	17,009	$	28,190
	Marketable securities			2,666		2,588
	Receivables, net of allowances			89,581		86,827
	Inventories			42,982		41,666
	Prepaid expenses			2,199		2,815
	Deferred income taxes, net			1,320		1,348
	Assets held for sale (Note 7)			5,481		8,966

		Total current assets		161,238		172,400
Receivables due beyond one year, net of allowances				76,131		76,653
Prearranged receivables, net				1,195,873		1,200,914
Goodwill				491,323		491,323
Deferred charges				252,419		253,083
Cemetery property, at cost				387,960		388,065
Property and equipment, at cost:
	Land			44,132		44,402
	Buildings			304,931		304,125
	Equipment and other			154,819		154,389

				503,882		502,916
	Less accumulated depreciation			173,153		168,600

	Net property and equipment			330,729		334,316
Deferred income taxes, net				89,988		95,794
Other assets				3,050		3,036

		Total assets	$	2,988,711	$	3,015,584

(continued)

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)


					January 31,			October 31,
LIABILITIES AND SHAREHOLDERS' EQUITY					2003			2002

Current liabilities:
	Current maturities of long-term debt				$	6,645		$	6,689
	Accounts payable					8,493			11,113
	Accrued payroll					7,588			13,903
	Accrued insurance					15,760			14,764
	Accrued interest					4,787			14,642
	Accrued other					9,109			10,978
	Liabilities associated with assets held for sale (Note 7)					2,153			2,911

		Total current liabilities				54,535			75,000
Long-term debt, less current maturities						542,550			545,255
Prearranged deferred revenue, net						1,547,479			1,561,533
Other long-term liabilities						22,009			21,533

		Total liabilities				2,166,573			2,203,321

Commitments and contingencies (Note 3)
Shareholders’ 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 104,533,816 and 104,469,572 shares at January 31, 2003 and October 31, 2002, respectively				104,534			104,470
		Class B authorized 5,000,000 shares; issued and outstanding 3,555,020 shares at January 31, 2003 and October 31, 2002; 10 votes per share; convertible into an equal number of Class A shares				3,555			3,555
	Additional paid-in capital					677,336			677,087
	Retained earnings					40,077			30,604
	Accumulated other comprehensive loss:
		Unrealized depreciation of investments				(921	)		(965	)
		Derivative financial instrument losses				(2,443	)		(2,488	)

			Total accumulated other comprehensive loss			(3,364	)		(3,453	)

				Total shareholders’ equity		822,138			812,263

			Total liabilities and shareholders’ equity		$	2,988,711		$	3,015,584

See accompanying notes to consolidated financial statements.

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands, except per share amounts)


								Unrealized
								Appreciation			Derivative
				Additional				(Depreciation)			Financial			Total
		Common		Paid-In		Retained		of			Instrument			Shareholders'
		Stock ⁽¹⁾		Capital		Earnings		Investments			Gains (Losses)			Equity

Balance October 31, 2002		$	108,025	$	677,087	$	30,604	$	(965	)	$	(2,488	)	$	812,263
Comprehensive income:
	Net earnings						9,473								9,473
	Other comprehensive income:
	Unrealized appreciation of investments								72						72
	Deferred income tax expense on unrealized appreciation of investments								(28	)					(28	)
	Unrealized appreciation on derivative instrument designated and qualifying as a cash flow hedging instrument											73			73
	Net deferred income tax on unrealized appreciation on derivative instrument designated and qualifying as a cash flow hedging instrument											(28	)		(28	)

	Total other comprehensive income		—		—		—		44			45			89

	Total comprehensive income		—		—		9,473		44			45			9,562
Issuance of common stock			64		249										313

Balance January 31, 2003		$	108,089	$	677,336	$	40,077	$	(921	)	$	(2,443	)	$	822,138

⁽¹⁾

Amount includes 104,534 and 104,470 shares (in thousands) of common stock with a stated value of $1 per share as of January 31, 2003 and October 31, 2002, respectively, and includes 3,555 shares (in thousands) of Class B common stock.

See accompanying notes to consolidated financial statements.

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands, except per share amounts)


			Three Months Ended January 31,

			2003			2002

Cash flows from operating activities:
	Net earnings		$	9,473		$	12,673
	Adjustments to reconcile net earnings to net cash used in operating activities:
	Depreciation and amortization			13,436			13,441
	Provision for doubtful accounts			2,009			2,667
	Net loss realized on marketable securities			—			485
	Net gains on sale of assets			(1,038	)		—
	Provision for deferred income taxes			5,777			6,050
	Changes in assets and liabilities:
		Increase in receivables		(4,507	)		(3,383	)
		Decrease in other deferred charges		1,606			1,311
		Increase in inventories and cemetery property		(180	)		(1,298	)
		Decrease in accounts payable and accrued expenses		(19,401	)		(19,193	)
		Change in prearranged activity		(7,962	)		(7,489	)
		Prearranged acquisition costs		(8,019	)		(7,229	)
		Increase (decrease) in other		1,122			(78	)

		Net cash used in operating activities		(7,684	)		(2,043	)

Cash flows from investing activities:
	Proceeds from sale of assets, net			1,830			1,794
	Additions to property and equipment			(3,052	)		(2,582	)
	Other			94			(259	)

		Net cash used in investing activities		(1,128	)		(1,047	)

Cash flows from financing activities:
	Repayments of long-term debt			(2,682	)		(3,475	)
	Issuance of common stock			313			336

		Net cash used in financing activities		(2,369	)		(3,139	)

Effect of exchange rates on cash and cash equivalents				—			(599	)

Net decrease in cash				(11,181

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents