Stewart Enterprises Reports Results for the Third Quarter of 2013

Stewart Enterprises Reports Results for the Third Quarter of 2013

JEFFERSON, La., Sept. 9, 2013 (GLOBE NEWSWIRE) -- Stewart Enterprises, Inc.
(Nasdaq:STEI) reported today its results for the third quarter of 2013.

          Three Months Ended July 31,       Nine Months Ended July 31,
          2013             2012             2013             2012
                    per              per              per              per
          millions diluted millions diluted millions diluted millions diluted
                    share            share            share            share
Net        $8.3   $.10  $9.6   $.11  $ 35.6  $.41  $ 26.9  $.31
earnings
Net
earnings
from       $8.3   $.10  $9.9   $.11  $ 35.6  $.41  $ 28.3  $.32
continuing
operations
Adjusted
earnings
from       $8.0   $.09  $9.6   $.11  $ 33.9  $.39  $ 30.1  $.34
continuing
operations
^(1)
                                                               
^(1)See table "Reconciliation of Non-GAAP Financial Measures" for additional
information on adjusted earnings and adjusted earnings per share from
continuing operations.

Thomas M. Kitchen, President and Chief Executive Officer, stated, "The third
quarter of 2013 proved to be a challenging period for the Company, with the
pending merger with SCI and continued refinements to our sales initiatives.
When we started our new sales initiatives, we expected it would be a process
that while beneficial in the long-term, would cause short-term disruptions.
In July 2013, we experienced the best month of cemetery property sales since
the implementation of the new sales initiatives earlier this year, which we
believe indicates that the initiatives are generating positive momentum.We
continue to believe that the new structure will improve customer service and
increase preneed sales over time.Operating results were also impacted
adversely by the timing of revenue recognition for cemetery construction
projects and for cemetery property sales. As construction occurs and
additional payments are received, these contracts will be recognized as
revenue in the future.Additionally, margins for the quarter were negatively
impacted due to expenses that exceeded the prior year quarter, particularly
increased selling expenses for sales of preneed funerals, which are recognized
currently while the related revenue is deferred to a future period.We are
continuing to refine the overall sales compensation program."

Mr. Kitchen continued, "Fiscal year 2013 continues to be a very successful
year for the Company and our shareholders.For the first nine months of 2013,
we increased total revenue by $10 million and gross profit by $6 million,
which reflects the highest nine month revenue and gross profit in five
years.In addition, we improved adjusted earnings by 13 percent, operating
cash flow by 16.5 percent and our investment portfolio has generated a total
return of 10 percent over the past nine months.Some additional highlights of
the first nine months of fiscal year 2013 include:

  *Improving overall revenue, gross profit in dollars and margin and earnings
    from continuing operations compared to the first nine months of fiscal
    year 2012;
    
  *Generating operating cash flow of $68.4 million, or a 16.5 percent
    improvement, and free cash flow of $54.1 million, or more than a 14
    percent improvement, compared to the same period of last year.As of July
    31, 2013, we had more than $117 million of cash and marketable securities
    with no amounts borrowed on our $150 million credit facility;
    
  *Realizing a 7 percent improvement in adjusted EBITDA to $88.6 million or a
    22.3 percent adjusted EBITDA margin, as discussed in the table
    "Reconciliation of Non-GAAP Financial Measures;" and
    
  *Producing total returns of 11 percent in our preneed trusts and 8 percent
    in our cemetery perpetual care trusts."

Mr. Kitchen concluded, "We are pleased with the progress of the activities
related to the pending merger with SCI over the past three months.We continue
to expect it will be completed in late 2013 or early 2014."

Definitive Merger Agreement with Service Corporation International

On May 29, 2013, the Company announced that it entered into a definitive
merger agreement with SCI. Pursuant to the agreement, holders of the
Company's Class A and Class B common stock will receive $13.25 in cash for
each share of common stock. The transaction was approved by the Company's
shareholders on August 13, 2013.The transaction is subject to the
satisfaction of customary closing conditions and regulatory approvals,
including expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act") or of any
agreement with the Federal Trade Commission ("FTC") not to consummate the
merger.On July 17, 2013, the Company announced that it and SCI had received
second requests from the FTC, which extends the waiting period under the HSR
Act until the 30th day after substantial compliance by SCI and the Company
with the requests, unless that period is extended voluntarily by the parties
or terminated sooner by the FTC.Subsequently, the Company and SCI have
entered into an agreement with the FTC not to consummate the merger prior to
90 days after both SCI and Stewart certify substantial compliance with the
second request, or December 13, 2013, whichever is earlier.The parties may
close the merger sooner if the FTC grants early termination, closes its
investigation or accepts for public comment a proposed consent agreement
settling the matter. The Company is preparing responses to the second request
and continues to anticipate that the transaction will close in late calendar
year 2013 or early 2014.For additional information, see the Company's Form
10-Q for the quarter ended July 31, 2013.

Third Quarter Results

FUNERAL

  *Funeral revenue declined $0.2 million, or 0.3 percent, to $68.7 million
    for the third quarter of 2013.This decline is primarily due to a 0.4
    percent decrease in same-store funeral services performed, coupled with a
    0.7 percent decrease in same-store average revenue per funeral
    service.During the third quarter of 2013, the Company experienced a $0.7
    million increase in revenue related to trust activities.
    
  *Funeral gross profit decreased $1.8 million, or 11.4 percent, to $14.0
    million for the third quarter of 2013, compared to $15.8 million for the
    same period of 2012.Funeral gross profit margin declined 250 basis points
    to 20.4 percent for the third quarter of 2013 from 22.9 percent for the
    third quarter of 2012.During the third quarter of 2013, the Company
    continued to refine its sales compensation plan, which resulted in an
    increase of preneed selling costs of $1.5 million.This negatively
    affected the Company's third quarter results, because preneed selling
    costs are expensed as incurred, while preneed funeral sales are deferred
    until they are performed.The Company is continuing to refine its sales
    compensation plan to seek the appropriate balance between preneed
    production and current period expenses.
    
  *The cremation rate for the Company's same-store operations was 44.9
    percent for the third quarter of 2013 compared to 43.8 percent for the
    third quarter of 2012.
    
  *Net preneed funeral sales decreased 2.0 percent during the third quarter
    of 2013 compared to the same period of 2012.Preneed funeral sales are
    deferred until the underlying contracts are performed and have no impact
    on current revenue.

CEMETERY

  *Cemetery revenue decreased $2.0 million, or 3.3 percent, to $58.4 million
    for the third quarter of 2013, compared to $60.4 million during the third
    quarter of 2012.During the third quarter of fiscal year 2013, the Company
    experienced a $3.0 million decline in revenue due to the timing of revenue
    recognition for both construction of cemetery projects and the payments
    for cemetery property sales.Due to the nature of these items, revenue
    recognition does not happen evenly throughout the year.As construction
    occurs and additional payments are received, these contracts will be
    recognized as revenue in the future.In addition, the Company experienced
    a strong third quarter in fiscal year 2012 of revenue recognized from
    these items.These results were partially offset by a $1.1 million
    increase in revenue related to trust activities and a $0.9 million
    improvement in merchandise delivered and services performed.
    
  *Cemetery property sales were essentially flat compared to the third
    quarter of 2012.These results are the strongest quarter of property sales
    since the implementation of the new sales initiatives earlier this year,
    due primarily to strong sales throughout the month of July.
    
  *Cemetery gross profit decreased $2.0 million, or 17.9 percent, to $9.2
    million for the third quarter of 2013, compared to $11.2 million for the
    same period of 2012.Cemetery gross profit margin declined 270 basis
    points to 15.8 percent for the third quarter of 2013 from 18.5 percent for
    the same period of 2012.The decline is primarily due to the decrease in
    revenue, as previously noted.

OTHER

  *Corporate general and administrative expenses improved $0.9 million to
    $6.4 million for the third quarter of fiscal year 2013.The Company
    reduced its accrual for annual incentive compensation based on third
    quarter results.
    
  *During the three months ended July 31, 2013, the Company incurred $3.1
    million in merger-related costs which consist primarily of legal fees.
    
  *The effective tax rate for continuing operations for the quarter ended
    July 31, 2013 was 0.6 percent compared to 27.9 percent for the same period
    in 2012. The reduced rate during the third quarter of 2013 is primarily
    due to a change in Puerto Rican tax legislation that increased the top tax
    rate for businesses from 30 percent to 39 percent.This new tax
    legislation reverses the tax legislation passed in January 2011.As a
    result, the Company revalued its Puerto Rican deferred tax assets,
    resulting in a one-time non-cash benefit of $3.0 million, net.During the
    third quarter of the prior year, the Company recorded a tax benefit of
    $1.1 million resulting from a reduction in the valuation allowance for
    capital losses, associated with the improved performance of the Company's
    trust portfolio.The Company did not have an adjustment to its valuation
    allowance during the third quarter of 2013.

Year to Date Results

FUNERAL

  *Funeral revenue increased $8.3 million, or 3.9 percent, to $222.0 million
    for the nine months ended July 31, 2013.Same-store funeral services
    performed increased 4.3 percent, or 1,736 events.In addition, the Company
    experienced a $1.1 million improvement in revenue related to trust
    activities.These increases were partially offset by a 0.4 percent
    decrease in same-store average revenue per funeral service.
    
  *Funeral gross profit increased $0.7 million, or 1.3 percent, to $53.7
    million for the nine months ended July 31, 2013.The increase is primarily
    due to the $8.3 million improvement in revenue, as previously noted.
    Funeral gross profit margin declined 60 basis points to 24.2 percent for
    the first nine months of fiscal year 2013 from 24.8 percent for the same
    period of 2012, due in part to an increase in preneed selling costs, as
    previously discussed.
    
  *The cremation rate for the Company's same-store operations was 43.8
    percent for the first nine months of fiscal year 2013 compared to 43.2
    percent for the corresponding period of 2012.
    
  *Net preneed funeral sales decreased 5.2 percent during the first nine
    months of fiscal year 2013 compared to the same period of 2012. As part
    of the integration of its operations and sales teams, the Company revised
    its organizational structure and compensation packages.These actions
    negatively impacted preneed funeral sales and cemetery property sales for
    the first nine months of fiscal year 2013.The Company anticipated these
    changes would create challenges, and is taking the necessary steps to
    address them.The Company has been recruiting, hiring and training new
    counselors.The Company continues to believe that the new structure will
    improve customer service and increase preneed sales over time.Preneed
    funeral sales are deferred until the underlying contracts are performed
    and have no impact on current revenue.

CEMETERY

  *Cemetery revenue increased $1.6 million, or 0.9 percent, to $174.6 million
    for the nine months ended July 31, 2013.The Company produced a $4.9
    million increase in revenue related to trust activities and a $3.2 million
    improvement in merchandise delivered and services performed.In addition,
    the Company generated a $3.1 million increase in revenue recognized for
    cemetery property sales for which the down payment required for revenue
    recognition was received and a $1.6 million increase in revenue recognized
    from the construction of various cemetery projects.These increases were
    partially offset by a $1.3 million decline in finance charges.
    
  *Cemetery property sales declined $9.3 million, or 11.9 percent, compared
    to the first nine months of fiscal year 2012, primarily due to the revised
    sales initiatives, as previously discussed.
    
  *Cemetery gross profit increased $5.3 million, or 18.6 percent, to $33.8
    million for the nine months ended July 31, 2013.Cemetery gross profit
    margin improved 290 basis points to 19.4 percent for the first nine months
    of fiscal year 2013 from 16.5 percent for the corresponding period of
    fiscal year 2012.The increase in gross profit is primarily due to a
    reduction in property and related selling costs, coupled with the
    improvement in revenue, as previously noted.

OTHER

  *During the nine months ended July 31, 2013, the Company incurred $3.7
    million in merger-related costs which consist primarily of financial
    advisory and legal fees.
    
  *During the first nine months of the prior fiscal year, the Company
    recorded $2.9 million in restructuring and other charges.These charges
    were primarily related to separation pay, termination benefits and a
    non-cash asset impairment due to the restructuring of the sales and
    operations of the organization, as well as a separate reduction in
    workforce associated with the Company's ongoing continuous improvement
    initiative.
    
  *Other operating income, net increased $0.9 million compared to the first
    nine months of fiscal year 2012 primarily due to the sale of excess
    cemetery land during fiscal year 2013.
    
  *The effective tax rate for continuing operations for the nine months ended
    July 31, 2013 was 25.9 percent compared to 32.7 percent for the
    corresponding period in fiscal year 2012.The reduced rate for the first
    nine months of fiscal year 2013 is primarily due to a change in Puerto
    Rican tax legislation that increased the top tax rate for businesses from
    30 percent to 39 percent, as previously discussed.As a result, the
    Company revalued its Puerto Rican deferred tax assets, resulting in a
    one-time non-cash benefit of $3.0 million, net.In addition, the Company
    benefitted from a $2.7 million and a $2.1 million reduction in the
    valuation allowance for capital losses, associated with the positive
    performance of its trust portfolio for the nine months ended July 31, 2013
    and 2012, respectively.
    
  *During the nine months ended July 31, 2012, the Company decided to hold
    one of its e-commerce businesses for sale.The results of operations and
    the related impairment resulted in a net loss of $1.4 million in
    discontinued operations.

Cash Flow Results and Debt for Total Operations

  *Cash flow provided by operating activities for the third quarter of fiscal
    year 2013 was $23.3 million compared to $30.3 million for the same period
    of last year.The decrease in operating cash flow is due in part to the
    decline in net earnings, coupled with additional net tax payments in the
    third quarter of 2013, compared to the same period of last year.
    
  *Cash flow provided by operating activities for the first nine months of
    fiscal year 2013 was $68.4 million compared to $58.7 million for the same
    period in fiscal year 2012.For the first nine months of fiscal year 2013,
    the Company generated an $8.7 million improvement in net earnings.In
    addition, the Company experienced a change in working capital, partly
    driven by a $4.5 million decline in spending on cemetery development
    projects and a $2.1 million improvement in cash flow from receivables due
    in part to the decline in preneed funeral and cemetery property sales,
    which are typically financed.These changes were partially offset by the
    timing of trust withdrawals and deposits, coupled with additional net tax
    payments in the first nine months of fiscal year 2013.
    
  *Free cash flow was $17.5 million and $54.1 million for the third quarter
    and first nine months of fiscal year 2013, respectively, compared to $26.7
    million and $47.3 million for the third quarter and first nine months of
    fiscal year 2012, respectively, primarily due to the changes in operating
    cash flow, as described above.See table "Reconciliation of Non-GAAP
    Financial Measures" for additional information on free cash flow.
    
  *The Company paid $.045 per share in dividends in the third quarter of
    fiscal year 2013, compared to $.040 per share in the prior year
    period.The Company paid $11.0 million, or $.13 per share, in dividends in
    the first nine months of fiscal year 2013, compared to $10.0 million, or
    $.115 per share, in the corresponding period of last year.

Trust Performance

The following total returns include realized and unrealized gains and losses:

  *For the quarter ended July 31, 2013, the Company's preneed funeral and
    cemetery merchandise and services trusts experienced a total return of 0.4
    percent, and its perpetual care trusts experienced a total decline of 0.9
    percent.
    
  *For the twelve months ended July 31, 2013, the Company's preneed funeral
    and cemetery merchandise and services trusts experienced a total return of
    13.3 percent, and its perpetual care trusts experienced a total return of
    10.8 percent.
    
  *For the three years ended July 31, 2013, the Company's preneed funeral and
    cemetery merchandise and services trusts experienced an average annual
    total return of 10.8 percent, and its perpetual care trusts experienced an
    average annual total return of 10.4 percent.
    
  *For the five years ended July 31, 2013, the Company's preneed funeral and
    cemetery merchandise and services trusts experienced an average annual
    total return of 6.7 percent, and its perpetual care trusts experienced an
    average annual total return of 8.2 percent.
    
  *For fiscal year 2013, the fair market value of the Company's portfolio
    improved $45.1 million to $901.3 million as of July 31, 2013.

Founded in 1910, Stewart Enterprises, Inc. is the second largest provider of
products and services in the death care industry in the United States. The
Company currently owns and operates 217 funeral homes and 141 cemeteries in
the United States and Puerto Rico. Through its subsidiaries, the Company
provides a complete range of funeral and cremation merchandise and services,
along with cemetery property, merchandise and services, both at the time of
need and on a preneed basis.For additional information on Stewart
Enterprises, Inc. please visit www.stewartenterprises.com.

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

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

                                                  Three Months Ended July 31,
                                                  2013          2012
Revenues:                                                       
Funeral                                            $68,696      $68,883
Cemetery                                           58,366       60,356
                                                  127,062      129,239
Costs and expenses:                                             
Funeral                                            54,714       53,128
Cemetery                                           49,153       49,125
                                                  103,867      102,253
Gross profit                                       23,195       26,986
Corporate general and administrative expenses      (6,386)      (7,326)
Merger-related costs                               (3,126)      —
Restructuring and other charges                    —            (305)
Other operating income, net                        568          191
Operating earnings                                 14,251       19,546
Interest expense                                   (5,922)      (5,873)
Investment and other income (expense), net         (2)          57
Earnings from continuing operations before income  8,327        13,730
taxes
Income taxes                                       50           3,834
Earnings from continuing operations                8,277        9,896
Discontinued operations:                                        
Loss from discontinued operations before income    —            (380)
taxes
Income tax benefit                                 —            (122)
Loss from discontinued operations                  —            (258)
Net earnings                                       $8,277       $9,638
                                                               
Basic earnings per common share:                                
Earnings from continuing operations                $.10         $.11
Loss from discontinued operations                  —            —
Net earnings                                       $.10         $.11
                                                               
Diluted earnings per common share:                              
Earnings from continuing operations                $.10         $.11
Loss from discontinued operations                  —            —
Net earnings                                       $.10         $.11
                                                               
Weighted average common shares outstanding (in                  
thousands):
Basic                                              84,692       85,798
Diluted                                            85,952       86,178
                                                               
Dividends declared per common share                $.045        $.040



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

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

                                     Nine Months Ended July 31,
                                     2013                2012
Revenues:                                                
Funeral                               $222,004           $213,646
Cemetery                              174,592            173,015
                                     396,596            386,661
Costs and expenses:                                      
Funeral                               168,299            160,685
Cemetery                              140,819            144,456
                                     309,118            305,141
Gross profit                          87,478             81,520
Corporate general and administrative  (20,294)           (20,264)
expenses
Merger-related costs                  (3,715)            —
Restructuring and other charges       (81)               (2,852)
Net gain on dispositions              742                332
Other operating income, net           1,688              773
Operating earnings                    65,818             59,509
Interest expense                      (17,794)           (17,544)
Investment and other income, net      160                148
Earnings from continuing operations   48,184             42,113
before income taxes
Income taxes                          12,498             13,773
Earnings from continuing operations   35,686             28,340
Discontinued operations:                                 
Loss from discontinued operations     (88)               (2,065)
before income taxes
Income tax benefit                    (31)               (644)
Loss from discontinued operations     (57)               (1,421)
Net earnings                          $35,629            $26,919
                                                        
Basic earnings per common share:                         
Earnings from continuing operations   $.42               $.32
Loss from discontinued operations     —                  (.01)
Net earnings                          $.42               $.31
                                                        
Diluted earnings per common share:                       
Earnings from continuing operations   $.41               $.32
Loss from discontinued operations     —                  (.01)
Net earnings                          $.41               $.31
                                                        
Weighted average common shares                           
outstanding (in thousands):
Basic                                 84,533             86,295
Diluted                               85,382             86,619
                                                        
Dividends declared per common share   $.09               $.115
^(1)
                                                        
^(1)The first quarter dividend historically declared in December and paid in
January (both the Company's first quarter) was declared in October 2012 (the
Company's fourth quarter) and paid in December 2012.The acceleration of the
declaration and payment of the first quarter 2013 dividend resulted in no
dividends being declared in the first quarter of 2013, although the dividend
was paid in the first quarter of 2013.The Company paid $11.0 million, or $.13
per share, in dividends for the nine months ended July 31, 2013, compared to
$10.0 million, or $.115 per share, in dividends during the nine months ended
July 31, 2012.



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
                                                            
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
                                                            
ASSETS                                           July 31,     October 31, 2012
                                                 2013
                                                            
Current assets:                                              
Cash and cash equivalents                        $ 99,087    $ 68,187
Restricted cash and cash equivalents             6,250       6,250
Marketable securities                            18,673      10,514
Receivables, net of allowances                   54,756      52,441
Inventories                                      36,108      36,495
Prepaid expenses                                 6,188       4,923
Deferred income taxes, net                       17,734      30,671
Total current assets                             238,796     209,481
Receivables due beyond one year, net of          71,364      72,620
allowances
Preneed funeral receivables and trust            457,520     432,422
investments
Preneed cemetery receivables and trust           233,565     225,048
investments
Goodwill                                         249,584     249,584
Cemetery property, at cost                       402,730     401,670
Property and equipment, at cost:                             
Land                                             50,227      49,085
Buildings                                        370,942     360,852
Equipment and other                              196,984     204,971
                                                618,153     614,908
Less accumulated depreciation                    326,016     323,648
Net property and equipment                       292,137     291,260
Deferred income taxes, net                       69,324      62,125
Cemetery perpetual care trust investments        275,891     263,663
Other assets                                     12,029      13,812
Total assets                                     $ 2,302,940 $ 2,221,685
                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY                         
                                                            
Current liabilities:                                         
Current maturities of long-term debt             $ 83,940    $ 6
Accounts payable and accrued expenses            24,923      25,214
Accrued payroll and other benefits               16,371      19,964
Accrued insurance                                23,694      22,152
Accrued interest                                 4,323       2,161
Estimated obligation to fund cemetery perpetual  11,950      11,965
care trust
Other current liabilities                        10,080      14,723
Income taxes payable                             1,038       1,004
Total current liabilities                        176,319     97,189
Long-term debt, less current maturities          241,192     321,887
Deferred income taxes, net                       4,768       4,931
Deferred preneed funeral revenue                 238,921     240,415
Deferred preneed cemetery revenue                268,775     265,347
Deferred preneed funeral and cemetery receipts   620,839     585,164
held in trust
Perpetual care trusts' corpus                    273,218     261,883
Other long-term liabilities                      21,335      20,548
Total liabilities                                1,845,367   1,797,364
Commitments and contingencies                                
                                                            
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 200,000,000 shares; issued
and outstanding 82,157,854 and 81,359,536 shares 82,158      81,360
at July 31, 2013 and October 31, 2012,
respectively
Class B authorized 5,000,000 shares; issued and
outstanding 3,555,020 shares at July 31, 2013
and October 31, 2012; 10 votes per share         3,555       3,555
convertible into an equal number of Class A
shares
Additional paid-in capital                       475,955     479,060
Accumulated deficit                              (104,067)   (139,696)
Accumulated other comprehensive income (loss):               
Unrealized appreciation (depreciation) of        (28)        42
investments
Total accumulated other comprehensive income     (28)        42
(loss)
 Total shareholders' equity                 457,573     424,321
Total liabilities and shareholders' equity       $ 2,302,940 $ 2,221,685



STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

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

                                                   Nine Months Ended July 31,
                                                   2013          2012
Cash flows from operating activities:                            
Net earnings                                        $35,629      $26,919
Adjustments to reconcile net earnings to net cash                
provided by operating activities:
Net (gain) loss on dispositions                     (654)       539
Non-cash restructuring charge                       —            1,236
Depreciation and amortization                       19,645       19,859
Non-cash interest and amortization of discount on   4,340        4,127
senior convertible notes
Provision for doubtful accounts                     3,377       3,041
Share-based compensation                            3,021       2,630
Excess tax benefits from share-based payment        (433)        (23)
arrangements
Provision for deferred income taxes                 6,276        6,935
Estimated obligation to fund cemetery perpetual     7            567
care trust
Other                                              100          90
Changes in assets and liabilities:                               
Increase in receivables                             (5,263)      (7,380)
Increase in prepaid expenses                        (1,266)      (1,165)
Increase in inventories and cemetery property       (1,141)      (5,636)
Increase (decrease) in accounts payable and accrued (1)          1,307
expenses
Federal income tax refund received                  740          —
Net effect of preneed funeral production and                     
maturities:
(Increase) decrease in preneed funeral receivables  (8,652)      1,703
and trust investments
Increase (decrease) in deferred preneed funeral     (1,466)      503
revenue
Increase (decrease) in deferred preneed funeral     7,312        (2,959)
receipts held in trust
Net effect of preneed cemetery production and                   
deliveries:
Decrease in preneed cemetery receivables and trust  677          409
investments
Increase in deferred preneed cemetery revenue       3,428        6,398
Increase (decrease) in deferred preneed cemetery    1,803        (695)
receipts held in trust
Increase in other                                   904          334
Net cash provided by operating activities           68,383       58,739
                                                                
Cash flows from investing activities:                            
Proceeds from sales/maturities of marketable        2,264        2,006
securities and release of restricted funds 
Deposits of restricted funds and purchases of       (10,366)     (2,036)
marketable securities
Proceeds from sale of assets                        799          533
Purchase of subsidiaries and other investments, net —            (3,113)
of cash acquired
Additions to property and equipment                 (20,913)     (16,215)
Other                                              104          87
Net cash used in investing activities               (28,112)     (18,738)
                                                                
Cash flows from financing activities:                            
Repayments of long-term debt                        (4)          (4)
Debt refinancing costs                              —            (34)
Issuance of common stock                            3,028        1,433
Purchase and retirement of common stock             (1,833)      (19,075)
Dividends                                           (10,995)     (9,955)
Excess tax benefits from share-based payment        433          23
arrangements
Net cash used in financing activities               (9,371)      (27,612)
                                                                
Net increase in cash                                30,900       12,389
Cash and cash equivalents, beginning of period      68,187       65,688
Cash and cash equivalents, end of period            $99,087      $78,077
                                                                
Supplemental cash flow information:                              
Cash paid during the period for:                                 
Income taxes, net                                   $5,608       $2,542
Interest                                            $11,466      $11,452
                                                                
Non-cash investing and financing activities:                     
Issuance of common stock to directors               $133         $437
Issuance of restricted stock, net of forfeitures    $1,491       $1,084



RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE PERIODS ENDED JULY 31, 2013 AND 2012
(Unaudited)
                                                                      
The Company recorded several items during the three and nine months ended July 31,
2013 and 2012 that impacted earnings from continuing operations: a non-cash interest
expense related to the Company's senior convertible notes, merger-related costs,
restructuring and other charges, a perpetual care funding obligation, net gain on
dispositions and unusual tax adjustments.The Company is presenting adjusted earnings
in the table below to eliminate the effects of the specified items.
                                                                      
                 Three Months Ended July 31,       Nine Months Ended July 31,
Adjusted Balances 2013             2012             2013             2012
are Net of Tax
                           per              per              per              per
                 millions diluted millions diluted millions diluted millions diluted
                           share            share            share            share
                                                                      
Consolidated net  $ 8.3  $ .10  $ 9.6   $ .11  $ 35.6  $ .41  $ 26.9  $ .31
earnings
Add:Loss from
discontinued      —      —      0.3     —      —       —      1.4     .01
operations
Earnings from
continuing        8.3    .10    9.9     .11    35.6    .41    28.3    .32
operations
Add:Non-cash
interest expense
on senior         0.7    .01    0.6     .01    2.0     .03    1.9     .02
convertible notes
(1)
Add:
Merger-related    2.0    .02    —       —      2.4     .03    —       —
costs (2)
Add:
Restructuring and —      —      0.2     —      —       —      1.8     .02
other charges (3)
Add: Perpetual
care funding      —      —      —       —      —       —      0.4     —
obligation (4)
Subtract:Net
gain on           —      —      —       —      (0.4)   (.01)  (0.2)   —
dispositions (5)
Subtract:Unusual
tax adjustments   (3.0)   (.04)  (1.1)   (.01)  (5.7)   (.07)  (2.1)   (.02)
(6)
Adjusted earnings
from continuing   $ 8.0  $ .09  $ 9.6   $ .11  $ 33.9  $ .39  $30.1   $ .34
operations
^(1)^ Effective November 1, 2009, the Company adopted Financial Accounting Standards
Board guidance that relates to the Company's senior convertible notes, which has been
applied retrospectively in the Company's financial statements.For additional
information, see Note 3 to the financial statements included in the Company's Form
10-K for the year ended October 31, 2012.The tax rate associated with the interest
expense related to the Company's senior convertible notes was 37.1 percent and 37.7
percent for the three and nine months ended July 31, 2013, respectively.The tax rate
associated with the interest expense related to the Company's senior convertible
notes was 35.8 percent and 37.3 percent for the three and nine months ended July 31,
2012, respectively.
^(2)^ On May 29, 2013, the Company announced that it had entered into a definitive
merger agreement with SCI.Pursuant to the agreement, holders of the Company's Class
A and Class B common stock will receive $13.25 in cash for each share of common stock
they hold.The transaction was approved by the Company's shareholders on August 13,
2013.The transaction is subject to the satisfaction of customary closing conditions
and regulatory approvals, including expiration or termination of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.The
proposed transaction is expected to close in late calendar year 2013 or early
2014.During the nine months ended July 31, 2013, the Company incurred $3.7 million
in merger-related costs, including $3.1 million in the third quarter of fiscal year
2013.The tax rate associated with the Company's merger-related costs for the three
and nine months ended July 31, 2013 was 37.6 percent and 37.7 percent, respectively.
^(3)^ The Company recorded $0.3 million and $2.9 million in restructuring and other
charges during the three and nine months ended July 31, 2012, respectively.These
charges were primarily related to separation pay, termination benefits and a non-cash
asset impairment due in part to the restructuring of the sales and operations of the
organization, along with a reduction in workforce associated with the Company's
continuous improvement initiative.The tax rate associated with this charge for the
three and nine months ended July 31, 2012 was 31.0 percent and 37.3 percent,
respectively.
^(4)^ As a result of Eastman Kodak's bankruptcy, the Company recorded a charge to
record a probable funding obligation related to the Company's perpetual care trusts
during the first quarter of 2012.The tax rate associated with the Company's
adjustment for the perpetual care funding obligation for the nine months ended July
31, 2012 was 37.3 percent.
^(5)^ The tax rate associated with the Company's adjustment for the net gain on
dispositions for the nine months ended July 31, 2013 and July 31, 2012 was 37.7
percent and 38.3 percent, respectively.
^(6) For the nine months ended July 31, 2013 and the three and nine months ended
July 31, 2012, the Company recorded a reduction in the tax valuation allowance,
primarily resulting from the improved performance of the Company's trust
portfolio.In the third quarter of 2013, Puerto Rico passed new tax legislation that
increased the top tax rate for businesses from 30 percent to 39 percent.This new tax
legislation reverses the tax legislation previously passed in January 2011.As a
result, the Company revalued its Puerto Rican deferred tax assets.The tax rate
change resulted in a one-time $3.0 million, net, non-cash charge to increase the
deferred tax assets related to the Puerto Rican operations.For additional
information, see Note 17 of the Company's Form 10-Q for the quarter ended July 31,
2013.



RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE PERIODS ENDED JULY 31, 2013 AND 2012
(Unaudited)
                                                                
Free cash flow is defined as net cash provided by operating activities less
maintenance capital expenditures. Management believes that free cash flow is a
useful measure of the Company's ability to make strategic investments,
repurchase stock, repay debt or pay dividends (subject to the restrictions in
its debt agreements).The following table provides a reconciliation between
net cash provided by operating activities (the GAAP financial measure that the
Company believes is most directly comparable to free cash flow) and free cash
flow for the three and nine months ended July 31, 2013 and 2012:
                                                                
Free Cash Flow               Three Months Ended        Nine Months Ended
                             July 31,                  July 31,
(Dollars in millions)        2013         2012         2013         2012
Net cash provided by         $ 23.3       $ 30.3       $ 68.4       $ 58.7
operating activities ^(1)
Less:Maintenance capital    (5.8)       (3.6)       (14.3)      (11.4)
expenditures
Free cash flow              $ 17.5       $ 26.7       $ 54.1       $ 47.3
                                                                
^(1)^ Cash flow provided by operating activities for the third quarter of
fiscal year 2013 was $23.3 million compared to $30.3 million for the same
period of last year.The decrease in operating cash flow is due in part to the
decline in net earnings, coupled with additional net tax payments in the third
quarter of 2013, compared to the same period of last year.

Cash flow provided by operating activities for the first nine months of fiscal
year 2013 was $68.4 million compared to $58.7 million for the same period in
fiscal year 2012.For the first nine months of fiscal year 2013, the Company
generated an $8.7 million improvement in net earnings.In addition, the
Company experienced a change in working capital, partly driven by a $4.5
million decline in spending on cemetery development projects and a $2.1
million improvement in cash flow from receivables due in part to the decline
in preneed funeral and cemetery property sales, which are typically
financed.These changes were partially offset by the timing of trust
withdrawals and deposits, coupled with additional net tax payments in the
first nine months of fiscal year 2013.



RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE PERIODS ENDED JULY 31, 2013 AND 2012
(Unaudited)
                                                                 
Adjusted EBITDA is defined as earnings from continuing operations plus
depreciation and amortization, interest expense, perpetual care funding
obligations, restructuring and other charges, merger-related costs, income
taxes and less net gain on dispositions.Adjusted EBITDA margins are
calculated by dividing adjusted EBITDA by revenue.
                                                                 
Management believes that adjusted EBITDA is a useful measure for providing
additional insight into the Company's operating performance.Due to the
Company's significant cash investment in preneed activity, management does not
view adjusted EBITDA as a measure of the Company's cash flow.Investors should
be aware that adjusted EBITDA may not be comparable to similarly titled
measures presented by other companies. The following table provides a
reconciliation between net earnings (the GAAP financial measure that the
Company believes is most directly comparable to adjusted EBITDA) and adjusted
EBITDA for the three and nine months ended July 31, 2013 and 2012:
                                                                 
Adjusted EBITDA                Three Months Ended        Nine Months Ended
                               July 31,                  July 31,
(Dollars in millions)          2013         2012         2013        2012
Consolidated net earnings     $ 8.3        $ 9.6        $ 35.6      $ 26.9
Add:Loss from discontinued    —            0.3          —           1.4
operations
Earnings from continuing       8.3         9.9         35.6       28.3
operations
Add:Depreciation and          6.6         6.6         19.6       19.8
amortization
Add:Interest expense         6.0         5.9         17.8       17.5
Add:Perpetual care funding    —           —           —          0.6
obligation ^(1)
Add:Restructuring and other   —           0.3         0.1        2.9
charges
Add:Merger-related costs     3.1         —           3.7        —
Add:Income taxes             —           3.8         12.5       13.8
Subtract:Net gain on          —           —           (0.7)      (0.3)
dispositions
Adjusted EBITDA               $ 24.0       $ 26.5       $ 88.6      $ 82.6
Adjusted EBITDA margin        18.9%        20.5%        22.3%       21.4%
                                                                 
^(1) As a result of Eastman Kodak's bankruptcy, the Company recorded a charge
to record a probable funding obligation related to the Company's perpetual
care trusts during the first quarter of 2012.

                          STEWART ENTERPRISES, INC.
                               AND SUBSIDIARIES

                            CAUTIONARY STATEMENTS

This press release includes forward-looking statements that are generally
identifiable through the use of words such as "believe," "expect," "intend,"
"plan," "estimate," "anticipate," "project," "will" and similar
expressions.These forward-looking statements rely on assumptions, estimates
and predictions that could be inaccurate and that are subject to risks and
uncertainties that could cause actual results to differ materially from our
goals or forecasts.These risks and uncertainties include, but are not limited
to:

  *effects on our trusts and escrow accounts of changes in stock and bond
    prices and interest and dividend rates;
    
  *effects of the substantial unrealized losses in the investments in our
    trusts, including:

    *decreased future cash flow and earnings as a result of reduced earnings
      from our trusts and trust fund management;
      
    *the potential to realize additional losses and additional cemetery
      perpetual care funding obligations and tax valuation allowances;

  *effects on at-need and preneed sales of a weak economy;
    
  *effects on revenue due to the changes in the number of deaths in our
    markets and recent annual declines in funeral call volume;
    
  *effects on our revenue and earnings of the continuing national trend
    toward increased cremation and the increases in the percentage of
    cremations performed by us that are inexpensive direct cremations;
    
  *effects on our future revenue and costs of our organizational
    restructuring designed to better integrate operations and sales,
    implemented primarily during the latter part of fiscal year 2012 and the
    beginning of fiscal year 2013;
    
  *effects on cash flow and earnings as a result of increased costs,
    particularly supply costs related to increases in commodity prices;
    
  *effects on our market share, prices, revenues and margins of intensified
    price competition or improved advertising and marketing by competitors,
    including low-cost casket providers and increased offerings of products or
    services over the Internet;
    
  *risk of loss due to hurricanes and other natural disasters;
    
  *effects of the call options the Company purchased and the warrants the
    Company sold on our Class A common stock and the effects of the
    outstanding warrants on the ownership interest of our current
    stockholders;
    
  *our ability to pay future dividends on our common stock;
    
  *the effects on us as a result of our industry's complex accounting model;
    
  *the occurrence of any circumstances that could give rise to the
    termination of the merger agreement; the outcome of any legal proceedings
    that may be instituted against the Company related to the merger
    agreement; the inability to complete the transaction due to the failure to
    satisfy conditions to completion of the transaction, including the receipt
    of all regulatory approvals related to the transaction; the disruption of
    management's attention from the Company's ongoing business operations due
    to the transaction; the effect of the announcement of the transaction on
    the Company's relationships with its customers, operating results and
    business generally;

and other risks and uncertainties described in our Form 10-K for the year
ended October 31, 2012 and our Form 10-Q for the quarter ended July 31, 2013,
filed with the SEC.We disclaim any obligation or intent to update or revise
any forward-looking statements in order to reflect events or circumstances
after the date of this release.

CONTACT: Lewis J. Derbes, Jr.
         Stewart Enterprises, Inc.
         1333 S. Clearview Parkway
         Jefferson, LA 70121
         504-729-1400

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