NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(1)
|
Basis of Presentation
|
Stewart
Enterprises, Inc. (the Company) is a provider of funeral and cemetery products and services in the death care industry in the United States and Puerto Rico. Through its subsidiaries, the Company offers a complete line 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. As of July 31, 2013, the Company owned and operated 217 funeral homes and 141 cemeteries in 24 states
within the United States and Puerto Rico. The Company has three operating and reportable segments consisting of a funeral segment, a cemetery segment and a corporate trust management segment.
|
(b)
|
Principles of Consolidation
|
The accompanying condensed consolidated financial statements include the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated.
The
information as of July 31, 2013, and for the three and nine months ended July 31, 2013 and 2012, is unaudited but, in the opinion of management, reflects all adjustments, which are of a normal recurring nature, necessary for a fair
statement of the results for the interim periods. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Companys Annual Report
on Form 10-K for the fiscal year ended October 31, 2012 (the 2012 Form 10-K).
The October 31, 2012
condensed consolidated balance sheet data was derived from audited financial statements in the Companys 2012 Form 10-K, but does not include all disclosures required by accounting principles generally accepted in the United States of America,
which are presented in the Companys 2012 Form 10-K.
The results of operations for the three and nine months ended
July 31, 2013 are not necessarily indicative of the results to be expected for the fiscal year ending October 31, 2013.
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Companys significant
estimates are disclosed in Note 2 in the Companys 2012 Form 10-K.
|
(e)
|
Share-Based Compensation
|
The Company has share-based compensation plans, which are described in more detail in Note 19 to the consolidated financial statements in
the Companys 2012 Form 10-K. Stock option expense is reflected in corporate general and administrative expenses in the condensed consolidated statements of earnings and amounted to $469 and $358 for the three months ended July 31, 2013
and 2012, respectively, and $1,395 and $1,076 for the nine months ended July 31, 2013 and 2012, respectively. As of July 31, 2013, there was $4,016 of total unrecognized compensation costs related to stock options that is expected to be
recognized over a weighted-average period of 2.7 years. Total stock option expense for fiscal year 2013 is expected to be approximately $1,800. The expense related to restricted stock is reflected in corporate general and administrative expenses in
the condensed consolidated statements of earnings and amounted to $567 and $385 for the three months ended July 31, 2013 and 2012,
10
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(1)
|
Basis of Presentation(Continued)
|
respectively, and $1,493 and $1,117 for the nine months ended July 31, 2013 and 2012, respectively. As of July 31, 2013, there was $1,780 of remaining future restricted stock expense to
be recognized. Total restricted stock expense for fiscal year 2013 is expected to be approximately $2,100. Under the terms of the Companys share-based compensation plans, all unvested stock options and restricted stock become fully vested and
exercisable upon a change of control with respect to the Companys ownership.
During the nine months ended July 31,
2013, the Company issued 17,116 shares of Class A common stock which amounted to $133 and paid approximately $437 in cash to the independent directors of the Company. During the nine months ended July 31, 2012, the Company issued 67,853
shares of Class A common stock which amounted to $437 and paid approximately $133 in cash to the independent directors of the Company. The total expenses related to these annual grants are reflected in corporate general and administrative
expenses in the condensed consolidated statements of earnings. All of the shares issued have a restriction requiring each independent director to hold the respective shares until completion of service as a member of the Companys Board of
Directors.
The table below presents all stock options and restricted stock granted to employees during the nine months ended
July 31, 2013:
|
|
|
|
|
|
|
|
|
Grant Type
|
|
Number of Shares Granted
|
|
Weighted Average
Price per Share
|
|
Vesting Period
|
|
Vesting Condition
|
Stock options
|
|
1,256,500
|
|
$7.36
|
|
Equal one-fourth portions over 4 years
|
|
Service condition
|
Restricted stock
|
|
516,500
|
|
$7.36
|
|
Equal one-third portions over 3 years
|
|
Market condition
|
The fair value of the Companys service based stock options granted in fiscal year 2013 is the
estimated present value at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for the nine months ended July 31, 2013: expected dividend yield of 2.2 percent; expected volatility of
37.6 percent; risk-free interest rate of 1.1 percent; and an expected term of 6.3 years. During the nine months ended July 31, 2013, the Company granted 516,500 shares of restricted stock with market conditions based on achieving certain
specified target stock prices in the fiscal years 2013, 2014 and 2015. The market condition related to fiscal year 2013 was achieved. The Company records the expense over the requisite service period.
|
(f)
|
Purchase and Retirement of Common Stock
|
Share repurchases are recorded at stated value with the amount in excess of stated value recorded as a reduction to additional paid-in capital. Share repurchases reduce the weighted average number of
common shares outstanding during each period.
In September 2007, the Company announced a stock repurchase program,
authorizing the investment of up to $25,000 in the repurchase of the Companys common stock. The program was increased by $25,000 in December 2007, June 2008, June 2011 and September 2011, resulting in a $125,000 program. Repurchases
under the program are limited to the Companys Class A common stock, and can be made in the open market or in privately negotiated transactions at such times and in such amounts as management deems appropriate, depending upon market
conditions and other factors. During the nine months ended July 31, 2013, the Company repurchased 245,118 shares of its Class A common stock for $1,826 at an average price of $7.45 per share. As of July 31, 2013, the Company has
repurchased 16,172,850 shares of its Class A common stock since the start of the program for $110,381 at an average price of $6.83 per share.
11
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(1)
|
Basis of Presentation(Continued)
|
In March
2005, the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend of two and one-half cents per share of Class A and B common stock. In each of September 2009, June 2011, March 2012 and April
2013, the Company announced that it had increased its quarterly dividend rate by one half cent per share. As a result, effective April 2013, the quarterly dividend rate is four and one-half cents per share of Class A and B common stock.
Although the Company intends to pay regular quarterly cash dividends for the foreseeable future, the declaration and payment of future dividends are discretionary and will be subject to determination by the Board of Directors each quarter after its
review of the Companys financial performance. For the nine months ended July 31, 2013 and 2012, the Company paid $10,995 and $9,955, respectively, in dividends. The Companys Board of Directors declared its first quarter 2013
dividend in the fourth quarter of fiscal year 2012, accelerating the payment to December of 2012.
|
(h)
|
Receivables and Allowance for Doubtful Accounts
|
The Company establishes an allowance for uncollectible installment contracts and trade accounts based on a range of percentages applied to various accounts receivable aging categories. These percentages
are based on an analysis of the Companys historical collection and write-off experience. At-need funeral and other receivables are considered past due after 30 days. The Company records an allowance on its interest accruals similar to the
corresponding principal aging categories. For accounts that are greater than 90 days past due, interest continues to be accrued, however, an allowance is established to fully reserve this interest receivable. Interest income on these receivables is
recognized only to the extent the account becomes less than 90 days past due and then only on the non-reserved portion. Accounts are restored to normal accrual status only when interest and principal payments are brought current and future payments
are reasonably assured.
As of July 31, 2013 and October 31, 2012, the Companys receivables and related
allowances were as follows:
|
|
|
|
|
|
|
|
|
|
|
Receivables as of July 31, 2013
|
|
|
Receivables as of October 31, 2012
|
|
|
|
Ending Balance Collectively
Evaluated
for Impairment
|
|
|
Ending Balance Collectively
Evaluated
for Impairment
|
|
Current receivables at-need funeral
|
|
$
|
7,663
|
|
|
$
|
8,120
|
|
Current receivables other
|
|
|
51,359
|
|
|
|
48,380
|
|
Receivables, due beyond one year other
|
|
|
76,391
|
|
|
|
77,873
|
|
Preneed funeral receivables
|
|
|
45,520
|
|
|
|
44,959
|
|
Preneed cemetery receivables
|
|
|
28,862
|
|
|
|
29,594
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
209,795
|
|
|
$
|
208,926
|
|
|
|
|
|
|
|
|
|
|
Total current receivables
|
|
|
59,022
|
|
|
|
56,500
|
|
Total noncurrent receivables
|
|
|
150,773
|
|
|
|
152,426
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
209,795
|
|
|
$
|
208,926
|
|
|
|
|
|
|
|
|
|
|
12
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(1)
|
Basis of Presentation(Continued)
|
Other receivables are comprised primarily of receivables related to the sale of preneed
property interment rights but also include income tax receivables and trade and other receivables.
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts
and Cancellations as of
July 31, 2013
|
|
|
Allowance for Doubtful Accounts
and Cancellations as of
October 31, 2012
|
|
|
|
Ending Balance Collectively
Evaluated
for Impairment
|
|
|
Ending Balance Collectively
Evaluated
for Impairment
|
|
Current receivables allowance at-need funeral and other
|
|
$
|
(4,266
|
)
|
|
$
|
(4,059
|
)
|
Receivables allowance, due beyond one year other
|
|
|
(5,027
|
)
|
|
|
(5,253
|
)
|
Preneed funeral receivables allowance
|
|
|
(10,053
|
)
|
|
|
(10,412
|
)
|
Preneed cemetery receivables allowance
|
|
|
(1,699
|
)
|
|
|
(2,090
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(21,045
|
)
|
|
$
|
(21,814
|
)
|
|
|
|
|
|
|
|
|
|
Total current receivables allowance
|
|
|
(4,266
|
)
|
|
|
(4,059
|
)
|
Total noncurrent receivables allowance
|
|
|
(16,779
|
)
|
|
|
(17,755
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(21,045
|
)
|
|
$
|
(21,814
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts and Cancellations Rollforward
|
|
|
|
Balance
October 31,
2012
|
|
|
Charged to costs
and expenses
|
|
|
Write-offs
|
|
|
Balance
July
31,
2013
|
|
Current receivables allowance at-need funeral and other
|
|
$
|
4,059
|
|
|
|
1,550
|
|
|
|
(1,343
|
)
|
|
$
|
4,266
|
|
Receivables allowance, due beyond one year other
|
|
|
5,253
|
|
|
|
1,827
|
|
|
|
(2,053
|
)
|
|
|
5,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,312
|
|
|
|
3,377
|
|
|
|
(3,396
|
)
|
|
$
|
9,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts and Cancellations Rollforward
|
|
|
|
Balance
October 31,
2011
|
|
|
Charged to costs
and expenses
|
|
|
Write-offs
|
|
|
Balance
July
31,
2012
|
|
Current receivables allowance at-need funeral and other
|
|
$
|
4,626
|
|
|
|
1,316
|
|
|
|
(1,893
|
)
|
|
$
|
4,049
|
|
Receivables allowance, due beyond one year other
|
|
|
7,118
|
|
|
|
1,725
|
|
|
|
(3,538
|
)
|
|
|
5,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,744
|
|
|
|
3,041
|
|
|
|
(5,431
|
)
|
|
$
|
9,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company establishes allowances for preneed funeral and cemetery merchandise and services trust
receivables. Changes in these allowances have no effect on the condensed consolidated statement of earnings but are recorded as reductions in preneed receivables and preneed deferred revenue in the condensed consolidated balance sheet.
13
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(1)
|
Basis of Presentation(Continued)
|
The following summarizes the Companys receivables aging analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables Aging Analysis
as of
July 31, 2013
|
|
|
|
1 to 30 Days
|
|
|
31 to 60 Days
|
|
|
61 to 90 Days
|
|
|
Greater than
90 Days
|
|
|
Total
|
|
Receivables at-need funeral
|
|
$
|
3,778
|
|
|
$
|
1,261
|
|
|
$
|
573
|
|
|
$
|
2,051
|
|
|
$
|
7,663
|
|
Receivables other
|
|
|
111,303
|
|
|
|
3,263
|
|
|
|
2,051
|
|
|
|
11,133
|
|
|
|
127,750
|
|
Preneed funeral receivables
|
|
|
34,244
|
|
|
|
627
|
|
|
|
358
|
|
|
|
10,291
|
|
|
|
45,520
|
|
Preneed cemetery receivables
|
|
|
25,720
|
|
|
|
817
|
|
|
|
397
|
|
|
|
1,928
|
|
|
|
28,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
175,045
|
|
|
$
|
5,968
|
|
|
$
|
3,379
|
|
|
$
|
25,403
|
|
|
$
|
209,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables Aging Analysis
as of
October 31, 2012
|
|
|
|
1 to 30 Days
|
|
|
31 to 60 Days
|
|
|
61 to 90 Days
|
|
|
Greater than
90 Days
|
|
|
Total
|
|
Receivables at-need funeral
|
|
$
|
4,392
|
|
|
$
|
1,274
|
|
|
$
|
509
|
|
|
$
|
1,945
|
|
|
$
|
8,120
|
|
Receivables other
|
|
|
107,602
|
|
|
|
4,239
|
|
|
|
2,491
|
|
|
|
11,921
|
|
|
|
126,253
|
|
Preneed funeral receivables
|
|
|
33,034
|
|
|
|
825
|
|
|
|
406
|
|
|
|
10,694
|
|
|
|
44,959
|
|
Preneed cemetery receivables
|
|
|
25,472
|
|
|
|
1,012
|
|
|
|
584
|
|
|
|
2,526
|
|
|
|
29,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
170,500
|
|
|
$
|
7,350
|
|
|
$
|
3,990
|
|
|
$
|
27,086
|
|
|
$
|
208,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Marketable Securities
|
The market value of the Companys marketable securities as of July 31, 2013 and October 31, 2012 was $19,673 and $11,514,
respectively. Of the total marketable securities balance as of July 31, 2013 and October 31, 2012, $1,000 is classified as a long-term asset in other assets in the condensed consolidated balance sheet. The Company is required
by Texas statutes to maintain a minimal capital level of $1,000, of which at least 40 percent must be in readily marketable investments. The July 31, 2013 balance consists of $16,521 of Level 1 investments and $3,152 of Level 2 investments. The
October 31, 2012 balance consists of $10,999 of Level 1 investments and $515 of Level 2 investments. Level 1 investments include cash, money market and other short-term investments, common stock and mutual funds. Level 2 investments include
U.S. government, agencies and municipalities and corporate bonds. See Notes 3, 4 and 5 for a discussion of the investments in the Companys preneed funeral merchandise and services trust, preneed cemetery merchandise and services trust and
cemetery perpetual care trust.
(2)
|
New Accounting Principles
|
In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2011-05 regarding the presentation of comprehensive income. This guidance amends the previous application of comprehensive income and the requirements regarding presentation in the financial statements. It requires the
disclosure of the components of comprehensive income, which the Company disclosed in other sections of its filings, to be presented as part of one statement of comprehensive income, or as a separate statement of comprehensive income following the
statement of earnings. This guidance is effective for fiscal years (and interim periods within such years) beginning after December 15, 2011, which corresponds to the Companys first fiscal quarter beginning November 1, 2012. The
adoption of this guidance by the Company had no impact on its financial condition or results of operations. The Company now includes separate statements of comprehensive income within its financial statements.
In December 2011, the FASB issued ASU No. 2011-12 which temporarily deferred those changes in ASU No. 2011-05 that relate to
the presentation of reclassification adjustments out of accumulated other comprehensive income. In February 2013, the FASB issued ASU No. 2013-02 which clarified the reporting requirements of
14
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(2)
|
New Accounting Principles(Continued)
|
reclassifications out of accumulated other comprehensive income. This guidance requires prospective application for annual periods and interim periods within those annual periods beginning after
December 15, 2012. The Company adopted the disclosure guidance in its first fiscal quarter beginning November 1, 2012. The adoption of this guidance had no impact on the Companys financial condition or results of operations. See the
required disclosures in Note 14.
In July 2012, the FASB issued ASU No. 2012-02 regarding subsequent measurement guidance
for long lived intangibles. This guidance is meant to reduce the cost and complexity of performing an impairment test for indefinite-lived intangible assets. This guidance is effective for annual and interim tests performed for fiscal years
beginning after September 15, 2012, which corresponds to the Companys first fiscal quarter beginning November 1, 2012. The adoption of this guidance by the Company had no impact on its consolidated financial statements.
In July 2013, the FASB issued ASU No. 2013-11 which amended the Income Taxes Topic of the Accounting Standards Codification to
eliminate a diversity in practice for the presentation of unrecognized tax benefits when net operating loss carryforwards, similar tax losses or tax credit carryforwards exist. The amendment requires that the unrecognized tax benefit be presented as
a reduction of the deferred tax assets associated with the carryforwards except in certain circumstances when it would be reflected as a liability. This guidance is effective for annual periods and interim periods within those annual periods
beginning after December 15, 2013, which corresponds to the Companys first fiscal quarter beginning November 1, 2014. The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated
financial statements.
(3)
|
Preneed Funeral Activities
|
The Company maintains three types of trust and escrow accounts: (1) preneed funeral merchandise and services,
(2) preneed cemetery merchandise and services and (3) cemetery perpetual care. The activity of these trust and escrow accounts is detailed below and in Notes 4 and 5.
Preneed Funeral Receivables and Trust Investments
Preneed funeral
receivables and trust investments represent trust assets and customer receivables related to unperformed, price-guaranteed trust-funded preneed funeral contracts. The components of preneed funeral receivables and trust investments in the condensed
consolidated balance sheets as of July 31, 2013 and October 31, 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
|
July 31,
2013
|
|
|
October 31,
2012
|
|
Trust assets
|
|
$
|
422,053
|
|
|
$
|
397,875
|
|
Receivables from customers
|
|
|
45,520
|
|
|
|
44,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
467,573
|
|
|
|
442,834
|
|
Allowance for cancellations
|
|
|
(10,053
|
)
|
|
|
(10,412
|
)
|
|
|
|
|
|
|
|
|
|
Preneed funeral receivables and trust investments
|
|
$
|
457,520
|
|
|
$
|
432,422
|
|
|
|
|
|
|
|
|
|
|
15
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(3)
|
Preneed Funeral Activities(Continued)
|
The cost basis and market values associated with preneed funeral merchandise and
services trust assets as of July 31, 2013 are detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2013
|
|
|
|
Fair Value
Hierarchy
Level
|
|
|
Cost Basis
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Market
|
|
|
|
|
Cash, money market and other short-term investments
|
|
|
1
|
|
|
$
|
21,338
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
21,338
|
|
|
|
|
|
Long-term certificate of deposit investments
|
|
|
1
|
|
|
|
5,939
|
|
|
|
|
|
|
|
|
|
|
|
5,939
|
|
|
|
|
|
U.S. Government, agencies and municipalities
|
|
|
2
|
|
|
|
2,359
|
|
|
|
55
|
|
|
|
(21
|
)
|
|
|
2,393
|
|
|
|
|
|
Corporate bonds
|
|
|
2
|
|
|
|
14,297
|
|
|
|
729
|
|
|
|
(9
|
)
|
|
|
15,017
|
|
|
|
|
|
Preferred stocks
|
|
|
2
|
|
|
|
26,456
|
|
|
|
935
|
|
|
|
(1,188
|
)
|
|
|
26,203
|
|
|
|
|
|
Common stocks
|
|
|
1
|
|
|
|
181,854
|
|
|
|
12,367
|
|
|
|
(26,219
|
)
|
|
|
168,002
|
|
|
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
1
|
|
|
|
22,212
|
|
|
|
1,200
|
|
|
|
(964
|
)
|
|
|
22,448
|
|
|
|
|
|
Fixed income
|
|
|
1
|
|
|
|
115,238
|
|
|
|
470
|
|
|
|
(4,271
|
)
|
|
|
111,437
|
|
|
|
|
|
Commodity
|
|
|
1
|
|
|
|
9,012
|
|
|
|
|
|
|
|
(3,183
|
)
|
|
|
5,829
|
|
|
|
|
|
Real estate investment trusts
|
|
|
1
|
|
|
|
8,512
|
|
|
|
333
|
|
|
|
(338
|
)
|
|
|
8,507
|
|
|
|
|
|
Master limited partnerships
|
|
|
1
|
|
|
|
27,772
|
|
|
|
548
|
|
|
|
(28
|
)
|
|
|
28,292
|
|
|
|
|
|
Preferred stock
|
|
|
1
|
|
|
|
105
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
102
|
|
|
|
|
|
Insurance contracts and other
|
|
|
3
|
|
|
|
5,136
|
|
|
|
|
|
|
|
|
|
|
|
5,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust investments
|
|
|
|
|
|
$
|
440,230
|
|
|
$
|
16,637
|
|
|
$
|
(36,224
|
)
|
|
$
|
420,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value as a percentage of cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
422,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated maturities and market values of debt securities included above are as follows:
|
|
|
|
|
|
|
July 31, 2013
|
|
Due in one year or less
|
|
$
|
4,451
|
|
Due in one to five years
|
|
|
8,619
|
|
Due in five to ten years
|
|
|
3,831
|
|
Thereafter
|
|
|
509
|
|
|
|
|
|
|
|
|
$
|
17,410
|
|
|
|
|
|
|
The weighted average maturity of the mutual fund-fixed income investments as of July 31, 2013 is 6.6
years.
16
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(3)
|
Preneed Funeral Activities(Continued)
|
The cost basis and market values associated with preneed funeral merchandise and
services trust assets as of October 31, 2012 are detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2012
|
|
|
|
Fair Value
Hierarchy
Level
|
|
|
Cost Basis
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Market
|
|
|
|
|
Cash, money market and other short-term investments
|
|
|
1
|
|
|
$
|
24,501
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
24,501
|
|
|
|
|
|
Long-term certificate of deposit investments
|
|
|
1
|
|
|
|
6,775
|
|
|
|
|
|
|
|
|
|
|
|
6,775
|
|
|
|
|
|
U.S. Government, agencies and municipalities
|
|
|
2
|
|
|
|
1,657
|
|
|
|
79
|
|
|
|
|
|
|
|
1,736
|
|
|
|
|
|
Corporate bonds
|
|
|
2
|
|
|
|
18,946
|
|
|
|
1,580
|
|
|
|
|
|
|
|
20,526
|
|
|
|
|
|
Preferred stocks
|
|
|
2
|
|
|
|
34,939
|
|
|
|
1,099
|
|
|
|
(688
|
)
|
|
|
35,350
|
|
|
|
|
|
Common stocks
|
|
|
1
|
|
|
|
196,745
|
|
|
|
4,598
|
|
|
|
(42,568
|
)
|
|
|
158,775
|
|
|
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
1
|
|
|
|
18,471
|
|
|
|
1,007
|
|
|
|
(1,494
|
)
|
|
|
17,984
|
|
|
|
|
|
Fixed income
|
|
|
1
|
|
|
|
96,021
|
|
|
|
3,271
|
|
|
|
(570
|
)
|
|
|
98,722
|
|
|
|
|
|
Commodity
|
|
|
1
|
|
|
|
13,412
|
|
|
|
|
|
|
|
(2,864
|
)
|
|
|
10,548
|
|
|
|
|
|
Real estate investment trusts
|
|
|
1
|
|
|
|
8,737
|
|
|
|
564
|
|
|
|
(9
|
)
|
|
|
9,292
|
|
|
|
|
|
Master limited partnerships
|
|
|
1
|
|
|
|
6,867
|
|
|
|
1
|
|
|
|
(26
|
)
|
|
|
6,842
|
|
|
|
|
|
Insurance contracts and other
|
|
|
3
|
|
|
|
5,372
|
|
|
|
168
|
|
|
|
|
|
|
|
5,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust investments
|
|
|
|
|
|
$
|
432,443
|
|
|
$
|
12,367
|
|
|
$
|
(48,219
|
)
|
|
$
|
396,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value as a percentage of cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
397,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company periodically manages a covered call program on its equity securities within the preneed
funeral merchandise and services trust in order to reduce the exposure to and volatility of equity securities as well as provide an opportunity for additional income. As of July 31, 2013 and October 31, 2012, the Company had
outstanding covered calls with a market value of $282 and $379, respectively. Covered calls are included at market value in the balance sheet line preneed funeral receivables and trust investments. For the three months ended
July 31, 2013 and 2012, the Company realized trust earnings (losses) of approximately ($402) and $180, respectively, related to the covered call program. For the nine months ended July 31, 2013 and 2012, the Company realized trust earnings
(losses) of ($625) and $336, respectively, related to the covered call program. These trust earnings and losses are accounted for in the same manner as other funeral merchandise and services trust earnings and losses and flow through funeral revenue
in the condensed consolidated statements of earnings as the underlying service or merchandise are actually performed or delivered. Although the Company realized losses associated with the covered call program for the three and nine months ended
July 31, 2013, it continues to hold the underlying securities against which these covered calls were issued; these underlying securities appreciated in value by $1,520 for the three months ended July 31, 2013 and $2,426 for the nine months
ended July 31, 2013.
Where quoted prices are available in an active market, investments held by the trusts are
classified as Level 1 investments pursuant to the three-level valuation hierarchy. The Companys Level 1 investments include cash, money market and other short-term investments, common stocks and mutual funds.
Where quoted market prices are not available for the specific security, then fair values are estimated by using quoted prices of
securities with similar characteristics. These investments are primarily U. S. Government, agencies and municipalities, corporate bonds, convertible bonds and preferred stocks, all of which are classified within Level 2 of the valuation hierarchy.
17
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(3)
|
Preneed Funeral Activities(Continued)
|
The Companys Level 3 investments include insurance contracts and partnership
investments purchased within the trusts. The valuation of insurance contracts and partnership investments requires significant management judgment due to the absence of quoted prices, inherent lack of liquidity and the long-term nature of such
assets. The fair market value of the insurance contracts is based upon the current face value of the contracts according to the respective insurance carriers, which is deemed to approximate fair market value. The fair market value of the partnership
investments was determined by using the most recent audited financial statements and assessing the market value of the underlying securities within the partnership.
The change in the Companys preneed funeral merchandise and services trust investments with significant unobservable inputs (Level 3) is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
Nine Months Ended July 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Fair market value, beginning balance
|
|
$
|
5,401
|
|
|
$
|
5,698
|
|
|
$
|
5,540
|
|
|
$
|
5,868
|
|
Total unrealized gains (losses) included in other comprehensive income
(1)
|
|
|
(208
|
)
|
|
|
56
|
|
|
|
(208
|
)
|
|
|
56
|
|
Distributions and other, net
|
|
|
(57
|
)
|
|
|
8
|
|
|
|
(196
|
)
|
|
|
(162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair market value, ending balance
|
|
$
|
5,136
|
|
|
$
|
5,762
|
|
|
$
|
5,136
|
|
|
$
|
5,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
All gains (losses) recognized in other comprehensive income for funeral trust investments are attributable to the Companys preneed customers and
are offset by a corresponding increase (decrease) in deferred preneed funeral receipts held in trust.
|
Activity related to preneed funeral trust investments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
Nine Months Ended July 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Purchases
|
|
$
|
76,924
|
|
|
$
|
22,182
|
|
|
$
|
209,213
|
|
|
$
|
56,092
|
|
Sales
|
|
|
58,527
|
|
|
|
14,587
|
|
|
|
212,718
|
|
|
|
51,669
|
|
Realized gains from sales of investments
|
|
|
6,343
|
|
|
|
1,320
|
|
|
|
18,661
|
|
|
|
4,491
|
|
Realized losses from sales of investments and other
|
|
|
(1,196
|
)
(1)
|
|
|
(1,605
|
)
|
|
|
(4,898
|
)
(2)
|
|
|
(2,709
|
)
|
Interest income, dividends and other ordinary income
|
|
|
3,440
|
|
|
|
2,952
|
|
|
|
10,056
|
|
|
|
10,914
|
|
Deposits
(3)
|
|
|
6,835
|
|
|
|
6,462
|
|
|
|
19,763
|
|
|
|
18,828
|
|
Withdrawals
(3)
|
|
|
11,619
|
|
|
|
10,905
|
|
|
|
31,621
|
|
|
|
29,995
|
|
(1)
|
Includes $980 in losses from the sale of investments and $216 in losses related to certain investments that the Company determined it no longer had the
ability and intent to hold until they recover in value.
|
(2)
|
Includes $2,847 in losses from the sale of investments and $2,051 in losses related to certain investments that the Company determined it no longer had
the ability and intent to hold until they recover in value.
|
(3)
|
The Company historically sold a significant portion of its preneed funeral sales through trust-funded price-guaranteed contracts. Over time, the mix
has shifted to a more significant portion being sold using insurance, particularly in states where trusting requirements are high.
|
18
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(3)
|
Preneed Funeral Activities(Continued)
|
The following tables show the gross unrealized losses and fair value of the preneed
funeral merchandise and services trust investments with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of July 31, 2013 and
October 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2013
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Greater
|
|
|
Total
|
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
U.S. Government, agencies and municipalities
|
|
$
|
1,088
|
|
|
$
|
(21
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,088
|
|
|
$
|
(21
|
)
|
Corporate bonds
|
|
|
991
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
991
|
|
|
|
(9
|
)
|
Preferred stocks
|
|
|
10,180
|
|
|
|
(678
|
)
|
|
|
1,915
|
|
|
|
(510
|
)
|
|
|
12,095
|
|
|
|
(1,188
|
)
|
Common stocks
|
|
|
27,624
|
|
|
|
(1,522
|
)
|
|
|
61,658
|
|
|
|
(24,697
|
)
|
|
|
89,282
|
|
|
|
(26,219
|
)
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
6,504
|
|
|
|
(132
|
)
|
|
|
2,357
|
|
|
|
(832
|
)
|
|
|
8,861
|
|
|
|
(964
|
)
|
Fixed income
|
|
|
82,391
|
|
|
|
(3,868
|
)
|
|
|
1,005
|
|
|
|
(403
|
)
|
|
|
83,396
|
|
|
|
(4,271
|
)
|
Commodity
|
|
|
|
|
|
|
|
|
|
|
5,829
|
|
|
|
(3,183
|
)
|
|
|
5,829
|
|
|
|
(3,183
|
)
|
Real estate investment trusts
|
|
|
5,982
|
|
|
|
(338
|
)
|
|
|
|
|
|
|
|
|
|
|
5,982
|
|
|
|
(338
|
)
|
Master limited partnerships
|
|
|
5,769
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
5,769
|
|
|
|
(28
|
)
|
Preferred stock
|
|
|
102
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
102
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
140,631
|
|
|
$
|
(6,599
|
)
|
|
$
|
72,764
|
|
|
$
|
(29,625
|
)
|
|
$
|
213,395
|
|
|
$
|
(36,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2012
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Greater
|
|
|
Total
|
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
Preferred stocks
|
|
$
|
5,707
|
|
|
$
|
(170
|
)
|
|
$
|
6,923
|
|
|
$
|
(518
|
)
|
|
$
|
12,630
|
|
|
$
|
(688
|
)
|
Common stocks
|
|
|
34,686
|
|
|
|
(2,241
|
)
|
|
|
76,621
|
|
|
|
(40,327
|
)
|
|
|
111,307
|
|
|
|
(42,568
|
)
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
2,467
|
|
|
|
(24
|
)
|
|
|
3,363
|
|
|
|
(1,470
|
)
|
|
|
5,830
|
|
|
|
(1,494
|
)
|
Fixed income
|
|
|
7,054
|
|
|
|
(11
|
)
|
|
|
3,684
|
|
|
|
(559
|
)
|
|
|
10,738
|
|
|
|
(570
|
)
|
Commodity
|
|
|
|
|
|
|
|
|
|
|
10,547
|
|
|
|
(2,864
|
)
|
|
|
10,547
|
|
|
|
(2,864
|
)
|
Real estate investment trusts
|
|
|
2,005
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
2,005
|
|
|
|
(9
|
)
|
Master limited partnerships
|
|
|
5,281
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
5,281
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
57,200
|
|
|
$
|
(2,481
|
)
|
|
$
|
101,138
|
|
|
$
|
(45,738
|
)
|
|
$
|
158,338
|
|
|
$
|
(48,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized losses in the preneed funeral merchandise and services trust portfolio are not considered
to be other than temporary. For a discussion of the Companys policies for determining whether a security is other-than-temporarily impaired, see Note 2(k) to the consolidated financial statements in the Companys 2012 Form 10-K. Of the
total unrealized losses at July 31, 2013, 84 percent, or $30,490 were generated by common stock and mutual fund-fixed income investments. Most of the common stock investments are part of the S&P 500 Index. The fixed income mutual funds
with losses are invested mostly in investment grade bonds and include both world bond funds and domestic bond funds. The Company generally expects its portfolio performance to improve if the performance of the overall financial market improves, but
would also expect its performance to deteriorate if the overall financial market declines. The Company believes it has the intent and ability to hold these investments until they recover in value.
The Companys policy for recognizing trust income follows the allocation of trust earnings to individual contracts as stipulated in
the Companys respective trust agreements. In substantially all of the Companys trusts, trust earnings, which include dividends and interest earned and net capital gains and losses (including losses from other-than-temporary impairments
of securities) realized by preneed funeral trust or escrow accounts net of fees, are allocated to individual contracts as earned or realized. In these trusts, unrealized gains and losses are not allocated to the underlying contracts. The trust
earnings allocated to individual contracts are recognized as components of revenue along with the original contract sales price when the underlying service or merchandise is actually performed or delivered. Principal and earnings are withdrawn only
as the merchandise or services are delivered or contracts are cancelled, except in jurisdictions that permit trust earnings to be withdrawn currently.
19
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(3)
|
Preneed Funeral Activities(Continued)
|
Cash flows from preneed funeral contracts are presented as operating cash flows in the
Companys condensed consolidated statements of cash flows.
(4)
|
Preneed Cemetery Merchandise and Service Activities
|
Preneed Cemetery Receivables and Trust Investments
Preneed cemetery receivables and trust investments represent trust assets and customer receivables for contracts sold in advance of when the merchandise or service is needed. The receivables related to
the sale of preneed property interment rights are included in the Companys current and long-term receivables. The components of preneed cemetery receivables and trust investments in the condensed consolidated balance sheets as of July 31,
2013 and October 31, 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
|
July 31,
2013
|
|
|
October 31,
2012
|
|
Trust assets
|
|
$
|
206,402
|
|
|
$
|
197,544
|
|
Receivables from customers
|
|
|
28,862
|
|
|
|
29,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
235,264
|
|
|
|
227,138
|
|
Allowance for cancellations
|
|
|
(1,699
|
)
|
|
|
(2,090
|
)
|
|
|
|
|
|
|
|
|
|
Preneed cemetery receivables and trust investments
|
|
$
|
233,565
|
|
|
$
|
225,048
|
|
|
|
|
|
|
|
|
|
|
The cost basis and market values associated with the preneed cemetery merchandise and services trust
assets as of July 31, 2013 are detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2013
|
|
|
|
Fair Value
Hierarchy
Level
|
|
|
Cost Basis
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Market
|
|
|
|
|
Cash, money market and other short-term investments
|
|
|
1
|
|
|
$
|
4,999
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,999
|
|
|
|
|
|
Long-term certificate of deposit investments
|
|
|
1
|
|
|
|
435
|
|
|
|
|
|
|
|
|
|
|
|
435
|
|
|
|
|
|
U.S. Government, agencies and municipalities
|
|
|
2
|
|
|
|
2,691
|
|
|
|
76
|
|
|
|
(35
|
)
|
|
|
2,732
|
|
|
|
|
|
Corporate bonds
|
|
|
2
|
|
|
|
2,153
|
|
|
|
108
|
|
|
|
|
|
|
|
2,261
|
|
|
|
|
|
Preferred stocks
|
|
|
2
|
|
|
|
9,426
|
|
|
|
22
|
|
|
|
(549
|
)
|
|
|
8,899
|
|
|
|
|
|
Common stocks
|
|
|
1
|
|
|
|
89,414
|
|
|
|
5,226
|
|
|
|
(18,508
|
)
|
|
|
76,132
|
|
|
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
1
|
|
|
|
32,163
|
|
|
|
485
|
|
|
|
(5,018
|
)
|
|
|
27,630
|
|
|
|
|
|
Fixed income
|
|
|
1
|
|
|
|
62,243
|
|
|
|
185
|
|
|
|
(1,868
|
)
|
|
|
60,560
|
|
|
|
|
|
Commodity
|
|
|
1
|
|
|
|
8,693
|
|
|
|
|
|
|
|
(3,161
|
)
|
|
|
5,532
|
|
|
|
|
|
Real estate investment trusts
|
|
|
1
|
|
|
|
3,970
|
|
|
|
36
|
|
|
|
(41
|
)
|
|
|
3,965
|
|
|
|
|
|
Master limited partnerships
|
|
|
1
|
|
|
|
12,038
|
|
|
|
513
|
|
|
|
(8
|
)
|
|
|
12,543
|
|
|
|
|
|
Preferred stock
|
|
|
1
|
|
|
|
44
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust investments
|
|
|
|
|
|
$
|
228,269
|
|
|
$
|
6,651
|
|
|
$
|
(29,189
|
)
|
|
$
|
205,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value as a percentage of cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
206,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(4)
|
Preneed Cemetery Merchandise and Service Activities(Continued)
|
The estimated maturities and market values of debt securities included above are as
follows:
|
|
|
|
|
|
|
July 31, 2013
|
|
Due in one year or less
|
|
$
|
309
|
|
Due in one to five years
|
|
|
1,998
|
|
Due in five to ten years
|
|
|
2,424
|
|
Thereafter
|
|
|
262
|
|
|
|
|
|
|
|
|
$
|
4,993
|
|
|
|
|
|
|
The weighted average maturity of the mutual fund-fixed income investments as of July 31, 2013 is 5.7
years.
The cost basis and market values associated with the preneed cemetery merchandise and services trust assets as of
October 31, 2012 are detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2012
|
|
|
|
Fair Value
Hierarchy
Level
|
|
|
Cost Basis
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Market
|
|
|
|
|
Cash, money market and other short-term investments
|
|
|
1
|
|
|
$
|
9,099
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,099
|
|
|
|
|
|
Long-term certificate of deposit investments
|
|
|
1
|
|
|
|
487
|
|
|
|
|
|
|
|
|
|
|
|
487
|
|
|
|
|
|
U.S. Government, agencies and municipalities
|
|
|
2
|
|
|
|
1,568
|
|
|
|
115
|
|
|
|
|
|
|
|
1,683
|
|
|
|
|
|
Corporate bonds
|
|
|
2
|
|
|
|
1,981
|
|
|
|
156
|
|
|
|
|
|
|
|
2,137
|
|
|
|
|
|
Preferred stocks
|
|
|
2
|
|
|
|
12,790
|
|
|
|
142
|
|
|
|
|
|
|
|
12,932
|
|
|
|
|
|
Common stocks
|
|
|
1
|
|
|
|
104,170
|
|
|
|
1,931
|
|
|
|
(27,687
|
)
|
|
|
78,414
|
|
|
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
1
|
|
|
|
23,818
|
|
|
|
201
|
|
|
|
(6,253
|
)
|
|
|
17,766
|
|
|
|
|
|
Fixed income
|
|
|
1
|
|
|
|
53,572
|
|
|
|
857
|
|
|
|
(16
|
)
|
|
|
54,413
|
|
|
|
|
|
Commodity
|
|
|
1
|
|
|
|
8,693
|
|
|
|
|
|
|
|
(1,991
|
)
|
|
|
6,702
|
|
|
|
|
|
Real estate investment trusts
|
|
|
1
|
|
|
|
3,021
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
3,007
|
|
|
|
|
|
Master limited partnerships
|
|
|
1
|
|
|
|
10,303
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
10,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust investments
|
|
|
|
|
|
$
|
229,502
|
|
|
$
|
3,402
|
|
|
$
|
(36,028
|
)
|
|
$
|
196,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value as a percentage of cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
197,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company periodically manages a covered call program on its equity securities within the preneed
cemetery merchandise and services trust in order to reduce the exposure to and volatility of equity securities as well as provide an opportunity for additional income. As of July 31, 2013 and October 31, 2012, the Company had
outstanding covered calls with a market value of $99 and $171, respectively. Covered calls are included at market value in the balance sheet line preneed cemetery receivables and trust investments. For the three months ended
July 31, 2013 and 2012, the Company realized trust (losses) earnings of approximately ($235) and $89, respectively, related to the covered call program. For the nine months ended July 31, 2013 and 2012, the Company realized trust earnings
(losses) of ($426) and $203, respectively, related to the covered call program. These trust earnings and losses are accounted for in the same manner as other cemetery merchandise and services trust earnings and losses and flow through cemetery
revenue in the condensed consolidated statements of earnings as the underlying service or merchandise are actually performed or delivered. Although the Company realized losses associated with the covered call program for the three and nine months
ended July 31, 2013, it continues to hold the underlying securities against which these covered calls were issued; these underlying securities appreciated in value by $577 for the three months ended July 31, 2013 and $1,309 for the nine
months ended July 31, 2013.
21
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(4)
|
Preneed Cemetery Merchandise and Service Activities(Continued)
|
Where quoted prices are available in an active market, investments held by the trusts
are classified as Level 1 investments pursuant to the three-level valuation hierarchy. The Companys Level 1 investments include cash, money market and other short-term investments, common stocks and mutual funds.
Where quoted market prices are not available for the specific security, then fair values are estimated by using quoted prices of
securities with similar characteristics. These investments are U. S. Government, agencies and municipalities, corporate bonds, convertible bonds and preferred stocks, all of which are classified within Level 2 of the valuation hierarchy.
There are no Level 3 investments in the preneed cemetery merchandise and services trust investment portfolio.
Activity related to preneed cemetery merchandise and services trust investments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
Nine Months Ended July 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Purchases
|
|
$
|
30,500
|
|
|
$
|
17,953
|
|
|
$
|
101,144
|
|
|
$
|
29,186
|
|
Sales
|
|
|
35,207
|
|
|
|
5,480
|
|
|
|
102,935
|
|
|
|
31,144
|
|
Realized gains from sales of investments
|
|
|
3,568
|
|
|
|
653
|
|
|
|
8,120
|
|
|
|
3,001
|
|
Realized losses from sales of investments and other
|
|
|
(1,016
|
)
(1)
|
|
|
(176
|
)
|
|
|
(3,412
|
)
(2)
|
|
|
(381
|
)
|
Interest income, dividends and other ordinary income
|
|
|
2,060
|
|
|
|
1,978
|
|
|
|
5,927
|
|
|
|
6,285
|
|
Deposits
|
|
|
4,459
|
|
|
|
4,127
|
|
|
|
13,361
|
|
|
|
12,769
|
|
Withdrawals
|
|
|
10,459
|
|
|
|
8,601
|
|
|
|
20,551
|
|
|
|
19,847
|
|
(1)
|
Includes $995 in losses from the sale of investments and $21 in the losses related to certain investments that the Company determined it no longer had
the ability and intent to hold until they recover in value.
|
(2)
|
Includes $2,328 in losses from the sale of investments and $1,084 in the losses related to certain investments that the Company determined it no longer
had the ability and intent to hold until they recover in value.
|
The following tables show the gross
unrealized losses and fair value of the preneed cemetery merchandise and services trust investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of
July 31, 2013 and October 31, 2012.
22
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(4)
|
Preneed Cemetery Merchandise and Service Activities(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2013
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Greater
|
|
|
Total
|
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
U.S. Government, agencies and municipalities
|
|
$
|
1,533
|
|
|
$
|
(35
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,533
|
|
|
$
|
(35
|
)
|
Preferred stocks
|
|
|
3,304
|
|
|
|
(243
|
)
|
|
|
1,189
|
|
|
|
(306
|
)
|
|
|
4,493
|
|
|
|
(549
|
)
|
Common stocks
|
|
|
13,175
|
|
|
|
(834
|
)
|
|
|
27,141
|
|
|
|
(17,674
|
)
|
|
|
40,316
|
|
|
|
(18,508
|
)
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
8,526
|
|
|
|
(312
|
)
|
|
|
13,060
|
|
|
|
(4,706
|
)
|
|
|
21,586
|
|
|
|
(5,018
|
)
|
Fixed income
|
|
|
51,031
|
|
|
|
(1,868
|
)
|
|
|
|
|
|
|
|
|
|
|
51,031
|
|
|
|
(1,868
|
)
|
Commodity
|
|
|
|
|
|
|
|
|
|
|
5,532
|
|
|
|
(3,161
|
)
|
|
|
5,532
|
|
|
|
(3,161
|
)
|
Real estate investment trusts
|
|
|
1,666
|
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
1,666
|
|
|
|
(41
|
)
|
Master limited partnerships
|
|
|
2,228
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
2,228
|
|
|
|
(8
|
)
|
Preferred stock
|
|
|
43
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
81,506
|
|
|
$
|
(3,342
|
)
|
|
$
|
46,922
|
|
|
$
|
(25,847
|
)
|
|
$
|
128,428
|
|
|
$
|
(29,189
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2012
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Greater
|
|
|
Total
|
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
Common stocks
|
|
$
|
18,856
|
|
|
$
|
(1,271
|
)
|
|
$
|
37,775
|
|
|
$
|
(26,416
|
)
|
|
$
|
56,631
|
|
|
$
|
(27,687
|
)
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
1,868
|
|
|
|
(14
|
)
|
|
|
11,756
|
|
|
|
(6,239
|
)
|
|
|
13,624
|
|
|
|
(6,253
|
)
|
Fixed income
|
|
|
11,014
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
11,014
|
|
|
|
(16
|
)
|
Commodity
|
|
|
|
|
|
|
|
|
|
|
6,703
|
|
|
|
(1,991
|
)
|
|
|
6,703
|
|
|
|
(1,991
|
)
|
Real estate investment trusts
|
|
|
3,007
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
3,007
|
|
|
|
(14
|
)
|
Master limited partnerships
|
|
|
10,236
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
10,236
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
44,981
|
|
|
$
|
(1,382
|
)
|
|
$
|
56,234
|
|
|
$
|
(34,646
|
)
|
|
$
|
101,215
|
|
|
$
|
(36,028
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized losses in the preneed cemetery merchandise and services trust portfolio are not considered
to be other than temporary. For a discussion of the Companys policies for determining whether a security is other-than-temporarily impaired, see Note 2(k) to the consolidated financial statements in the Companys 2012 Form 10-K. Of the
total unrealized losses at July 31, 2013, 81 percent, or $23,526, were generated by common stock and mutual fund-equity investments. Most of the common stock investments are part of the S&P 500 Index, and the mutual fund-equity
investments are invested in small-cap, mid-cap and international mutual funds that are highly diversified. The Company generally expects its portfolio performance to improve if the performance of the overall financial market improves, but would
also expect its performance to deteriorate if the overall financial market declines. The Company believes it has the intent and ability to hold these investments until they recover in value.
The Companys policy for recognizing trust income follows the allocation of trust earnings to individual contracts as stipulated in
the Companys respective trust agreements. In substantially all of the Companys trusts, trust earnings, which include dividends and interest earned and net capital gains and losses (including losses from other-than-temporary impairments
of securities) realized by preneed cemetery trust or escrow accounts net of fees, are allocated to individual contracts as earned or realized. In these trusts, unrealized gains and losses are not allocated to the underlying contracts. The trust
earnings allocated to individual contracts are recognized as components of revenue along with the original contract sales price when the underlying service or merchandise is actually performed or delivered. Principal and earnings are withdrawn only
as the merchandise or services are delivered or contracts are cancelled, except in jurisdictions that permit trust earnings to be withdrawn currently.
23
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(4)
|
Preneed Cemetery Merchandise and Service Activities(Continued)
|
Cash flows from preneed cemetery merchandise and services contracts are presented as
operating cash flows in the Companys condensed consolidated statements of cash flows.
(5)
|
Cemetery Interment Rights and Perpetual Care Trusts
|
Earnings from cemetery perpetual care trust investments that the Company is legally permitted to withdraw are
recognized as current cemetery revenues and are used to defray cemetery maintenance costs which are expensed as incurred. Recognized earnings related to these cemetery perpetual care trust investments were $2,433 and $1,815 for the three months
ended July 31, 2013 and 2012, respectively, and $10,690 and $7,098 for the nine months ended July 31, 2013 and 2012, respectively.
The cost basis and market values of the trust investments held by the cemetery perpetual care trusts as of July 31, 2013 are detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2013
|
|
|
|
Fair Value
Hierarchy
Level
|
|
|
Cost Basis
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Market
|
|
|
|
|
Cash, money market and other short-term investments
|
|
|
1
|
|
|
$
|
21,349
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
21,349
|
|
|
|
|
|
U.S. Government, agencies and municipalities
|
|
|
2
|
|
|
|
6,331
|
|
|
|
151
|
|
|
|
(63
|
)
|
|
|
6,419
|
|
|
|
|
|
Corporate bonds
|
|
|
2
|
|
|
|
22,645
|
|
|
|
839
|
|
|
|
(315
|
)
|
|
|
23,169
|
|
|
|
|
|
Preferred stocks
|
|
|
2
|
|
|
|
24,527
|
|
|
|
1,679
|
|
|
|
(1,251
|
)
|
|
|
24,955
|
|
|
|
|
|
Common stocks
|
|
|
1
|
|
|
|
69,967
|
|
|
|
6,036
|
|
|
|
(11,681
|
)
|
|
|
64,322
|
|
|
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
1
|
|
|
|
17,708
|
|
|
|
2,806
|
|
|
|
(349
|
)
|
|
|
20,165
|
|
|
|
|
|
Fixed income
|
|
|
1
|
|
|
|
94,938
|
|
|
|
373
|
|
|
|
(3,750
|
)
|
|
|
91,561
|
|
|
|
|
|
Commodity
|
|
|
1
|
|
|
|
4,615
|
|
|
|
|
|
|
|
(1,186
|
)
|
|
|
3,429
|
|
|
|
|
|
Real estate investment trusts
|
|
|
1
|
|
|
|
7,981
|
|
|
|
1,016
|
|
|
|
(80
|
)
|
|
|
8,917
|
|
|
|
|
|
Preferred stock
|
|
|
1
|
|
|
|
10,862
|
|
|
|
|
|
|
|
(285
|
)
|
|
|
10,577
|
|
|
|
|
|
Other
|
|
|
3
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust investments
|
|
|
|
|
|
$
|
280,964
|
|
|
$
|
12,900
|
|
|
$
|
(18,960
|
)
|
|
$
|
274,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value as a percentage of cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
275,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated maturities and market values of debt securities included above are as follows:
|
|
|
|
|
|
|
July 31, 2013
|
|
Due in one year or less
|
|
$
|
2,090
|
|
Due in one to five years
|
|
|
14,537
|
|
Due in five to ten years
|
|
|
9,075
|
|
Thereafter
|
|
|
3,886
|
|
|
|
|
|
|
|
|
$
|
29,588
|
|
|
|
|
|
|
The weighted average maturity of the mutual fund-fixed income investments as of July 31, 2013 is 5.5
years.
24
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(5)
|
Cemetery Interment Rights and Perpetual Care Trusts(Continued)
|
The cost basis and market values of the trust investments held by the cemetery perpetual
care trusts as of October 31, 2012 are detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2012
|
|
|
|
Fair Value
Hierarchy
Level
|
|
|
Cost Basis
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Market
|
|
|
|
|
Cash, money market and other short-term investments
|
|
|
1
|
|
|
$
|
16,856
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
16,856
|
|
|
|
|
|
U.S. Government, agencies and municipalities
|
|
|
2
|
|
|
|
5,089
|
|
|
|
250
|
|
|
|
|
|
|
|
5,339
|
|
|
|
|
|
Corporate bonds
|
|
|
2
|
|
|
|
26,479
|
|
|
|
1,409
|
|
|
|
(828
|
)
|
|
|
27,060
|
|
|
|
|
|
Preferred stocks
|
|
|
2
|
|
|
|
33,476
|
|
|
|
552
|
|
|
|
(2,069
|
)
|
|
|
31,959
|
|
|
|
|
|
Common stocks
|
|
|
1
|
|
|
|
90,085
|
|
|
|
3,017
|
|
|
|
(19,440
|
)
|
|
|
73,662
|
|
|
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
1
|
|
|
|
17,204
|
|
|
|
1,164
|
|
|
|
(521
|
)
|
|
|
17,847
|
|
|
|
|
|
Fixed income
|
|
|
1
|
|
|
|
74,762
|
|
|
|
2,400
|
|
|
|
(713
|
)
|
|
|
76,449
|
|
|
|
|
|
Commodity
|
|
|
1
|
|
|
|
4,591
|
|
|
|
6
|
|
|
|
(463
|
)
|
|
|
4,134
|
|
|
|
|
|
Real estate investment trusts
|
|
|
1
|
|
|
|
8,792
|
|
|
|
614
|
|
|
|
(15
|
)
|
|
|
9,391
|
|
|
|
|
|
Other
|
|
|
3
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust investments
|
|
|
|
|
|
$
|
277,381
|
|
|
$
|
9,412
|
|
|
$
|
(24,049
|
)
|
|
$
|
262,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value as a percentage of cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
263,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company periodically manages a covered call program on its equity securities within the cemetery
perpetual care trust in order to reduce the exposure to and volatility of equity securities as well as provide an opportunity for additional income. As of July 31, 2013 and October 31, 2012, the Company had outstanding covered calls
with a market value of $115 and $131, respectively. Covered calls are included at market value in the balance sheet line cemetery perpetual care trust investments. For the three months ended July 31, 2013 and 2012, the Company
realized trust earnings (losses) of approximately ($186) and $73, respectively, related to the covered call program. For the nine months ended July 31, 2013 and 2012, the Company realized trust earnings (losses) of approximately ($305) and
$147, respectively, related to the covered call program. These trust earnings and losses are accounted for in the same manner as other cemetery perpetual care trust earnings and losses and flow through cemetery revenue in the condensed consolidated
statements of earnings. Although the Company realized losses associated with the covered call program for the three and nine months ended July 31, 2013, it continues to hold the underlying securities against which these covered calls were
issued; these underlying securities appreciated in value by $385 for the three months ended July 31, 2013 and $899 for the nine months ended July 31, 2013.
Where quoted prices are available in an active market, investments held by the trusts are classified as Level 1 investments pursuant to the three-level valuation hierarchy. The Companys Level 1
investments include cash, money market and other short-term investments, common stocks and mutual funds.
Where quoted market
prices are not available for the specific security, then fair values are estimated by using quoted prices of securities with similar characteristics. These investments are primarily U. S. Government, agencies and municipalities, corporate bonds,
convertible bonds and preferred stocks, all of which are classified within Level 2 of the valuation hierarchy.
The
Companys Level 3 investments include an investment in a partnership. The valuation of partnership investments requires significant management judgment due to the absence of quoted prices, inherent lack of liquidity and the long-term nature of
such assets. The fair market value of the partnership investment was determined by using its most recent audited financial statements and assessing the market value of the underlying securities within the partnership.
25
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(5)
|
Cemetery Interment Rights and Perpetual Care Trusts(Continued)
|
The change in the Companys cemetery perpetual care trust investments with
significant unobservable inputs (Level 3) is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
Nine Months Ended July 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Fair market value, beginning balance
|
|
$
|
47
|
|
|
$
|
48
|
|
|
$
|
47
|
|
|
$
|
48
|
|
Total unrealized losses included in other comprehensive income
(1)
|
|
|
(6
|
)
|
|
|
(1
|
)
|
|
|
(6
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair market value, ending balance
|
|
$
|
41
|
|
|
$
|
47
|
|
|
$
|
41
|
|
|
$
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
All gains (losses) recognized in other comprehensive income for perpetual care trust investments are attributable to the Companys customers and
are offset by a corresponding increase (decrease) in perpetual care trusts corpus.
|
In states where
the Company withdraws and recognizes capital gains in its cemetery perpetual care trusts, if it realizes subsequent net capital losses (i.e., losses in excess of capital gains in the trust) and the fair market value of the trust assets is less than
the aggregate amounts required to be contributed to the trust, some states may require the Company to make cash deposits to the trusts or may require the Company to stop withdrawing earnings until future earnings restore the initial corpus. As of
July 31, 2013 and October 31, 2012, the Company had a liability recorded for the estimated probable funding obligation to restore the net realized losses of $11,950 and $11,965, respectively. The Company recorded an additional $7 and $567
for the estimated probable funding obligation to restore the net realized losses in the cemetery perpetual care trust for the nine months ended July 31, 2013 and 2012, respectively. The Company had earnings of $4 and $0 for the three months
ended July 31, 2013 and 2012, respectively, and $22 and $520 for the nine months ended July 31, 2013 and 2012, respectively, within the trusts that it did not withdraw from the trusts in order to satisfy a portion of its estimated probable
funding obligation. In those states where realized net capital gains have not been withdrawn, the Company believes it is reasonably possible but not probable that additional funding obligations may exist with an estimated amount of $1,206; no charge
has been recorded for these amounts as of July 31, 2013.
Activity related to preneed cemetery perpetual care trust
investments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
Nine Months Ended July 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Purchases
|
|
$
|
63,372
|
|
|
$
|
19,529
|
|
|
$
|
184,608
|
|
|
$
|
83,809
|
|
Sales
|
|
|
62,160
|
|
|
|
18,313
|
|
|
|
190,079
|
|
|
|
75,211
|
|
Realized gains from sales of investments
|
|
|
2,967
|
|
|
|
660
|
|
|
|
10,069
|
|
|
|
4,715
|
|
Realized losses from sales of investments and other
|
|
|
(252
|
)
(1)
|
|
|
(963
|
)
|
|
|
(1,734
|
)
(2)
|
|
|
(2,902
|
)
|
Interest income, dividends and other ordinary income
|
|
|
2,524
|
|
|
|
2,523
|
|
|
|
8,555
|
|
|
|
7,958
|
|
Deposits
|
|
|
2,857
|
|
|
|
2,180
|
|
|
|
6,675
|
|
|
|
6,849
|
|
Withdrawals
|
|
|
3,270
|
|
|
|
2,299
|
|
|
|
9,904
|
|
|
|
7,211
|
|
(1)
|
Includes $223 in losses from the sale of investments and $29 in the losses related to certain investments that the Company determined it no longer had
the ability and intent to hold until they recover in value.
|
(2)
|
Includes $604 in losses from the sale of investments and $1,130 in the losses related to certain investments that the Company determined it no longer
had the ability and intent to hold until they recover in value.
|
26
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(5)
|
Cemetery Interment Rights and Perpetual Care Trusts(Continued)
|
During the three months ended July 31, 2013 and 2012, cemetery revenues were
$58,366 and $60,356, respectively, of which $2,244 and $2,373, respectively, were required to be placed into perpetual care trusts and were recorded as revenues and expenses. During the nine months ended July 31, 2013 and 2012, cemetery
revenues were $174,592 and $173,015, respectively, of which $6,558 and $6,701, respectively, were required to be placed into perpetual care trusts and were recorded as revenues and expenses.
The following tables show the gross unrealized losses and fair value of the cemetery perpetual care trust investments with unrealized
losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of July 31, 2013 and October 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2013
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Greater
|
|
|
Total
|
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
U.S. Government, agencies and municipalities
|
|
$
|
2,975
|
|
|
$
|
(63
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,975
|
|
|
$
|
(63
|
)
|
Corporate bonds
|
|
|
7,790
|
|
|
|
(315
|
)
|
|
|
|
|
|
|
|
|
|
|
7,790
|
|
|
|
(315
|
)
|
Preferred stocks
|
|
|
10,521
|
|
|
|
(400
|
)
|
|
|
3,443
|
|
|
|
(851
|
)
|
|
|
13,964
|
|
|
|
(1,251
|
)
|
Common stocks
|
|
|
15,753
|
|
|
|
(820
|
)
|
|
|
22,636
|
|
|
|
(10,861
|
)
|
|
|
38,389
|
|
|
|
(11,681
|
)
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
202
|
|
|
|
(8
|
)
|
|
|
1,395
|
|
|
|
(341
|
)
|
|
|
1,597
|
|
|
|
(349
|
)
|
Fixed income
|
|
|
53,858
|
|
|
|
(2,254
|
)
|
|
|
12,273
|
|
|
|
(1,496
|
)
|
|
|
66,131
|
|
|
|
(3,750
|
)
|
Commodity
|
|
|
1,168
|
|
|
|
(253
|
)
|
|
|
2,261
|
|
|
|
(933
|
)
|
|
|
3,429
|
|
|
|
(1,186
|
)
|
Real estate investment trusts
|
|
|
1,384
|
|
|
|
(80
|
)
|
|
|
|
|
|
|
|
|
|
|
1,384
|
|
|
|
(80
|
)
|
Preferred stock
|
|
|
10,576
|
|
|
|
(285
|
)
|
|
|
|
|
|
|
|
|
|
|
10,576
|
|
|
|
(285
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
104,227
|
|
|
$
|
(4,478
|
)
|
|
$
|
42,008
|
|
|
$
|
(14,482
|
)
|
|
$
|
146,235
|
|
|
$
|
(18,960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2012
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Greater
|
|
|
Total
|
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
|
Market
Value
|
|
|
Unrealized
Losses
|
|
Corporate bonds
|
|
$
|
4,736
|
|
|
$
|
(80
|
)
|
|
$
|
276
|
|
|
$
|
(748
|
)
|
|
$
|
5,012
|
|
|
$
|
(828
|
)
|
Preferred stocks
|
|
|
4,076
|
|
|
|
(54
|
)
|
|
|
6,492
|
|
|
|
(2,015
|
)
|
|
|
10,568
|
|
|
|
(2,069
|
)
|
Common stocks
|
|
|
19,623
|
|
|
|
(704
|
)
|
|
|
32,424
|
|
|
|
(18,736
|
)
|
|
|
52,047
|
|
|
|
(19,440
|
)
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
3,405
|
|
|
|
(40
|
)
|
|
|
1,169
|
|
|
|
(481
|
)
|
|
|
4,574
|
|
|
|
(521
|
)
|
Fixed income
|
|
|
7,267
|
|
|
|
(12
|
)
|
|
|
14,517
|
|
|
|
(701
|
)
|
|
|
21,784
|
|
|
|
(713
|
)
|
Commodity
|
|
|
2,559
|
|
|
|
(234
|
)
|
|
|
1,539
|
|
|
|
(229
|
)
|
|
|
4,098
|
|
|
|
(463
|
)
|
Real estate investment trusts
|
|
|
2,106
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
2,106
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
43,772
|
|
|
$
|
(1,139
|
)
|
|
$
|
56,417
|
|
|
$
|
(22,910
|
)
|
|
$
|
100,189
|
|
|
$
|
(24,049
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized losses in the cemetery perpetual care trust portfolio are not considered to be other than
temporary. For a discussion of the Companys policies for determining whether a security is other-than-temporarily impaired, see Note 2(k) to the consolidated financial statements in the Companys 2012 Form 10-K. Of the total unrealized
losses at July 31, 2013, 81 percent, or $15,431, were generated by common stock and mutual fund-fixed income investments. Most of the common stock investments are part of the S&P 500 Index. The fixed income mutual funds with losses are
invested mostly in investment grade bonds and include both world bond funds and domestic bond funds. The Company generally expects its portfolio performance to improve if the performance of the overall financial market improves, but would also
expect its performance to deteriorate if the overall financial market declines. The Company believes it has the intent and ability to hold these investments until they recover in value.
Cash flows from cemetery perpetual care contracts are presented as operating cash flows in the Companys condensed consolidated
statements of cash flows.
27
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(6)
|
Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care Trusts Corpus
|
The components of deferred preneed funeral and cemetery receipts held in trust in the condensed consolidated balance
sheet at July 31, 2013 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Receipts Held in Trust
|
|
|
|
|
|
|
Preneed
Funeral
|
|
|
Preneed
Cemetery
|
|
|
Total
|
|
Trust assets at market value
|
|
$
|
422,053
|
|
|
$
|
206,402
|
|
|
$
|
628,455
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pending withdrawals
|
|
|
(8,270
|
)
|
|
|
(3,159
|
)
|
|
|
(11,429
|
)
|
Pending deposits
|
|
|
2,339
|
|
|
|
1,474
|
|
|
|
3,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred receipts held in trust
|
|
$
|
416,122
|
|
|
$
|
204,717
|
|
|
$
|
620,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of perpetual care trusts corpus in the condensed consolidated balance sheet at
July 31, 2013 are as follows:
|
|
|
|
|
|
|
Perpetual Care
Trusts
Corpus
|
|
Trust assets at market value
|
|
$
|
275,891
|
|
Less:
|
|
|
|
|
Pending withdrawals
|
|
|
(2,958
|
)
|
Pending deposits
|
|
|
285
|
|
|
|
|
|
|
Perpetual care trusts corpus
|
|
$
|
273,218
|
|
|
|
|
|
|
The components of deferred preneed funeral and cemetery receipts held in trust in the condensed
consolidated balance sheet at October 31, 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Receipts Held in Trust
|
|
|
|
|
|
|
Preneed
Funeral
|
|
|
Preneed
Cemetery
|
|
|
Total
|
|
Trust assets at market value
|
|
$
|
397,875
|
|
|
$
|
197,544
|
|
|
$
|
595,419
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pending withdrawals
|
|
|
(7,870
|
)
|
|
|
(6,345
|
)
|
|
|
(14,215
|
)
|
Pending deposits
|
|
|
2,333
|
|
|
|
1,627
|
|
|
|
3,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred receipts held in trust
|
|
$
|
392,338
|
|
|
$
|
192,826
|
|
|
$
|
585,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of perpetual care trusts corpus in the condensed consolidated balance sheet at
October 31, 2012 are as follows:
|
|
|
|
|
|
|
Perpetual Care
Trusts
Corpus
|
|
Trust assets at market value
|
|
$
|
263,663
|
|
Less:
|
|
|
|
|
Pending withdrawals
|
|
|
(1,905
|
)
|
Pending deposits
|
|
|
125
|
|
|
|
|
|
|
Perpetual care trusts corpus
|
|
$
|
261,883
|
|
|
|
|
|
|
28
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(6)
|
Deferred Preneed Funeral and Cemetery Receipts Held in Trust and Perpetual Care Trusts Corpus(Continued)
|
Investment and other income, net
The components of investment and other income, net in the condensed consolidated statements of earnings for the three and nine months
ended July 31, 2013 and 2012 are detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
Nine Months Ended July 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Realized gains from sales of investments
|
|
$
|
12,878
|
|
|
$
|
2,633
|
|
|
$
|
36,850
|
|
|
$
|
12,207
|
|
Realized losses from sales of investments and other
|
|
|
(2,464
|
)
|
|
|
(2,744
|
)
|
|
|
(10,044
|
)
|
|
|
(5,992
|
)
|
Interest income, dividends and other ordinary income
|
|
|
8,024
|
|
|
|
7,453
|
|
|
|
24,538
|
|
|
|
25,157
|
|
Trust expenses and income taxes
|
|
|
(4,093
|
)
|
|
|
(2,966
|
)
|
|
|
(11,076
|
)
|
|
|
(8,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net trust investment income
|
|
|
14,345
|
|
|
|
4,376
|
|
|
|
40,268
|
|
|
|
22,580
|
|
Reclassification to deferred preneed funeral and cemetery receipts held in trust
|
|
|
(10,539
|
)
|
|
|
(3,112
|
)
|
|
|
(27,103
|
)
|
|
|
(15,802
|
)
|
Reclassification to perpetual care trusts corpus
|
|
|
(3,806
|
)
|
|
|
(1,264
|
)
|
|
|
(13,165
|
)
|
|
|
(6,778
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred preneed funeral and cemetery receipts held in trust and perpetual care trusts corpus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and other income (expense), net
|
|
|
(2
|
)
|
|
|
57
|
|
|
|
160
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment and other income, net
|
|
$
|
(2
|
)
|
|
$
|
57
|
|
|
$
|
160
|
|
|
$
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7)
|
Commitments and Contingencies
|
Litigation
On June 13, 2013, a putative class action was filed in the Civil District Court of the Parish of Orleans by Karen Moulton, an alleged shareholder of the Company (
Karen Moulton, Individually and on
Behalf of All Others Similarly Situated v. Stewart Enterprises, Inc. et al
., Case No. 2013-5636). A subsequent similar suit and interventions have been consolidated with the
Moulton
case.
The lawsuit alleges, among other things, (i) the Companys board of directors breached its fiduciary duties by conducting a
conflicted process to sell the Company, by agreeing to inadequate consideration, and by agreeing to terms in the merger agreement that impose deal protection devices that preclude other bidders from making a successful competing offer, (ii) the
Companys board of directors breached its fiduciary duties by failing to disclose material information concerning the proposed transaction, and (iii) that Stewart Enterprises, Inc., Service Corporation International and Rio Acquisition
Corp. aided and abetted the breaches of fiduciary duty. The lawsuit seeks to enjoin the merger, and award the plaintiffs costs, including reasonable attorneys fees.
The Company and director defendants believe that the lawsuit is without merit and intend to defend themselves vigorously.
29
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(7)
|
Commitments and Contingencies(Continued)
|
On August 9, 2013, the court denied the plaintiffs request for a preliminary
injunction to enjoin the special meeting of shareholders on August 13, 2013.
The Company is a defendant in a variety of
other litigation matters that have arisen in the ordinary course of business, which are covered by insurance or otherwise not considered to be material. The Company carries insurance with coverages and coverage limits that it believes to be
adequate.
Other Commitments and Contingencies
In those states where the Company has withdrawn realized net capital gains in the past from its cemetery perpetual care trusts, regulators may seek replenishment of subsequent realized net capital losses
either by requiring a cash deposit to the trust or by prohibiting or restricting withdrawals of future earnings until they restore the initial corpus. As of July 31, 2013, the Company had $11,950 recorded as a liability for the estimated
probable funding obligation. As of July 31, 2013, the Company had net unrealized losses of approximately $11,491 in the cemetery perpetual care trusts in these states that could be subject to a future funding obligation. Because some of these
trusts currently have assets with a fair market value less than the aggregate amounts required to be contributed to the trust, any additional realized net capital losses in these trusts may result in an additional corresponding funding liability and
increase in cemetery costs.
From time to time, contracts are presented to the Company relating to contracts sold prior to the
time the Company acquired certain businesses for which the Company was previously unaware. In addition, from time to time, the Company has identified in its backlog certain contracts in which services or merchandise have previously been delivered
but the revenue was not yet recognized. Using historical trends and statistical analyses, the Company has recorded for these items $0 and an estimated net debit of approximately $0.3 million as of July 31, 2013 and October 31, 2012,
respectively.
The Company is required to maintain a bond ($18,797 and $23,456 as of July 31, 2013 and October 31,
2012, respectively) to guarantee its obligations relating to funds the Company withdrew in fiscal year 2001 from its preneed funeral trusts in Florida. This amount would become senior secured debt if the Company was required to borrow funds under
the senior secured revolving credit facility and return to the trusts the amounts it previously withdrew that relate to the remaining undelivered preneed contracts in lieu of this bond.
(8)
|
Reconciliation of Basic and Diluted Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per Share
Data
|
|
Three Months Ended July 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
8,277
|
|
|
|
|
|
|
|
|
|
Allocation of earnings to nonvested restricted stock
|
|
|
(90
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations available to common shareholders
|
|
$
|
8,187
|
|
|
|
84,692
|
|
|
$
|
.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options assumed exercised
|
|
|
|
|
|
|
1,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations available to common shareholders plus stock options assumed exercised
|
|
$
|
8,187
|
|
|
|
85,952
|
|
|
$
|
.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(8)
|
Reconciliation of Basic and Diluted Per Share Data(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per Share
Data
|
|
Three Months Ended July 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
9,896
|
|
|
|
|
|
|
|
|
|
Allocation of earnings to nonvested restricted stock
|
|
|
(87
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations available to common shareholders
|
|
$
|
9,809
|
|
|
|
85,798
|
|
|
$
|
.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options assumed exercised
|
|
|
|
|
|
|
380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations available to common shareholders plus stock options assumed exercised
|
|
$
|
9,809
|
|
|
|
86,178
|
|
|
$
|
.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per Share
Data
|
|
Nine Months Ended July 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
35,686
|
|
|
|
|
|
|
|
|
|
Allocation of earnings to nonvested restricted stock
|
|
|
(388
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations available to common shareholders
|
|
$
|
35,298
|
|
|
|
84,533
|
|
|
$
|
.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options assumed exercised
|
|
|
|
|
|
|
849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations available to common shareholders plus stock options assumed exercised
|
|
$
|
35,298
|
|
|
|
85,382
|
|
|
$
|
.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per Share
Data
|
|
Nine Months Ended July 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
28,340
|
|
|
|
|
|
|
|
|
|
Allocation of earnings to nonvested restricted stock
|
|
|
(251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations available to common shareholders
|
|
$
|
28,089
|
|
|
|
86,295
|
|
|
$
|
.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options assumed exercised
|
|
|
|
|
|
|
324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations available to common shareholders plus stock options assumed exercised
|
|
$
|
28,089
|
|
|
|
86,619
|
|
|
$
|
.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three and nine months ended July 31, 2013, all stock options were dilutive.
Options to purchase 390,290 shares of common stock at prices ranging from $6.83 to $8.47 per share for the three months ended
July 31, 2012 and options to purchase 877,683 shares of common stock at prices ranging from $6.33 to $8.47 per share for the nine months ended July 31, 2012 were outstanding but were not included in the computation of diluted earnings per
share because the exercise prices of the options were greater than the average market price of the common shares for those periods. Additionally, weighted average shares outstanding for the three and nine months ended July 31, 2012 exclude the
effect of approximately 2,140,192 and 1,936,384 options respectively, because such options were not dilutive.
31
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(8)
|
Reconciliation of Basic and Diluted Per Share Data(Continued)
|
For the three and nine months ended July 31, 2013 and 2012, all of the outstanding
94,500 market based stock options were dilutive as the respective market conditions had been previously achieved.
For the
three and nine months ended July 31, 2013, a maximum of 13,153,500 shares of the Companys Class A common stock related to the senior convertible notes and a maximum of 12,161,253 shares of Class A common stock under the common
stock warrants associated with the June 2007 senior convertible debt transaction were not dilutive. For the three and nine months ended July 31, 2012, a maximum of 13,153,500 shares of the Companys Class A common stock related to the
senior convertible notes and a maximum of 12,033,253 shares of Class A common stock under the associated common stock warrants were also not dilutive.
The Company includes Class A and Class B common stock in its diluted shares calculation. As of July 31, 2013, the Companys Chairman, Frank B. Stewart, Jr., was the record holder of all of
the Companys shares of Class B common stock. The Companys Class A and B common stock are substantially identical, except that holders of Class A common stock are entitled to one vote per share, and holders of Class B common
stock are entitled to ten votes per share. Each share of Class B common stock is automatically converted into one share of Class A common stock upon transfer to persons other than certain affiliates of Frank B. Stewart, Jr.
The Company has determined that managements approach to operating the business indicates that there are three
operating and reportable segments: a funeral segment, a cemetery segment and a corporate trust management segment. The Company does not aggregate its operating segments. Therefore, its operating and reportable segments are the same. The tables below
present information about reported segments for the three and nine months ended July 31, 2013 and 2012 for the Companys continuing operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
Total Revenue
|
|
|
|
Three Months
Ended
July 31, 2013
|
|
|
Three Months
Ended
July
31, 2012
|
|
|
Nine Months
Ended
July
31, 2013
|
|
|
Nine Months
Ended
July
31, 2012
|
|
Funeral
|
|
$
|
64,608
|
|
|
$
|
65,468
|
|
|
$
|
209,243
|
|
|
$
|
201,960
|
|
Cemetery
(1)
|
|
|
55,410
|
|
|
|
57,918
|
|
|
|
166,034
|
|
|
|
165,809
|
|
Corporate Trust Management
(2)
|
|
|
7,044
|
|
|
|
5,853
|
|
|
|
21,319
|
|
|
|
18,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
127,062
|
|
|
$
|
129,239
|
|
|
$
|
396,596
|
|
|
$
|
386,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Profit
|
|
|
Total Gross Profit
|
|
|
|
Three Months
Ended
July 31, 2013
|
|
|
Three Months
Ended
July
31, 2012
|
|
|
Nine Months
Ended
July
31, 2013
|
|
|
Nine Months
Ended
July
31, 2012
|
|
Funeral
|
|
$
|
10,108
|
|
|
$
|
12,628
|
|
|
$
|
41,644
|
|
|
$
|
41,973
|
|
Cemetery
(1)
|
|
|
6,501
|
|
|
|
9,061
|
|
|
|
25,957
|
|
|
|
22,019
|
|
Corporate Trust Management
(2)
|
|
|
6,586
|
|
|
|
5,297
|
|
|
|
19,877
|
|
|
|
17,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23,195
|
|
|
$
|
26,986
|
|
|
$
|
87,478
|
|
|
$
|
81,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Perpetual care trust earnings are included in the revenues and gross profit of the cemetery segment and amounted to $2,433 and $1,815 for the three
months ended July 31, 2013 and 2012, respectively, and $10,690 and $7,098 for the nine months ended July 31, 2013 and 2012, respectively.
|
(2)
|
Corporate trust management consists of trust management fees and funeral and cemetery merchandise and service trust earnings recognized with respect to
preneed contracts delivered during the period. Trust management fees are established by the Company at rates consistent with industry norms based on the fair
|
32
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(9)
|
Segment Data(Continued)
|
|
market value of the assets managed and are paid by the trusts to the Companys subsidiary, Investors Trust, Inc. The trust earnings represent the amount of distributable earnings as
stipulated by the Companys respective trust agreements that are generated by the trusts over the life of the preneed contracts and allocated to those products and services delivered during the relevant periods. Trust management fees included
in funeral revenue for the three months ended July 31, 2013 and 2012 were $1,860 and $1,335, respectively, and funeral trust earnings recognized with respect to preneed contracts delivered included in funeral revenue for the three months ended
July 31, 2013 and 2012 were $2,227 and $2,080, respectively. Trust management fees included in cemetery revenue for the three months ended July 31, 2013 and 2012 were $2,174 and $1,555, respectively, and cemetery trust earnings recognized
with respect to preneed contracts delivered included in cemetery revenue for the three months ended July 31, 2013 and 2012 were $783 and $883, respectively.
|
Trust management fees included in funeral revenue for the nine months ended July 31, 2013 and 2012 were $5,271 and $3,993, respectively, and funeral trust earnings for the nine months ended
July 31, 2013 and 2012 were $7,490 and $7,693, respectively. Trust management fees included in cemetery revenue for the nine months ended July 31, 2013 and 2012 were $6,077 and $4,649, respectively, and cemetery trust earnings for the nine
months ended July 31, 2013 and 2012 were $2,481 and $2,557, respectively.
A reconciliation of total segment gross profit
to total earnings from continuing operations before income taxes for the three and nine months ended July 31, 2013 and 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
Nine Months Ended July 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Gross profit for reportable segments
|
|
$
|
23,195
|
|
|
$
|
26,986
|
|
|
$
|
87,478
|
|
|
$
|
81,520
|
|
Corporate general and administrative expenses
|
|
|
(6,386
|
)
|
|
|
(7,326
|
)
|
|
|
(20,294
|
)
|
|
|
(20,264
|
)
|
Merger-related costs
|
|
|
(3,126
|
)
|
|
|
|
|
|
|
(3,715
|
)
|
|
|
|
|
Restructuring and other charges
|
|
|
|
|
|
|
(305
|
)
|
|
|
(81
|
)
|
|
|
(2,852
|
)
|
Net gain on dispositions
|
|
|
|
|
|
|
|
|
|
|
742
|
|
|
|
332
|
|
Other operating income, net
|
|
|
568
|
|
|
|
191
|
|
|
|
1,688
|
|
|
|
773
|
|
Interest expense
|
|
|
(5,922
|
)
|
|
|
(5,873
|
)
|
|
|
(17,794
|
)
|
|
|
(17,544
|
)
|
Investment and other income (expense), net
|
|
|
(2
|
)
|
|
|
57
|
|
|
|
160
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before income taxes
|
|
$
|
8,327
|
|
|
$
|
13,730
|
|
|
$
|
48,184
|
|
|
$
|
42,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below presents total net preneed merchandise and services sales for the three and nine months
ended July 31, 2013 and 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Preneed Merchandise
and Service Sales
(1)
|
|
|
Total Net Preneed Merchandise
and Service Sales
(1)
|
|
|
|
Three Months
Ended
July 31, 2013
|
|
|
Three Months
Ended
July
31, 2012
|
|
|
Nine Months
Ended
July
31, 2013
|
|
|
Nine Months
Ended
July
31, 2012
|
|
Funeral
|
|
$
|
27,440
|
|
|
$
|
28,013
|
|
|
$
|
75,596
|
|
|
$
|
79,714
|
|
Cemetery
|
|
|
13,002
|
|
|
|
12,949
|
|
|
|
35,418
|
|
|
|
38,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
40,442
|
|
|
$
|
40,962
|
|
|
$
|
111,014
|
|
|
$
|
117,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Preneed sales amounts represent total preneed funeral trust and insurance sales and cemetery service and merchandise trust sales generated in the
applicable period, net of cancellations. Preneed funeral and cemetery merchandise and service sales are deferred until a future period and have no impact on current revenues.
|
33
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(10)
|
Supplementary Information
|
The detail of certain income statement accounts is as follows for the three and nine months ended July 31, 2013
and 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
Nine Months Ended July 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Service revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
$
|
47,057
|
|
|
$
|
47,688
|
|
|
$
|
152,016
|
|
|
$
|
146,675
|
|
Cemetery
|
|
|
16,626
|
|
|
|
14,459
|
|
|
|
54,736
|
|
|
|
45,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,683
|
|
|
|
62,147
|
|
|
|
206,752
|
|
|
|
192,381
|
|
Merchandise revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
|
19,338
|
|
|
|
19,333
|
|
|
|
63,321
|
|
|
|
61,265
|
|
Cemetery
|
|
|
38,365
|
|
|
|
42,781
|
|
|
|
109,982
|
|
|
|
117,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,703
|
|
|
|
62,114
|
|
|
|
173,303
|
|
|
|
178,779
|
|
Other revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
|
2,301
|
|
|
|
1,862
|
|
|
|
6,667
|
|
|
|
5,706
|
|
Cemetery
|
|
|
3,375
|
|
|
|
3,116
|
|
|
|
9,874
|
|
|
|
9,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,676
|
|
|
|
4,978
|
|
|
|
16,541
|
|
|
|
15,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
127,062
|
|
|
$
|
129,239
|
|
|
$
|
396,596
|
|
|
$
|
386,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
$
|
17,865
|
|
|
$
|
16,535
|
|
|
$
|
54,071
|
|
|
$
|
50,032
|
|
Cemetery
|
|
|
12,353
|
|
|
|
11,024
|
|
|
|
36,072
|
|
|
|
31,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,218
|
|
|
|
27,559
|
|
|
|
90,143
|
|
|
|
81,923
|
|
Merchandise costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
|
13,900
|
|
|
|
13,292
|
|
|
|
43,452
|
|
|
|
41,216
|
|
Cemetery
|
|
|
22,159
|
|
|
|
24,181
|
|
|
|
61,200
|
|
|
|
70,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,059
|
|
|
|
37,473
|
|
|
|
104,652
|
|
|
|
111,482
|
|
Facility expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
|
22,949
|
|
|
|
23,301
|
|
|
|
70,776
|
|
|
|
69,437
|
|
Cemetery
|
|
|
14,641
|
|
|
|
13,920
|
|
|
|
43,547
|
|
|
|
42,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,590
|
|
|
|
37,221
|
|
|
|
114,323
|
|
|
|
111,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs
|
|
$
|
103,867
|
|
|
$
|
102,253
|
|
|
$
|
309,118
|
|
|
$
|
305,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenue includes funeral service revenue, funeral trust earnings, insurance commission revenue,
burial site openings and closings and perpetual care trust earnings. Merchandise revenue includes funeral merchandise revenue, flower sales, cemetery property sales revenue, cemetery merchandise delivery revenue and merchandise trust
earnings. Other revenue consists of finance charge revenue and trust management fees. Service costs include the direct costs associated with service revenue and preneed selling costs associated with preneed service sales. Merchandise
costs include the direct costs associated with merchandise revenue and preneed selling costs associated with preneed merchandise sales.
34
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(11)
|
Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes
|
The following tables present the condensed consolidating historical financial statements as of July 31, 2013 and
October 31, 2012 and for the three and nine months ended July 31, 2013 and 2012, for the direct and indirect domestic subsidiaries of the Company that serve as guarantors of the Companys 6.50 percent senior notes and its 3.125
percent and 3.375 percent senior convertible notes, and the financial results of the Companys subsidiaries that do not serve as guarantors. Non-guarantor subsidiaries of the 6.50 percent senior notes and senior convertible notes include the
Puerto Rican subsidiaries, Investors Trust, Inc. and certain immaterial domestic subsidiaries that are not 100 percent owned, or are prohibited by law from guaranteeing the 6.50 percent senior notes and senior convertible notes. The guarantor
subsidiaries of the 6.50 percent senior notes and senior convertible notes are 100 percent-owned directly or indirectly by the Company. The guarantees are full and unconditional and joint and several. In the condensed consolidating statements of
earnings, corporate general and administrative expenses and interest expense of the parent are presented net of amounts charged to the guarantor and non-guarantor subsidiaries. All amounts reported as interest expense on the guarantor and
non-guarantor subsidiaries are amounts charged by the parent.
Condensed Consolidating Statements of Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2013
|
|
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
$
|
|
|
|
$
|
63,247
|
|
|
$
|
5,449
|
|
|
$
|
|
|
|
$
|
68,696
|
|
Cemetery
|
|
|
|
|
|
|
52,266
|
|
|
|
6,100
|
|
|
|
|
|
|
|
58,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,513
|
|
|
|
11,549
|
|
|
|
|
|
|
|
127,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
|
|
|
|
|
51,095
|
|
|
|
3,619
|
|
|
|
|
|
|
|
54,714
|
|
Cemetery
|
|
|
|
|
|
|
44,648
|
|
|
|
4,505
|
|
|
|
|
|
|
|
49,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,743
|
|
|
|
8,124
|
|
|
|
|
|
|
|
103,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
19,770
|
|
|
|
3,425
|
|
|
|
|
|
|
|
23,195
|
|
Corporate general and administrative expenses
|
|
|
(6,386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,386
|
)
|
Merger-related costs
|
|
|
(3,126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,126
|
)
|
Other operating income, net
|
|
|
48
|
|
|
|
471
|
|
|
|
49
|
|
|
|
|
|
|
|
568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss)
|
|
|
(9,464
|
)
|
|
|
20,241
|
|
|
|
3,474
|
|
|
|
|
|
|
|
14,251
|
|
Interest expense
|
|
|
(2,981
|
)
|
|
|
(2,766
|
)
|
|
|
(175
|
)
|
|
|
|
|
|
|
(5,922
|
)
|
Investment and other income (expense), net
|
|
|
(15
|
)
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
(2
|
)
|
Equity in subsidiaries
|
|
|
15,198
|
|
|
|
226
|
|
|
|
|
|
|
|
(15,424
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before income taxes
|
|
|
2,738
|
|
|
|
17,701
|
|
|
|
3,312
|
|
|
|
(15,424
|
)
|
|
|
8,327
|
|
Income tax expense (benefit)
|
|
|
(5,539
|
)
|
|
|
7,441
|
|
|
|
(1,852
|
)
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
8,277
|
|
|
$
|
10,260
|
|
|
$
|
5,164
|
|
|
$
|
(15,424
|
)
|
|
$
|
8,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(11)
|
Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
|
Condensed Consolidating Statements of Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2012
|
|
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
$
|
|
|
|
$
|
63,813
|
|
|
$
|
5,070
|
|
|
$
|
|
|
|
$
|
68,883
|
|
Cemetery
|
|
|
|
|
|
|
54,252
|
|
|
|
6,104
|
|
|
|
|
|
|
|
60,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118,065
|
|
|
|
11,174
|
|
|
|
|
|
|
|
129,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
|
|
|
|
|
49,452
|
|
|
|
3,676
|
|
|
|
|
|
|
|
53,128
|
|
Cemetery
|
|
|
|
|
|
|
44,372
|
|
|
|
4,753
|
|
|
|
|
|
|
|
49,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,824
|
|
|
|
8,429
|
|
|
|
|
|
|
|
102,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
24,241
|
|
|
|
2,745
|
|
|
|
|
|
|
|
26,986
|
|
Corporate general and administrative expenses
|
|
|
(7,326
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,326
|
)
|
Restructuring and other charges
|
|
|
(305
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(305
|
)
|
Other operating income, net
|
|
|
10
|
|
|
|
126
|
|
|
|
55
|
|
|
|
|
|
|
|
191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss)
|
|
|
(7,621
|
)
|
|
|
24,367
|
|
|
|
2,800
|
|
|
|
|
|
|
|
19,546
|
|
Interest expense
|
|
|
(1,869
|
)
|
|
|
(3,669
|
)
|
|
|
(335
|
)
|
|
|
|
|
|
|
(5,873
|
)
|
Investment and other income, net
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
Equity in subsidiaries
|
|
|
15,417
|
|
|
|
607
|
|
|
|
|
|
|
|
(16,024
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before income taxes
|
|
|
5,984
|
|
|
|
21,305
|
|
|
|
2,465
|
|
|
|
(16,024
|
)
|
|
|
13,730
|
|
Income tax expense (benefit)
|
|
|
(3,654
|
)
|
|
|
6,411
|
|
|
|
1,077
|
|
|
|
|
|
|
|
3,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
|
9,638
|
|
|
|
14,894
|
|
|
|
1,388
|
|
|
|
(16,024
|
)
|
|
|
9,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations before income taxes
|
|
|
|
|
|
|
(380
|
)
|
|
|
|
|
|
|
|
|
|
|
(380
|
)
|
Income tax benefit
|
|
|
|
|
|
|
(122
|
)
|
|
|
|
|
|
|
|
|
|
|
(122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
(258
|
)
|
|
|
|
|
|
|
|
|
|
|
(258
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
9,638
|
|
|
$
|
14,636
|
|
|
$
|
1,388
|
|
|
$
|
(16,024
|
)
|
|
$
|
9,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(11)
|
Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
|
Condensed Consolidating Statements of Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31, 2013
|
|
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
$
|
|
|
|
$
|
205,480
|
|
|
$
|
16,524
|
|
|
$
|
|
|
|
$
|
222,004
|
|
Cemetery
|
|
|
|
|
|
|
156,066
|
|
|
|
18,526
|
|
|
|
|
|
|
|
174,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
361,546
|
|
|
|
35,050
|
|
|
|
|
|
|
|
396,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
|
|
|
|
|
157,099
|
|
|
|
11,200
|
|
|
|
|
|
|
|
168,299
|
|
Cemetery
|
|
|
|
|
|
|
127,330
|
|
|
|
13,489
|
|
|
|
|
|
|
|
140,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
284,429
|
|
|
|
24,689
|
|
|
|
|
|
|
|
309,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
77,117
|
|
|
|
10,361
|
|
|
|
|
|
|
|
87,478
|
|
Corporate general and administrative expenses
|
|
|
(20,294
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,294
|
)
|
Merger-related costs
|
|
|
(3,715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,715
|
)
|
Restructuring and other charges
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(81
|
)
|
Net gain on dispositions
|
|
|
|
|
|
|
742
|
|
|
|
|
|
|
|
|
|
|
|
742
|
|
Other operating income, net
|
|
|
80
|
|
|
|
1,445
|
|
|
|
163
|
|
|
|
|
|
|
|
1,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss)
|
|
|
(24,010
|
)
|
|
|
79,304
|
|
|
|
10,524
|
|
|
|
|
|
|
|
65,818
|
|
Interest expense
|
|
|
(8,708
|
)
|
|
|
(8,577
|
)
|
|
|
(509
|
)
|
|
|
|
|
|
|
(17,794
|
)
|
Investment and other income, net
|
|
|
109
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
160
|
|
Equity in subsidiaries
|
|
|
55,513
|
|
|
|
802
|
|
|
|
|
|
|
|
(56,315
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before income taxes
|
|
|
22,904
|
|
|
|
71,529
|
|
|
|
10,066
|
|
|
|
(56,315
|
)
|
|
|
48,184
|
|
Income tax expense (benefit)
|
|
|
(12,725
|
)
|
|
|
24,779
|
|
|
|
444
|
|
|
|
|
|
|
|
12,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
|
35,629
|
|
|
|
46,750
|
|
|
|
9,622
|
|
|
|
(56,315
|
)
|
|
|
35,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations before income taxes
|
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
|
|
|
(88
|
)
|
Income tax benefit
|
|
|
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
35,629
|
|
|
$
|
46,693
|
|
|
$
|
9,622
|
|
|
$
|
(56,315
|
)
|
|
$
|
35,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(11)
|
Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
|
Condensed Consolidating Statements of Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31, 2012
|
|
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
$
|
|
|
|
$
|
198,789
|
|
|
$
|
14,857
|
|
|
$
|
|
|
|
$
|
213,646
|
|
Cemetery
|
|
|
|
|
|
|
155,460
|
|
|
|
17,555
|
|
|
|
|
|
|
|
173,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
354,249
|
|
|
|
32,412
|
|
|
|
|
|
|
|
386,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
|
|
|
|
|
150,421
|
|
|
|
10,264
|
|
|
|
|
|
|
|
160,685
|
|
Cemetery
|
|
|
|
|
|
|
131,144
|
|
|
|
13,312
|
|
|
|
|
|
|
|
144,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281,565
|
|
|
|
23,576
|
|
|
|
|
|
|
|
305,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
72,684
|
|
|
|
8,836
|
|
|
|
|
|
|
|
81,520
|
|
Corporate general and administrative expenses
|
|
|
(20,264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,264
|
)
|
Restructuring and other charges
|
|
|
(1,616
|
)
|
|
|
(1,071
|
)
|
|
|
(165
|
)
|
|
|
|
|
|
|
(2,852
|
)
|
Net gain on dispositions
|
|
|
|
|
|
|
332
|
|
|
|
|
|
|
|
|
|
|
|
332
|
|
Other operating income, net
|
|
|
67
|
|
|
|
529
|
|
|
|
177
|
|
|
|
|
|
|
|
773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss)
|
|
|
(21,813
|
)
|
|
|
72,474
|
|
|
|
8,848
|
|
|
|
|
|
|
|
59,509
|
|
Interest expense
|
|
|
(5,212
|
)
|
|
|
(11,296
|
)
|
|
|
(1,036
|
)
|
|
|
|
|
|
|
(17,544
|
)
|
Investment and other income, net
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148
|
|
Equity in subsidiaries
|
|
|
42,487
|
|
|
|
1,161
|
|
|
|
|
|
|
|
(43,648
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before income taxes
|
|
|
15,610
|
|
|
|
62,339
|
|
|
|
7,812
|
|
|
|
(43,648
|
)
|
|
|
42,113
|
|
Income tax expense (benefit)
|
|
|
(11,309
|
)
|
|
|
22,224
|
|
|
|
2,858
|
|
|
|
|
|
|
|
13,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
|
26,919
|
|
|
|
40,115
|
|
|
|
4,954
|
|
|
|
(43,648
|
)
|
|
|
28,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations before income taxes
|
|
|
|
|
|
|
(2,065
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,065
|
)
|
Income tax benefit
|
|
|
|
|
|
|
(644
|
)
|
|
|
|
|
|
|
|
|
|
|
(644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
(1,421
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
26,919
|
|
|
$
|
38,694
|
|
|
$
|
4,954
|
|
|
$
|
(43,648
|
)
|
|
$
|
26,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(11)
|
Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
|
Condensed Consolidating Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2013
|
|
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net earnings
|
|
$
|
8,277
|
|
|
$
|
10,260
|
|
|
$
|
5,164
|
|
|
$
|
(15,424
|
)
|
|
$
|
8,277
|
|
Unrealized depreciation of investments, net of tax
|
|
|
(66
|
)
|
|
|
|
|
|
|
(23
|
)
|
|
|
23
|
|
|
|
(66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
8,211
|
|
|
$
|
10,260
|
|
|
$
|
5,141
|
|
|
$
|
(15,401
|
)
|
|
$
|
8,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(11)
|
Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
|
Condensed Consolidating Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2012
|
|
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net earnings
|
|
$
|
9,638
|
|
|
$
|
14,636
|
|
|
$
|
1,388
|
|
|
$
|
(16,024
|
)
|
|
$
|
9,638
|
|
Unrealized appreciation of investments, net of tax
|
|
|
15
|
|
|
|
|
|
|
|
15
|
|
|
|
(15
|
)
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
9,653
|
|
|
$
|
14,636
|
|
|
$
|
1,403
|
|
|
$
|
(16,039
|
)
|
|
$
|
9,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(11)
|
Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
|
Condensed Consolidating Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31, 2013
|
|
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net earnings
|
|
$
|
35,629
|
|
|
$
|
46,693
|
|
|
$
|
9,622
|
|
|
$
|
(56,315
|
)
|
|
$
|
35,629
|
|
Unrealized depreciation of investments, net of tax
|
|
|
(70
|
)
|
|
|
|
|
|
|
(15
|
)
|
|
|
15
|
|
|
|
(70
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
35,559
|
|
|
$
|
46,693
|
|
|
$
|
9,607
|
|
|
$
|
(56,300
|
)
|
|
$
|
35,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(11)
|
Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
|
Condensed Consolidating Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31, 2012
|
|
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net earnings
|
|
$
|
26,919
|
|
|
$
|
38,694
|
|
|
$
|
4,954
|
|
|
$
|
(43,648
|
)
|
|
$
|
26,919
|
|
Unrealized appreciation of investments, net of tax
|
|
|
23
|
|
|
|
|
|
|
|
23
|
|
|
|
(23
|
)
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
26,942
|
|
|
$
|
38,694
|
|
|
$
|
4,977
|
|
|
$
|
(43,671
|
)
|
|
$
|
26,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(11)
|
Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
|
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2013
|
|
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
94,997
|
|
|
$
|
2,580
|
|
|
$
|
1,510
|
|
|
$
|
|
|
|
$
|
99,087
|
|
Restricted cash and cash equivalents
|
|
|
6,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
Marketable securities
|
|
|
17,856
|
|
|
|
|
|
|
|
817
|
|
|
|
|
|
|
|
18,673
|
|
Receivables, net of allowances
|
|
|
2,353
|
|
|
|
45,550
|
|
|
|
6,853
|
|
|
|
|
|
|
|
54,756
|
|
Inventories
|
|
|
214
|
|
|
|
33,237
|
|
|
|
2,657
|
|
|
|
|
|
|
|
36,108
|
|
Prepaid expenses
|
|
|
1,531
|
|
|
|
3,043
|
|
|
|
1,614
|
|
|
|
|
|
|
|
6,188
|
|
Deferred income taxes, net
|
|
|
5,122
|
|
|
|
11,945
|
|
|
|
667
|
|
|
|
|
|
|
|
17,734
|
|
Intercompany receivables
|
|
|
1,784
|
|
|
|
|
|
|
|
|
|
|
|
(1,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
130,107
|
|
|
|
96,355
|
|
|
|
14,118
|
|
|
|
(1,784
|
)
|
|
|
238,796
|
|
Receivables due beyond one year, net of allowances
|
|
|
|
|
|
|
60,324
|
|
|
|
11,040
|
|
|
|
|
|
|
|
71,364
|
|
Preneed funeral receivables and trust investments
|
|
|
|
|
|
|
447,504
|
|
|
|
10,016
|
|
|
|
|
|
|
|
457,520
|
|
Preneed cemetery receivables and trust investments
|
|
|
|
|
|
|
226,389
|
|
|
|
7,176
|
|
|
|
|
|
|
|
233,565
|
|
Goodwill
|
|
|
|
|
|
|
229,749
|
|
|
|
19,835
|
|
|
|
|
|
|
|
249,584
|
|
Cemetery property, at cost
|
|
|
|
|
|
|
367,699
|
|
|
|
35,031
|
|
|
|
|
|
|
|
402,730
|
|
Property and equipment, at cost
|
|
|
59,863
|
|
|
|
513,654
|
|
|
|
44,636
|
|
|
|
|
|
|
|
618,153
|
|
Less accumulated depreciation
|
|
|
48,800
|
|
|
|
255,734
|
|
|
|
21,482
|
|
|
|
|
|
|
|
326,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
11,063
|
|
|
|
257,920
|
|
|
|
23,154
|
|
|
|
|
|
|
|
292,137
|
|
Deferred income taxes, net
|
|
|
7,841
|
|
|
|
50,771
|
|
|
|
10,712
|
|
|
|
|
|
|
|
69,324
|
|
Cemetery perpetual care trust investments
|
|
|
|
|
|
|
261,368
|
|
|
|
14,523
|
|
|
|
|
|
|
|
275,891
|
|
Other assets
|
|
|
7,192
|
|
|
|
3,813
|
|
|
|
1,024
|
|
|
|
|
|
|
|
12,029
|
|
Intercompany receivables
|
|
|
557,644
|
|
|
|
|
|
|
|
|
|
|
|
(557,644
|
)
|
|
|
|
|
Equity in subsidiaries
|
|
|
105,291
|
|
|
|
11,872
|
|
|
|
|
|
|
|
(117,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
819,138
|
|
|
$
|
2,013,764
|
|
|
$
|
146,629
|
|
|
$
|
(676,591
|
)
|
|
$
|
2,302,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
83,940
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
83,940
|
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
16,527
|
|
|
|
71,849
|
|
|
|
4,003
|
|
|
|
|
|
|
|
92,379
|
|
Intercompany payables
|
|
|
|
|
|
|
|
|
|
|
1,784
|
|
|
|
(1,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
100,467
|
|
|
|
71,849
|
|
|
|
5,787
|
|
|
|
(1,784
|
)
|
|
|
176,319
|
|
Long-term debt, less current maturities
|
|
|
241,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
241,192
|
|
Deferred income taxes, net
|
|
|
|
|
|
|
4,191
|
|
|
|
577
|
|
|
|
|
|
|
|
4,768
|
|
Intercompany payables
|
|
|
|
|
|
|
550,358
|
|
|
|
7,286
|
|
|
|
(557,644
|
)
|
|
|
|
|
Deferred preneed funeral revenue
|
|
|
|
|
|
|
190,973
|
|
|
|
47,948
|
|
|
|
|
|
|
|
238,921
|
|
Deferred preneed cemetery revenue
|
|
|
|
|
|
|
239,238
|
|
|
|
29,537
|
|
|
|
|
|
|
|
268,775
|
|
Deferred preneed funeral and cemetery receipts held in trust
|
|
|
|
|
|
|
612,283
|
|
|
|
8,556
|
|
|
|
|
|
|
|
620,839
|
|
Perpetual care trusts corpus
|
|
|
|
|
|
|
258,712
|
|
|
|
14,506
|
|
|
|
|
|
|
|
273,218
|
|
Other long-term liabilities
|
|
|
19,906
|
|
|
|
1,429
|
|
|
|
|
|
|
|
|
|
|
|
21,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
361,565
|
|
|
|
1,929,033
|
|
|
|
114,197
|
|
|
|
(559,428
|
)
|
|
|
1,845,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
85,713
|
|
|
|
102
|
|
|
|
376
|
|
|
|
(478
|
)
|
|
|
85,713
|
|
Other
|
|
|
371,888
|
|
|
|
84,629
|
|
|
|
32,062
|
|
|
|
(116,691
|
)
|
|
|
371,888
|
|
Accumulated other comprehensive loss
|
|
|
(28
|
)
|
|
|
|
|
|
|
(6
|
)
|
|
|
6
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
457,573
|
|
|
|
84,731
|
|
|
|
32,432
|
|
|
|
(117,163
|
)
|
|
|
457,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
819,138
|
|
|
$
|
2,013,764
|
|
|
$
|
146,629
|
|
|
$
|
(676,591
|
)
|
|
$
|
2,302,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(11)
|
Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
|
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2012
|
|
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
65,722
|
|
|
$
|
1,033
|
|
|
$
|
1,432
|
|
|
$
|
|
|
|
$
|
68,187
|
|
Restricted cash and cash equivalents
|
|
|
6,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
Marketable securities
|
|
|
10,046
|
|
|
|
|
|
|
|
468
|
|
|
|
|
|
|
|
10,514
|
|
Receivables, net of allowances
|
|
|
2,682
|
|
|
|
43,453
|
|
|
|
6,306
|
|
|
|
|
|
|
|
52,441
|
|
Inventories
|
|
|
193
|
|
|
|
33,929
|
|
|
|
2,373
|
|
|
|
|
|
|
|
36,495
|
|
Prepaid expenses
|
|
|
1,373
|
|
|
|
2,128
|
|
|
|
1,422
|
|
|
|
|
|
|
|
4,923
|
|
Deferred income taxes, net
|
|
|
16,701
|
|
|
|
13,154
|
|
|
|
816
|
|
|
|
|
|
|
|
30,671
|
|
Intercompany receivables
|
|
|
1,247
|
|
|
|
|
|
|
|
|
|
|
|
(1,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
104,214
|
|
|
|
93,697
|
|
|
|
12,817
|
|
|
|
(1,247
|
)
|
|
|
209,481
|
|
Receivables due beyond one year, net of allowances
|
|
|
|
|
|
|
61,025
|
|
|
|
11,595
|
|
|
|
|
|
|
|
72,620
|
|
Preneed funeral receivables and trust investments
|
|
|
|
|
|
|
422,753
|
|
|
|
9,669
|
|
|
|
|
|
|
|
432,422
|
|
Preneed cemetery receivables and trust investments
|
|
|
|
|
|
|
218,018
|
|
|
|
7,030
|
|
|
|
|
|
|
|
225,048
|
|
Goodwill
|
|
|
|
|
|
|
229,749
|
|
|
|
19,835
|
|
|
|
|
|
|
|
249,584
|
|
Cemetery property, at cost
|
|
|
|
|
|
|
365,901
|
|
|
|
35,769
|
|
|
|
|
|
|
|
401,670
|
|
Property and equipment, at cost
|
|
|
63,328
|
|
|
|
506,957
|
|
|
|
44,623
|
|
|
|
|
|
|
|
614,908
|
|
Less accumulated depreciation
|
|
|
50,732
|
|
|
|
252,124
|
|
|
|
20,792
|
|
|
|
|
|
|
|
323,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
12,596
|
|
|
|
254,833
|
|
|
|
23,831
|
|
|
|
|
|
|
|
291,260
|
|
Deferred income taxes, net
|
|
|
2,967
|
|
|
|
52,379
|
|
|
|
6,779
|
|
|
|
|
|
|
|
62,125
|
|
Cemetery perpetual care trust investments
|
|
|
|
|
|
|
249,608
|
|
|
|
14,055
|
|
|
|
|
|
|
|
263,663
|
|
Other assets
|
|
|
8,281
|
|
|
|
4,279
|
|
|
|
1,252
|
|
|
|
|
|
|
|
13,812
|
|
Intercompany receivables
|
|
|
601,223
|
|
|
|
|
|
|
|
|
|
|
|
(601,223
|
)
|
|
|
|
|
Equity in subsidiaries
|
|
|
55,287
|
|
|
|
11,070
|
|
|
|
|
|
|
|
(66,357
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
784,568
|
|
|
$
|
1,963,312
|
|
|
$
|
142,632
|
|
|
$
|
(668,827
|
)
|
|
$
|
2,221,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
6
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6
|
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
19,263
|
|
|
|
73,119
|
|
|
|
4,801
|
|
|
|
|
|
|
|
97,183
|
|
Intercompany payables
|
|
|
|
|
|
|
|
|
|
|
1,247
|
|
|
|
(1,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
19,269
|
|
|
|
73,119
|
|
|
|
6,048
|
|
|
|
(1,247
|
)
|
|
|
97,189
|
|
Long-term debt, less current maturities
|
|
|
321,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
321,887
|
|
Deferred income taxes, net
|
|
|
|
|
|
|
4,350
|
|
|
|
581
|
|
|
|
|
|
|
|
4,931
|
|
Intercompany payables
|
|
|
|
|
|
|
591,381
|
|
|
|
9,842
|
|
|
|
(601,223
|
)
|
|
|
|
|
Deferred preneed funeral revenue
|
|
|
|
|
|
|
193,860
|
|
|
|
46,555
|
|
|
|
|
|
|
|
240,415
|
|
Deferred preneed cemetery revenue
|
|
|
|
|
|
|
236,249
|
|
|
|
29,098
|
|
|
|
|
|
|
|
265,347
|
|
Deferred preneed funeral and cemetery receipts held in trust
|
|
|
|
|
|
|
577,013
|
|
|
|
8,151
|
|
|
|
|
|
|
|
585,164
|
|
Perpetual care trusts corpus
|
|
|
|
|
|
|
247,845
|
|
|
|
14,038
|
|
|
|
|
|
|
|
261,883
|
|
Other long-term liabilities
|
|
|
19,091
|
|
|
|
1,457
|
|
|
|
|
|
|
|
|
|
|
|
20,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
360,247
|
|
|
|
1,925,274
|
|
|
|
114,313
|
|
|
|
(602,470
|
)
|
|
|
1,797,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
84,915
|
|
|
|
102
|
|
|
|
376
|
|
|
|
(478
|
)
|
|
|
84,915
|
|
Other
|
|
|
339,364
|
|
|
|
37,936
|
|
|
|
27,934
|
|
|
|
(65,870
|
)
|
|
|
339,364
|
|
Accumulated other comprehensive income
|
|
|
42
|
|
|
|
|
|
|
|
9
|
|
|
|
(9
|
)
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
424,321
|
|
|
|
38,038
|
|
|
|
28,319
|
|
|
|
(66,357
|
)
|
|
|
424,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
784,568
|
|
|
$
|
1,963,312
|
|
|
$
|
142,632
|
|
|
$
|
(668,827
|
)
|
|
$
|
2,221,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(11)
|
Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
|
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31, 2013
|
|
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net cash provided by operating activities
|
|
$
|
656
|
|
|
$
|
59,264
|
|
|
$
|
8,463
|
|
|
$
|
|
|
|
$
|
68,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales/maturities of marketable securities
|
|
|
2,014
|
|
|
|
|
|
|
|
250
|
|
|
|
|
|
|
|
2,264
|
|
Purchases of marketable securities
|
|
|
(9,978
|
)
|
|
|
|
|
|
|
(388
|
)
|
|
|
|
|
|
|
(10,366
|
)
|
Proceeds from sale of assets
|
|
|
|
|
|
|
799
|
|
|
|
|
|
|
|
|
|
|
|
799
|
|
Additions to property and equipment
|
|
|
(2,582
|
)
|
|
|
(17,596
|
)
|
|
|
(735
|
)
|
|
|
|
|
|
|
(20,913
|
)
|
Other
|
|
|
|
|
|
|
103
|
|
|
|
1
|
|
|
|
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(10,546
|
)
|
|
|
(16,694
|
)
|
|
|
(872
|
)
|
|
|
|
|
|
|
(28,112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
Intercompany receivables (payables)
|
|
|
48,536
|
|
|
|
(41,023
|
)
|
|
|
(7,513
|
)
|
|
|
|
|
|
|
|
|
Issuance of common stock
|
|
|
3,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,028
|
|
Purchase and retirement of common stock
|
|
|
(1,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,833
|
)
|
Dividends
|
|
|
(10,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,995
|
)
|
Excess tax benefits from share-based payment arrangements
|
|
|
433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
39,165
|
|
|
|
(41,023
|
)
|
|
|
(7,513
|
)
|
|
|
|
|
|
|
(9,371
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
29,275
|
|
|
|
1,547
|
|
|
|
78
|
|
|
|
|
|
|
|
30,900
|
|
Cash and cash equivalents, beginning of period
|
|
|
65,722
|
|
|
|
1,033
|
|
|
|
1,432
|
|
|
|
|
|
|
|
68,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
94,997
|
|
|
$
|
2,580
|
|
|
$
|
1,510
|
|
|
$
|
|
|
|
$
|
99,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(11)
|
Condensed Consolidating Financial Statements of Guarantors of Senior Notes and Senior Convertible Notes(Continued)
|
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31, 2012
|
|
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net cash provided by operating activities
|
|
$
|
7,049
|
|
|
$
|
45,188
|
|
|
$
|
6,502
|
|
|
$
|
|
|
|
$
|
58,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales/maturities of marketable securities and release of restricted funds
|
|
|
1,756
|
|
|
|
|
|
|
|
250
|
|
|
|
|
|
|
|
2,006
|
|
Deposits of restricted funds and purchases of marketable securities
|
|
|
(1,756
|
)
|
|
|
|
|
|
|
(280
|
)
|
|
|
|
|
|
|
(2,036
|
)
|
Proceeds from sale of assets
|
|
|
|
|
|
|
533
|
|
|
|
|
|
|
|
|
|
|
|
533
|
|
Purchase of subsidiaries and other investments, net of cash acquired
|
|
|
(100
|
)
|
|
|
(3,013
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,113
|
)
|
Additions to property and equipment
|
|
|
(2,669
|
)
|
|
|
(12,319
|
)
|
|
|
(1,227
|
)
|
|
|
|
|
|
|
(16,215
|
)
|
Other
|
|
|
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(2,769
|
)
|
|
|
(14,712
|
)
|
|
|
(1,257
|
)
|
|
|
|
|
|
|
(18,738
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
Intercompany receivables (payables)
|
|
|
36,305
|
|
|
|
(31,249
|
)
|
|
|
(5,056
|
)
|
|
|
|
|
|
|
|
|
Debt refinancing costs
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34
|
)
|
Issuance of common stock
|
|
|
1,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,433
|
|
Purchase and retirement of common stock
|
|
|
(19,075
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,075
|
)
|
Dividends
|
|
|
(9,955
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,955
|
)
|
Excess tax benefits from share based payment arrangements
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
8,693
|
|
|
|
(31,249
|
)
|
|
|
(5,056
|
)
|
|
|
|
|
|
|
(27,612
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
12,973
|
|
|
|
(773
|
)
|
|
|
189
|
|
|
|
|
|
|
|
12,389
|
|
Cash and cash equivalents, beginning of period
|
|
|
62,388
|
|
|
|
1,937
|
|
|
|
1,363
|
|
|
|
|
|
|
|
65,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
75,361
|
|
|
$
|
1,164
|
|
|
$
|
1,552
|
|
|
$
|
|
|
|
$
|
78,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(12)
|
Definitive Merger Agreement
|
On May 29, 2013, the Company announced that it has entered into a definitive merger agreement with Service
Corporation International. Pursuant to the agreement, holders of the Companys Class A and Class B common stock will receive $13.25 in cash for each share of common stock they hold. 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 complete the merger. On July 17, 2013, the Company announced that it and SCI had received second requests from the FTC, which extend 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 Company is preparing responses to the second request, and the proposed transaction is expected
to close in late calendar year 2013 or early 2014. The Companys shareholders voted on August 13, 2013 to approve this agreement. During the three and nine months ended July 31, 2013, the Company incurred $3,126 and $3,715,
respectively, in merger-related costs which consist primarily of financial advisory and legal fees.
During the nine months ended July 31, 2013 and 2012, the Company recorded net gains on dispositions of $742 and
$332, respectively, due to the sale of funeral homes.
In April 2012, the Company designated a business as held for sale,
recorded impairment charges related to the business and classified its operations as discontinued operations for all periods presented. The loss from discontinued operations before income taxes for the three months ended July 31, 2013 and 2012
was $0 and $380, respectively, and for the nine months ended July 31, 2013 and 2012 was $88 and $2,065, respectively.
(14)
|
Accumulated Other Comprehensive Income
|
The components of accumulated other comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
Balance as of October 31, 2012
|
|
$
|
42
|
|
Unrealized depreciation of investments, net of deferred tax benefit of $40
|
|
|
(70
|
)
|
Reduction in net unrealized losses associated with available-for-sale securities of the trusts
|
|
|
34,930
|
|
Reclassification of the net unrealized losses activity attributable to the deferred preneed funeral and cemetery receipts held in
trust and perpetual care trusts corpus
|
|
|
(34,930
|
)
|
|
|
|
|
|
Balance as of July 31, 2013
|
|
$
|
(28
|
)
|
|
|
|
|
|
(15)
|
Restructuring and Other Charges
|
In April 2012, the Company announced an organizational restructuring as well as a separate workforce reduction. The
organizational restructuring involved the integration of management of operations and sales and a complete restructuring of the Companys sales force. The Company realigned its geographic regions and appointed one regional vice president who is
responsible for funeral and cemetery operations and sales in each region. Formerly, the Company had different managers responsible for operations and sales. In addition, the Company engaged in an across-the-board redesign of its sales organization.
The Company eliminated layers of sales management, redefined sales roles, and in the first quarter of fiscal year 2013, completed the restructuring with the implementation of a new sales compensation program. Separately in April 2012, the Company
reduced its workforce by approximately 60 employees, primarily in corporate support services. Total expenses related to the organizational restructuring and workforce reduction consisted primarily of separation pay and termination benefits and other
non-cash asset impairments associated with the sales restructuring. The Company recorded $3,291 in charges related to the restructuring and workforce reduction during the year ended October 31, 2012 and $81 during the nine months ended
July 31, 2013. These charges are in the restructuring and other charges line in the
47
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(15)
|
Restructuring and Other Charges(Continued)
|
condensed consolidated statements of earnings. As of July 31, 2013, the Company does not expect to incur any material additional costs related to the restructuring. The following table
summarizes the activity related to the restructuring liability for the nine months ended July 31, 2013:
|
|
|
|
|
Restructuring liability as of October 31, 2012
|
|
$
|
206
|
|
Additional restructuring costs incurred
|
|
|
81
|
|
Cash payments
|
|
|
(287
|
)
|
|
|
|
|
|
Restructuring liability as of July 31, 2013
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2013
|
|
|
October 31, 2012
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
3.125% senior convertible notes due 2014, net of unamortized discount of $2,482 and $4,757 as of July 31, 2013 and
October 31, 2012, respectively
|
|
$
|
83,934
|
|
|
$
|
81,659
|
|
3.375% senior convertible notes due 2016, net of unamortized discount of $3,996 and $4,965 as of July 31, 2013 and
October 31, 2012, respectively
|
|
|
41,123
|
|
|
|
40,154
|
|
Senior secured revolving credit facility
|
|
|
|
|
|
|
|
|
6.50% senior notes due 2019
|
|
|
200,000
|
|
|
|
200,000
|
|
Other, principally seller financing of acquired operations or assumption upon acquisition, weighted average interest rate of 8.0%
as of July 31, 2013 and October 31, 2012, partially secured by assets of subsidiaries, with maturities through 2022
|
|
|
75
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
325,132
|
|
|
|
321,893
|
|
Less current maturities
|
|
|
83,940
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
241,192
|
|
|
$
|
321,887
|
|
|
|
|
|
|
|
|
|
|
Fair Value
As of July 31, 2013, the carrying values of the Companys 3.125 percent senior convertible notes due 2014 (the 2014 Notes) and 3.375 percent senior convertible notes due 2016 (the
2016 Notes), including accrued interest, were $84,054 and $41,191, respectively, compared to fair values of $106,736 and $58,553, respectively. The aggregate principal amounts outstanding of the 2014 Notes and 2016 Notes as of
July 31, 2013 were $86,416 and $45,119, respectively. As of July 31, 2013, the carrying value of the Companys 6.50 percent senior notes due 2019, including accrued interest, was $203,792 compared to a fair value of $217,069. Fair
values were determined using quoted market prices for those securities and are classified within Level 1 of the three-level valuation hierarchy.
Senior Notes
On June 12, 2013, after receiving the required consent of the
holders of the 6.50 percent senior notes due 2019 (the senior notes), the Company and trustee entered into a supplemental indenture amending the indenture for the senior notes to waive the requirement for a change of control offer upon
completion of the merger and providing that the Companys obligations to deliver quarterly and annual financial information and other reports to the trustee under the indenture will be satisfied by the delivery of Service Corporation
Internationals (SCI) filings with the Securities and Exchange Commission for so long as SCI guarantees the senior notes. SCI has agreed to guarantee the senior notes promptly following completion of the merger. In consideration for
the consents, the Company agreed to pay to the holders of the senior notes that timely consented an aggregate cash payment equal to $2.50 per $1,000 principal amount of senior notes, of which half was paid promptly after the consent solicitation
expiration (for which the Company has been reimbursed by SCI) and the other half will be paid, if at all, promptly after completion of the merger.
48
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(16)
|
Long-term Debt(Continued)
|
Senior Convertible Notes
As of July 31, 2013, the $86,416 principal amount outstanding of the 2014 Notes, which are due in July 2014, was reclassified to current maturities of long-term debt.
As a result of the proposed merger with Service Corporation International, holders of the Companys 2014 Notes and 2016 Notes will
have the right to convert their notes, subject to the terms and conditions of the indentures governing these notes. As a result of the recent increase in the Companys quarterly dividend rate on its Class A common stock to $0.045 per
share, the conversion rate for the senior convertible notes was adjusted to 92.4564 effective April 11, 2013.
With
respect to the senior convertible notes, a Fundamental Change as defined in the indentures for such notes, will occur at the effective time of the merger. Holders of the senior convertible notes will have the option to require the
Company to purchase such notes, in whole or in part, on a date (the Fundamental Change Purchase Date) to be specified by the Company that is not less than 30 days and not more than 45 days after the effective date of the merger, for 100
percent of the principal amount plus accrued and unpaid interest to but excluding the Fundamental Change Purchase Date.
As
provided in the indentures for such notes, the Company will provide notice to the holders of the notes and the trustee at least 15 days prior to the date that is anticipated to be the effective date of the merger. Holders of the notes may surrender
them for conversion at any time beginning 15 days prior to the date that is anticipated to be the effective date of the merger, until the trading day prior to the Fundamental Change Purchase Date. If notice of conversion is received by the
conversion agent during such time but prior to the effective date of the merger, the conversion rate will be 92.4564. If notice of conversion is received by the conversion agent from and including the effective date of the merger and prior to the
close of business on the business day before the Fundamental Change Purchase Date, then the conversion rate for the notes will be increased to include a make whole premium, based on the date on which the closing occurs and the price paid
per share in the merger.
In connection with the issuance of the senior convertible notes in 2007, the Company also purchased
call options and sold warrants. The settlement of the call options is expected to offset any amounts more than $1,000 per note that the Company pays in connection with conversion of such notes. The settlement of the warrants is determined pursuant
to the provisions in the confirmations for such warrants.
In June 2013, the government of Puerto Rico signed into law corporate tax rate changes that increased the top tax rate
from 30 percent to 39 percent. The Company will incur additional tax expense from this increased tax rate when paying taxes in the future. As a result of this change, the Company was required to revalue its previously
49
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(17)
|
Income Taxes(Continued)
|
recorded Puerto Rican-related deferred tax asset using the new top tax rate of 39 percent. During the third quarter of fiscal year 2013, the Company recorded a non-cash benefit of $2,970 ($4,570
benefit less a federal tax charge of $1,600). The Puerto Rican deferred tax asset increased from approximately $16,960 to $21,530 at the newly enacted rate of 39 percent. In January 2011, the government of Puerto Rico had decreased the top tax rate
for businesses from 39 percent to 30 percent.
Income tax expense for the nine months ended July 31, 2013 was positively
impacted by a $2,700 overall reduction in the capital loss tax valuation allowance associated with the positive performance of the Companys trust portfolio during the nine months ended July 31, 2013. Realized capital losses in the trusts
for which the Company is the grantor, in which insufficient offsetting capital gains are expected, may require the Company to record a valuation allowance against the related deferred tax asset (capital loss carryforward). Reductions in the
valuation allowance result when the Company has realized or unrealized gains in the grantor trust or from other assets that are expected to be sold at a capital gain.
Income tax expense for the three and nine months ended July 31, 2012 was impacted by $1,125 and $2,075, respectively, overall reductions in the capital loss tax valuation allowance primarily due to
the reduction of a portion of the valuation allowance related to capital losses associated with the positive performance of the Companys trust portfolio during those periods.
As of August 31, 2013, the fair market value of the Companys preneed funeral and cemetery merchandise and
services trusts and cemetery perpetual care trusts decreased 2.4 percent, or approximately $21,246, from July 31, 2013.
50