NEW ORLEANS, March 11, 2008 (PRIME NEWSWIRE) -- Stewart Enterprises, Inc. (Nasdaq:STEI) reported today its results for the fiscal quarter ended January 31, 2008.
The Company reported net earnings from continuing operations for the quarter ended January 31, 2008 of $8.9 million, or $.09 per diluted share, compared to net earnings from continuing operations of $11.9 million, or $.11 per diluted share, for the quarter ended January 31, 2007.
Thomas J. Crawford, President and Chief Executive Officer, stated, "While the overall first quarter performance did not meet our financial expectations, we were encouraged by the performance of our funeral operations with funeral revenue increasing $1.3 million. We maintained our average revenue per funeral while growing same-store calls 2.2 percent in the face of industry data that indicates declining deaths in our markets. We have what we believe to be a sustainable long-term strategy to maintain and grow market share by focusing on the strong brand names in our local markets. Currently, we are implementing enhanced funeral packages which should help us increase our average revenue per funeral."
Mr. Crawford continued, "Operating income was negatively impacted by a decline in cemetery revenue and above average increases in merchandise costs. While overall cemetery property sales declined compared to the same period in 2007, we generated positive growth during the first two months of the quarter; a slowdown in January accounted for the entire reduction for the quarter. Though cemetery revenue is down for the quarter, it has been and still remains one of the core strengths of our Company. We own and operate several of the premier cemeteries in the country and the strong fundamentals of these businesses remain intact. We have experienced significant cost increases from certain suppliers driven by rising increases in raw material costs and are aggressively pursuing alternative product and sourcing options to improve our margin performance."
Mr. Crawford concluded, "We are optimistic about our 'Best in Class' initiative which is designed to improve operational performance across rooftops, by adherence to Stewart cultural values, focus on key measures and use of management tools to implement performance solutions and best practices. We believe this initiative will give us the building blocks to construct long-term successful growth opportunities. Additionally, we made planned investments in the first phase of an overall continuous improvement initiative to consolidate databases and improve back office processes, to produce greater efficiencies and reduce costs. We are excited with the significant opportunities already identified."
First Quarter Results From Continuing Operations
FUNERAL
* Funeral revenue increased $1.3 million, or 1.8 percent, to
$73.4 million.
* The Company's same-store funeral operations achieved a 2.2
percent, or 331 event increase in funeral services performed,
to 15,400 events.
* The Company's same-store funeral operations achieved a 0.8
percent increase in average revenue per traditional funeral
service and a 0.5 percent increase in average revenue per
cremation service. Notwithstanding the increases in average
revenue per traditional funeral and cremation service,
same-store average revenue per funeral call remained the
same quarter-over-quarter due to a proportionally greater
increase in lower-priced cremation services when compared
with the total number of higher-priced traditional services.
* The cremation rate for the Company's same-store operations
was 40.1 percent for the first quarter of 2008 compared to
38.9 percent for the first quarter of 2007.
* Net preneed funeral sales decreased 0.5 percent during the
first quarter of 2008 compared to the first quarter of 2007.
* Funeral gross profit decreased $0.7 million to $18.0 million
for the first quarter of 2008 compared to $18.7 million for
the same period of 2007. Revenue increased $1.3 million;
however, expenses increased $2.0 million. The increase in
funeral expenses is primarily due to a $0.5 million increase
in depreciation expense partially due to the opening of a new
funeral home and the re-opening of two Louisiana facilities,
a $0.5 million, or 2.6 percent, increase in salaries and
wages partially due to standard rate adjustments in the
latter part of fiscal year 2007, a $0.4 million, or 5.3
percent, increase in merchandise costs primarily due to
increased volume and price increases from a few of the
Company's suppliers and a $0.3 million increase in health
insurance costs primarily due to an increase in high
dollar claims.
CEMETERY
* Cemetery revenue decreased $2.9 million, or 4.9 percent,
to $56.8 million for the first quarter of 2008. This decrease
is due primarily to a $1.7 million, or 5.9 percent, decrease
in gross cemetery property sales and a $1.5 million decrease
in construction on various cemetery projects. The Company
currently has a backlog of approximately $24 million of
cemetery property related to items that are pending
construction such as private estates and community
mausoleums. These sales are complete and the revenue related
to these items will be recognized as construction occurs.
* Cemetery gross profit decreased $3.3 million to $9.0 million
for the first quarter of 2008 compared to $12.3 million for
the same period of 2007 due primarily to the $2.9 million
decrease in cemetery revenue, as discussed above, and a $0.4
million increase in expenses. The increase in cemetery
expenses is due in part to a $1.5 million, or 41.8 percent,
increase in merchandise costs due to price increases from
the Company's suppliers related to increases in raw materials
and a $0.2 million increase in health insurance costs
primarily due to an increase in high dollar claims. These
increases were partially offset by a decrease in construction
costs due in part to the decrease in construction revenue,
noted above, and a $0.5 million decrease in cemetery selling
costs due to the decline in property sales.
OTHER
* Corporate general and administrative expenses increased $1.2
million to $8.2 million for the first quarter of 2008. The
increase was primarily due to a $0.6 million increase in
information technology costs primarily due to the
implementation of the new business systems and a web
development project and a $0.4 million increase of cost
related to the process improvement initiative that began in
the first quarter of 2008.
* The Company recorded a hurricane related recovery of $0.1
million during the quarter compared to a hurricane related
charge of $1.9 million ($1.1 million after tax, or $.01 per
diluted share) for the same period of 2007. The charges in
the prior year were due to repairs at locations damaged by
Hurricane Katrina. The timing of the receipt of insurance
proceeds is not in line with the timing of cash spending
related to Hurricane Katrina. The Company has been unable
to finalize its negotiations with its carriers related to
damages caused by Hurricane Katrina. Accordingly, in
August 2007, the Company initiated litigation to pursue
resolution.
* Interest expense decreased $0.9 million to $5.9 million
during the first quarter of 2008 due to a 208 basis point
decrease in the average rate primarily related to the
issuance of the $250 million of senior convertible notes
in 2007. The convertible notes carry an average interest
rate of 3.25 percent.
* Investment and other income, net decreased $0.3 million
to $0.8 million due primarily to a $0.3 million decrease in
interest income related to amounts due from the Internal
Revenue Service.
* The effective tax rate for continuing operations for the
quarter ended January 31, 2008 was 37.5 percent compared
to 26.4 percent for the same period in 2007. The reduced
rate in 2007 was primarily due to a tax benefit of $1.9
million resulting from the utilization of a capital loss
carryforward. The effective tax rate for 2007 exclusive of
the tax benefit would have been 37.9 percent.
Depreciation and Amortization
* Depreciation and amortization from continuing and total
operations was $7.0 million for the first quarter of 2008
compared to $6.5 million for the first quarter of 2007.
Cash Flow Results and Debt for Total Operations
* Cash flow provided by operating activities for the first
quarter of 2008 was $4.1 million compared to $17.9 million
for the same period of last year. The decrease in operating
cash flow was due to various reasons including a decline in
earnings for the period and the fact that the Company became
a cash tax payer in the current year. The Company received
$1.4 million in net tax refunds in the first quarter of 2007
compared to net tax payments of $3.3 million in the first
quarter of 2008. Also, the Company paid an additional $1.4
million in interest payments in the first quarter of 2008
compared to the first quarter of 2007 due to the timing of
payments as a result of the issuance of the senior
convertible notes. Lastly, the Company had cash inflows in
the first quarter of 2007 related to Hurricane Katrina of
$2.1 million in insurance proceeds, net of Hurricane Katrina
expenses, and $3.2 million of business interruption proceeds.
* Recurring free cash flow was $1.2 million during the first
quarter of 2008 compared to $12.2 million for the first
quarter of 2007.
* During the first quarter of 2008, the Company paid $2.4
million, or $.025 per share, in dividends compared to $2.6
million, or $.025 per share, paid in the first quarter of
2007.
* As of January 31, 2008, the Company had outstanding debt
of $450.2 million and cash on hand of $30.4 million, or
net debt of $419.8 million.
* As of March 7, 2008, the Company has purchased 3.6
million shares at an average price of $7.83 for approximately
$28.0 million under the Board approved $50.0 million stock
repurchase program. The Company currently has $22.0 million
available under the program.
Trust Performance
The following returns include realized and unrealized gains and losses:
* For the quarter ended January 31, 2008, the Company's
preneed funeral and cemetery merchandise trust funds
experienced a total return of (7.3) percent, and its
perpetual care trust funds experienced a total return of
(4.2) percent. For a portfolio balanced with equity and
fixed-income securities, this is consistent with the overall
performance of the equity market as demonstrated by the S&P
500 performance with a total return of (10.6) percent for
the same period.
* For the last three years ended January 31, 2008, the
Company's preneed funeral and cemetery merchandise trust
funds experienced an annual total average return of 5.2
percent, and its perpetual care trust funds experienced a
total return of 4.4 percent. For a portfolio balanced with
equity and fixed-income securities, this is consistent with
the overall performance of the equity market as demonstrated
by the S&P 500 performance with a total return of 7.3 percent
for the same time period.
* For the last five years ended January 31, 2008, the Company's
preneed funeral and cemetery merchandise trust funds
experienced an annual total average return of 7.7 percent,
and its perpetual care trust funds experienced a total return
of 6.8 percent. For a portfolio balanced with equity and
fixed-income securities, this is consistent with the overall
performance of the equity market as demonstrated by the S&P
500 performance with a total return of 12.0 percent for the
same time period.
Founded in 1910, Stewart Enterprises is the second largest provider of products and services in the death care industry in the United States. The Company currently owns and operates 221 funeral homes and 139 cemeteries in the United States and Puerto Rico. Through its subsidiaries, the Company provides a complete range of funeral merchandise and services, along with cemetery property, merchandise and services, both at the time of need and on a preneed basis.
Stewart Enterprises, Inc. will host its quarterly conference call for investors to discuss first quarter results today at 10 a.m. Central Standard Time. The teleconference dial-in number is 888-801-6504. To participate, please call the number at least 15 minutes prior to the call. If you are calling from outside the United States, the dial-in number is 913-312-0383. A replay of the call will be available by dialing 888-203-1112 (from within the continental United States) or 719-457-0820 (from outside the continental United States), and using pass code 3253408 until March 18, 2008, at 10:59 p.m. Central Standard Time. Interested parties will also have the opportunity to listen to the live conference call via the Internet through Stewart Enterprises' website http://www.stewartenterprises.com. To listen to the live call, please go to the website at least 15 minutes early to register, download and install any necessary audio software. A replay will be available at this website shortly following the conference call and will be available at the website until April 11, 2008.
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended
January 31,
-----------------------
2008 2007
-------- --------
Revenues:
Funeral $ 73,449 $ 72,163
Cemetery 56,824 59,683
-------- --------
130,273 131,846
-------- --------
Costs and expenses:
Funeral 55,447 53,445
Cemetery 47,756 47,404
-------- --------
103,203 100,849
-------- --------
Gross profit 27,070 30,997
Corporate general and administrative
expenses (8,235) (7,042)
Hurricane related recoveries (charges), net 159 (1,850)
Separation charges -- (485)
Gains on dispositions and impairment
(losses), net 147 98
Other operating income, net 242 267
-------- --------
Operating earnings 19,383 21,985
Interest expense (5,888) (6,757)
Investment and other income, net 720 1,050
-------- --------
Earnings from continuing operations before 14,215 16,278
income taxes
Income taxes 5,330 4,305
-------- --------
Earnings from continuing operations 8,885 11,973
-------- --------
Discontinued operations:
Loss from discontinued operations before -- (40)
income taxes
Income taxes -- 7
-------- --------
Loss from discontinued operations -- (47)
-------- --------
Net earnings 8,885 $ 11,926
======== ========
Basic earnings per common share:
Earnings from continuing operations $ .09 $ .11
Earnings from discontinued operations -- --
-------- --------
Net earnings $ .09 $ .11
======== ========
Diluted earnings per common share:
Earnings from continuing operations $ .09 $ .11
Earnings from discontinued operations -- --
-------- --------
Net earnings $ .09 $ .11
======== ========
Weighted average common shares outstanding
(in thousands):
Basic 96,784 104,900
======== ========
Diluted 97,019 104,998
======== ========
Dividends declared per common share $ .025 $ .025
======== ========
Certain reclassifications have been made to the 2007 consolidated
statement of earnings in order for these periods to be comparable.
These reclassifications had no effect on net earnings.
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
Jan. 31, Oct. 31,
ASSETS 2008 2007
------- ----------- ----------
Current assets:
Cash and cash equivalents $ 30,375 $ 71,545
Marketable securities 15,203 262
Receivables, net of allowances 62,493 60,615
Inventories 35,873 36,061
Prepaid expenses 11,315 6,355
Deferred income taxes, net 7,528 8,621
---------- ----------
Total current assets 162,787 183,459
Receivables due beyond one year, net
of allowances 81,684 83,608
Preneed funeral receivables and trust
investments 478,594 515,053
Preneed cemetery receivables and trust
investments 234,462 255,679
Goodwill 273,188 273,286
Cemetery property, at cost 377,554 374,800
Property and equipment, at cost:
Land 43,761 43,767
Buildings 312,923 310,968
Equipment and other 168,307 164,246
---------- ----------
524,991 518,981
Less accumulated depreciation 218,925 213,063
---------- ----------
Net property and equipment 306,066 305,918
Deferred income taxes, net 195,419 192,859
Cemetery perpetual care trust investments 225,524 236,503
Other assets 17,181 17,809
---------- ----------
Total assets $2,352,459 $2,438,974
========== ==========
Jan. 31, Oct. 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 2008 2007
----------------------------------- ----------- ----------
Current liabilities:
Current maturities of long-term debt $ 130 $ 198
Accounts payable 25,477 26,606
Accrued payroll and other benefits 12,988 16,316
Accrued insurance 20,564 21,252
Accrued interest 6,468 5,576
Other current liabilities 14,562 17,958
Income taxes payable 4,083 4,177
---------- ----------
Total current liabilities 84,272 92,083
Long-term debt, less current maturities 450,106 450,115
Deferred preneed funeral revenue 253,920 256,603
Deferred preneed cemetery revenue 284,859 284,507
Non-controlling interest in funeral and
cemetery trusts 627,083 683,052
Other long-term liabilities 18,741 13,869
---------- ----------
Total liabilities
1,718,981 1,780,229
---------- ----------
Commitments and contingencies
Non-controlling interest in perpetual
care trusts 224,331 235,427
---------- ----------
Shareholders' equity:
Preferred stock, $1.00 par value,
5,000,000 shares authorized; no
shares issued -- --
Common stock, $1.00 stated value:
Class A authorized 150,000,000
shares; issued and outstanding
92,505,295 and 94,865,387 shares
at January 31, 2008 and October 31,
2007, respectively 92,505 94,865
Class B authorized 5,000,000 shares;
issued and outstanding 3,555,020
shares at January 31, 2008 and
October 31, 2007; 10 votes per share
convertible into an equal number of
Class A shares 3,555 3,555
Additional paid-in capital 563,978 583,789
Accumulated deficit (250,972) (258,902)
Accumulated other comprehensive income:
Unrealized appreciation of
investments 81 11
---------- ----------
Total accumulated other comprehensive
income 81 11
---------- ----------
Total shareholders' equity 409,147 423,318
---------- ----------
Total liabilities and shareholders'
equity $ 2,352,459 $2,438,974
=========== ==========
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended
January 31,
----------------------
2008 2007
------- --------
Cash flows from operating activities:
Net earnings $ 8,885 $ 11,926
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Gains on dispositions and impairment
losses, net (147) (17)
Depreciation and amortization 6,962 6,494
Provision for doubtful accounts 2,093 2,238
Share-based compensation 477 318
Excess tax benefits from share-based
payment arrangements (165) (37)
Provision (benefit) for deferred
income taxes 1,866 (2,102)
Other 825 66
Changes in assets and liabilities:
(Increase) decrease in receivables (2,030) 9,159
Increase in prepaid expenses (4,963) (6,439)
(Increase) decrease in inventories
and cemetery property (2,576) 837
Decrease in accounts payable and
accrued expenses (6,208) (3,426)
Net effect of preneed funeral
production and maturities:
Decrease in preneed funeral
receivables and trust investments 2,758 77
Decrease in deferred preneed
funeral revenue (2,329) (2,891)
Decrease in funeral non-control-
ling interest (1,856) (82)
Net effect of preneed cemetery
production and deliveries:
(Increase) decrease in preneed
cemetery receivables and trust
investments 2,461 (1,000)
Increase (decrease) in deferred
preneed cemetery revenue 351 (1,325)
Increase (decrease) in cemetery
non-controlling interest (1,919) 3,312
Increase (decrease) in other (387) 781
------- -------
Net cash provided by operating activities 4,098 17,889
------- -------
Cash flows from investing activities:
Proceeds from sales of marketable
securities 4,984 --
Purchases of marketable securities (19,802) (66)
Proceeds from sale of assets, net 338 388
Purchase of subsidiaries, net of cash
acquired -- (2,805)
Insurance proceeds related to hurricane
damaged properties -- 1,400
Additions to property and equipment (7,056) (7,777)
Other 10 29
------- -------
Net cash used in investing activities (21,526) (8,831)
------- -------
Cash flows from financing activities:
Repayments of long-term debt (77) (865)
Issuance of common stock 1,380 643
Purchase and retirement of common stock (22,807) --
Dividends (2,403) (2,627)
Excess tax benefits from share-based
payment arrangements 165 37
------- -------
Net cash used in financing activities (23,742) (2,812)
------- -------
Net increase (decrease) in cash (41,170) 6,246
Cash and cash equivalents, beginning of
period 71,545 43,870
------- -------
Cash and cash equivalents, end of period $ 30,375 $ 50,116
======== ========
Supplemental cash flow information:
Cash paid (received) during the
period for:
Income taxes, net $ 3,262 $ (1,370)
Interest $ 4,982 $ 3,600
Non-cash investing and financing activities:
Issuance of common stock to executive
officers and directors $ 921 $ 363
Issuance of restricted stock, net of
forfeitures $ 304 $ 290
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE PERIODS ENDED JANUARY 31, 2008 AND 2007
(Unaudited)
Free cash flow is defined as net cash provided by operating activities less maintenance capital expenditures. Recurring free cash flow is defined as net cash provided by operating activities less maintenance capital expenditures and specified items not expected to recur. Management believes that free cash flow and recurring free cash flow are useful measures of the Company's ability to repay debt, make strategic investments, repurchase stock or pay dividends (subject to the restrictions in its debt agreements). The following table provides a reconciliation between net cash provided by operating activities (the GAAP financial measure that the Company believes is most directly comparable to free cash flow and recurring free cash flow) and free cash flow and between net cash provided by operating activities and recurring free cash flow for the three months ended January 31, 2008 and 2007:
Three months ended
January 31,
Free Cash Flow -----------------------
(Dollars in millions) 2008 2007
------- -------
Net cash provided by operating
activities(1) $ 4.1 $ 17.9
Less: Maintenance capital
expenditures (3.2) (3.6)
------- -------
Free cash flow $ 0.9 $ 14.3
======= =======
Net cash provided by operating
activities $ 4.1 $ 17.9
Add (Subtract): Net cash outflows
(inflows) from insurance proceeds
and expenditures recorded related
to Hurricane Katrina 0.3 (2.1)
------- -------
Adjusted cash provided by operating
activities 4.4 15.8
Less: Maintenance capital
expenditures (3.2) (3.6)
------- -------
Recurring free cash flow $ 1.2 $ 12.2
======= =======
(1) Net cash provided by operating activities decreased $13.8
million from $17.9 million for the first quarter of 2007
to $4.1 million for the first quarter of 2008. This
decrease is primarily due to the following:
* $4.7 million increase in income taxes payments
* $3.2 million decrease in business interruption
insurance proceeds
* $3.0 million decrease in net income
* $2.4 million decrease in Hurricane Katrina inflows
* $1.4 million increase in interest payments due to timing
* ($0.9) million decrease in other $13.8 million in total
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
CAUTIONARY STATEMENTS
This press release includes forward-looking statements that are generally identifiable through the use of words such as "believe," "expect," "intend," "plan," "estimate," "anticipate," "project," "will" and similar expressions. These forward-looking statements rely on assumptions, estimates and predictions that could be inaccurate and that are subject to risks and uncertainties that could cause actual results to differ materially from our goals or forecasts. These risks and uncertainties include, but are not limited to:
* effects on revenue due to the changes in the number of deaths
in our markets and decline in funeral call volume;
* effects on at-need and preneed sales of a weakening economy;
* effects on our market share, prices, revenues and margins
of intensified price competition or improved advertising and
marketing by competitors, including low-cost casket providers
and increased offerings of products or services over the
Internet;
* effects on cash flow and earnings as a result of increased
costs;
* effects on our revenue and earnings of the continuing
national trend toward increased cremation and the increase
in the percentage of cremations performed by us that are
inexpensive direct cremations;
* effects on our trust fund and escrow accounts of changes
in stock and bond prices and interest and dividend rates;
* risk of loss due to hurricanes;
* effects of the call options we purchased and the warrants
we sold on our Class A common stock and the effects of the
outstanding warrants on the ownership interest of our
current stockholders;
* our ability to pay future dividends on our common stock;
* possible adverse outcomes of pending class action lawsuits
and the continuing cost of defending against them;
* our ability to consummate significant acquisitions
successfully;
* the effects on us as a result of our industry's complex
accounting model;
* the effect of the potential change in accounting method
for our convertible notes;
and other risks and uncertainties described in our Form 10-K for the year ended October 31, 2007, filed with the SEC. We disclaim any obligation or intent to update or revise any forward-looking statements in order to reflect events or circumstances after the date of this release.