UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 25, 1997
STEWART ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
LOUISIANA 0-19508 72-0693290
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
110 Veterans Memorial Boulevard
Metairie, Louisiana 70005
(Address of principal executive offices) (Zip Code)
(504) 837-5880
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Item 5. Other Events
The Company changed the following accounting principles
effective November 1, 1996:
(a) The Company now defers a portion of the earnings realized
by irrevocable prearranged funeral trust funds and escrow accounts
in order to offset the estimated effects of inflation on the
future cost of performing prearranged funeral services. Earnings
realized in excess of those deferred are recognized on a current
basis, except in those jurisdictions where earnings revert to a
customer if a prearranged funeral service contract is canceled.
Previously, all such earnings were recognized as realized.
(b) The Company now records all revenues and costs attributable
to prearranged sales of cemetery interment rights and related
products when customer contracts are signed. Allowances for
customer cancellations and refunds are provided at the date of
sale based upon historical experience. Previously, such sales
generally were deferred under accounting principles prescribed for
sales of real estate. Under the Company's application of this
method of accounting for sales of real estate, revenues and costs
were deferred until 20% of the contract amount had been collected.
(c) The Company now records revenue and related costs
attributable to cemetery burial site openings and closings at the
time of sale. Previously, such sales were deferred until
delivery.
The accounting changes were made principally for the following
reasons:
(a) A portion of funeral trust earnings and increasing benefits
under insurance contracts is intended to cover increases in the
future costs of providing price guaranteed funeral services. The
Company believes that deferring such earnings to the extent of the
increased costs of the services to be provided will better match
revenues and costs because the total funds available to satisfy
the contract (principal and deferred earnings) will be included in
revenues with concurrent recognition of all costs related to
performance of the service when the funeral service is performed.
(b) The cemetery accounting methods have been adopted because
all significant obligations of the Company, including delivery of
products and opening and closing the burial site, have been
satisfied in the period the contract is signed. Related costs are
provided based on actual costs incurred, firm commitments or
reliable estimates. Historical experience is the basis for making
appropriate allowances for customer cancellations and will be
adjusted when required.
The cumulative effect of these changes on prior years resulted
in a decrease in net earnings for the nine months ended July 31,
1997 of $2.3 million (net of a $2.2 million income tax benefit),
or $.05 per share. The effect of the change in accounting
principles resulted in an increase in net earnings of $1.9
million, or $.04 per share, for the three months ended July 31,
1997, and $2.3 million, or $.05 per share, for the nine months
ended July 31, 1997.
The following statements of earnings for fiscal year 1996
periods, for the three months ended January 31, 1997 and April 30,
1997, and for the six months ended April 30, 1997 are presented on
a pro forma basis to reflect the changes in the Company's
accounting methods, as if such methods had been in effect during
all prior periods.
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Three Months Three Months Six Months
Ended Ended Ended
January 31, 1996 April 30, 1996 April 30, 1996
Revenues: ---------------- -------------- --------------
Funeral........................... $ 51,497 $ 53,360 $104,857
Cemetery.......................... 51,715 54,464 106,179
--------- --------- ---------
103,212 107,824 211,036
--------- --------- ---------
Costs and Expenses:
Funeral........................... 36,369 37,333 73,702
Cemetery.......................... 38,330 41,417 79,747
--------- --------- ---------
74,699 78,750 153,449
--------- --------- ---------
28,513 29,074 57,587
Corporate general and administrative
expenses............................. 2,950 3,315 6,265
--------- --------- ---------
Operating earnings..................... 25,563 25,759 51,322
Interest expense....................... (6,204) (5,818) (12,022)
Investment and other income............ 551 856 1,407
--------- --------- ---------
Earnings before income taxes......... 19,910 20,797 40,707
Income taxes........................... 7,466 7,799 15,265
--------- --------- ---------
Net earnings......................... $ 12,444 $ 12,998 $ 25,442
========= ========= =========
Earnings per common share............ $ .30 expenses:
Funeral.......................... 46,405 47,370 93,775
Cemetery......................... 41,010 41,892 82,902
-------- -------- --------
87,415 89,262 176,677
------- -------- --------
35,297 38,860 74,157
Corporate general and administrative
expenses............................ 3,855 3,181 7,036
-------- -------- --------
Operating earnings.............. 31,442 35,679 67,121
Interest expense.................... (8,962) (10,071) (19,033)
Investment and other income......... 785 781 1,566
-------- -------- --------
Earnings before income taxes.... 23,265 26,389 49,654
Income taxes........................ 8,258 9,121 17,379
-------- -------- --------
Net earnings.................... $ 15,007 (1) $ 17,268 $ 32,275 (1)
======== ======== ========
Earnings per common share....... $ .36 (1) $ .41 $ .77 (1)
======== ======== ========
Weighted average common shares
outstanding
(in thousands).................. 41,853 42,161 42,005
======== ======== ========
</TABLE>
(1) Excludes the cumulative effect of the change in
accounting principles on prior years, which resulted in a
decrease in net earnings of $2,324 (net of a $2,230 income
tax benefit), or $.06 per share.
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Nine Months
Ended Ended
July 31, 1997 July 31, 1997
------------- -------------
(As Reported)
Revenues:
Funeral.................................... $ 75,350 $211,539
Cemetery................................... 64,196 178,841
------------- -------------
139,546 390,380
------------- -------------
Costs and expenses:
Funeral.................................... 52,559 146,334
Cemetery................................... 45,481 128,383
------------- -------------
98,040 274,717
------------- -------------
41,506 115,663
Corporate general and
administrative expenses...................... 3,423 10,459
------------- -------------
Operating earnings......................... 38,083 105,204
Interest expense.............................. (10,132) (29,165)
Investment and other income................... 756 2,322
------------- -------------
Earnings before income taxes............... 28,707 78,361
Income taxes.................................. 9,656 27,035
------------- -------------
Net earnings............................... $ 19,051 $ 51,326(1)
============= ==============
Earnings per common share.................. $ .42 $ 1.19(1)
============= ==============
Weighted average common shares outstanding
(in thousands)............................. 44,826 42,955
============= ==============
(1) Excludes the cumulative effect of the change in accounting
principles on prior years, which resulted in a decrease in net
earnings of $2,324 (net of a $2,230 income tax benefit), or
$.05 per share.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
STEWART ENTERPRISES, INC.
September 25, 1997 /s/ KENNETH C. BUDDE
--------------------------
Kenneth C. Budde
Senior Vice President-Finance
Secretary and Treasurer
(Principal Accounting Officer)
