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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): June 9, 1998
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)
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Item 5. Other Events
On June 9, 1998, the Company issued the following press
release.
CONTACT: Kenneth C. Budde
Stewart Enterprises, Inc.
110 Veterans Memorial Boulevard
Metairie, Louisiana 70005
504/837-5880
FOR IMMEDIATE RELEASE
STEWART ENTERPRISES REPORTS SECOND QUARTER FISCAL YEAR 1998 RESULTS -
EARNINGS INCREASE 40 PERCENT, EARNINGS PER SHARE INCREASE 25 PERCENT
BEFORE EFFECT OF STOCK OPTION CHARGE
Metairie, Louisiana, June 9, 1998. . . Stewart Enterprises, Inc. (Nasdaq
NMS: STEI) today announced that earnings increased 40 percent, and
earnings per share increased 25 percent for the second quarter ended
April 30, 1998, compared to the corresponding period in fiscal year 1997,
before giving effect to the previously announced non-recurring, non-cash
charge recorded during the current quarter in connection with the vesting
of the Company's performance-based stock options.
Earnings for the second quarter increased 40 percent to $24.3 million,
and earnings per share increased 25 percent to $.25, from $17.3 million
and $.20, respectively, reported for the second quarter of fiscal year
1997, before giving effect to the $76.8 million ($50.3 million, or $.51
per share, after-tax) non-recurring, non-cash charge required by
generally accepted accounting principles in connection with the vesting
of the Company's performance-based stock options, which was recorded
during the current quarter. Including the effect of the stock option
charge, the Company reported a loss of $26.0 million, or $.27 per share
(basic and diluted), for the quarter.
Second quarter 1998 per-share performance reflects a 14 percent increase
in the weighted average number of diluted shares outstanding, from 85.2
million to 97.5 million, and a 16 percent increase in the weighted
average number of basic shares outstanding, from 84.3 million to 97.5
million, due principally to the Company's June 1997 equity offering. All
share and per-share information presented reflects the Company's two-for-
one stock split effective April 24, 1998.
For the quarter, revenues increased 21 percent to $154.6 million, from
$128.1 million for the comparable period last fiscal year, while gross
profit expanded 27 percent to $49.5 million, from $38.9 million reported
last year.
For the six months ended April 30, 1998, earnings increased 43 percent to
$46.2 million, and earnings per share increased 24 percent to $.47, from
$32.3 million and $.38, respectively, reported for the first half of
fiscal year 1997, before giving effect to the stock option charge
recorded during the second quarter of fiscal year 1998, and the $2.3
million, or $.03 per share (diluted) ($.02 per share basic) charge for
the cumulative effect of the change in accounting principles recorded in
fiscal year 1997. Including the effect of the stock option charge, the
Company reported a loss of $4.1 million, or $.04 per share (basic and
diluted), for the first six months of this fiscal year.
Year to date fiscal 1998 per-share performance reflects a 15 percent
increase in the weighted average number of diluted shares outstanding,
from 85.0 million to 97.5 million, and a 16 percent increase in the
weighted average number of basic shares outstanding, from 84.0 million to
97.5 million, due principally to the Company's June 1997 equity offering.
All share and per-share information presented reflects the Company's two-
for-one stock split effective April 24, 1998.
For the six months ended April 30, 1998, revenues increased 21 percent to
$303.9 million, from $250.8 million for the comparable period last fiscal
year, while gross profit expanded 29 percent to $95.7 million, from $74.2
million reported last year.
Joseph P. Henican, III, Chief Executive Officer, commented, "The second
quarter of fiscal year 1998 has been an especially exciting one for the
Company. In addition to posting 20%+ increases in revenue, gross profit,
earnings and earnings per share (excluding the performance-based stock
option charge), we completed a $200 million public debt offering,
effected a two-for-one stock split, entered South America, and achieved
the stock price performance objective for performance-based stock options
granted under the Company's 1995 Incentive Compensation Plan."
Mr. Henican continued, "In April we completed a $200 million offering of
6.40% Remarketable or Redeemable Securities (ROARS) due May 1, 2013.
Including the remarketing payment by NationsBanc Montgomery Securities
LLC for the right to remarket the securities after five years, the
offering generated net proceeds to the Company of approximately $203.6
million, which was used to reduce the balances outstanding on our
existing credit facilities. As a result, the credit facilities are again
available to fuel our ongoing business expansion program. The net
effective rate to the Company, assuming the securities are redeemed by
the Company after five years, is 5.77%. If the securities are remarketed
after five years, the net effective rate is expected to be approximately
6.14% over 15 years."
"In March, we announced a two-for-one stock split effected in the form of
a 100% stock dividend paid on April 24, 1998. Our Board of Directors
confirmed their intention to maintain the policy of paying a quarterly
cash dividend of $.02 per share on the increased number of outstanding
shares, beginning with the third quarter of the Company's 1998 fiscal
year. This commitment effectively will double the dividend paid to
shareholders."
"As reported in April of this year, the Company achieved the stock price
performance objective for performance-based options granted under the
Company's 1995 Incentive Compensation Plan, designed to reward management
only in the event of significant enhancement to shareholder value. The
options became exercisable only if the average of the closing sale prices
of a share of the Company's Class A Common Stock equaled or exceeded
$26.44 (split-adjusted) for 20 consecutive trading days. This target
represented a five-year 20 percent annual compounded growth in the price
of a share of the Company's stock from the Plan's inception, and we are
very pleased to have been able to achieve that target nearly 2 1/2 years
ahead of schedule."
"Once the stock price objective was achieved, the Company was required to
record a non-recurring, non-cash charge to earnings of approximately
$76.8 million ($50.3 million, or $.51 per share, after-tax). We firmly
believe that this Plan, the second of its kind for the Company, has been
a significant factor in our continued success as it aligns management's
compensation with our goal of enhancing shareholder value. We are in the
process of developing a new plan, which we expect to implement in the
near future."
William E. Rowe, President and Chief Operating Officer, commented, "Our
operating results during the second quarter and first six months of this
fiscal year reflect our firm commitment to improve the performance of our
core businesses, to assimilate new businesses efficiently and to control
costs. For the quarter, our gross margin expanded 180 basis points, to
32.1%, and our operating margin (excluding the stock option charge)
expanded 160 basis points, to 29.4%, from 30.3% and 27.8%, respectively,
for the second quarter of fiscal year 1997. For the year to date period,
our gross margin increased 190 basis points, to 31.5%, and our operating
margin (excluding the stock option charge) increased 200 basis points, to
28.8%, from 29.6% and 26.8%, respectively, reported for the comparable
period last fiscal year."
Mr. Rowe continued, "Thus far in fiscal year 1998, we have acquired or
committed to acquire 143 businesses for an aggregate purchase price of
approximately $173 million. These businesses are expected to generate
annualized revenues of approximately $85 million and serve more than
32,000 families worldwide."
"During the second quarter, we entered South America with the acquisition
in Argentina of 18 funeral homes, collectively known as Cocheria Parana,
S.A. These firms are located in Buenos Aires and perform more than 6,400
services annually. Additionally, we entered Nevada, bringing the total
number of states in which we operate to 26. Shortly after the close of
the quarter, we made our entry into France and Belgium with strategic
acquisitions in those countries, expanding our European presence to a
total of 63 businesses serving more than 16,000 families annually. Our
acquisition pipeline remains full, and we are on track with our estimate
of total acquisition spending of $200-$225 million for fiscal year 1998."
Founded in 1910, Stewart Enterprises is the third largest provider of
products and services in the death care industry in North America,
currently owning and operating 492 funeral homes and 133 cemeteries in
North America, South America, Europe and the Pacific Rim.
Statements made herein that are not historical facts are forward-looking
statements. The Company's actual results could differ materially due to
several important factors including the following: the Company's ability
to sustain recent levels of acquisition activity and enter new markets;
the economy, death rate and competition in the Company's markets;
financial market conditions, including stock and bond prices and interest
rates; the Company's ability to achieve economies of scale and manage
growth; and the performance of acquired businesses. Such factors, and
others, are more fully described in Item 5 of the Company's Form 10-Q for
the quarter ended January 31, 1998. The Company assumes no obligation to
update information contained herein.
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STEWART ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended April 30,
----------------------------
1998 1997
Revenues: --------- ---------
Funeral $ 91,752 $ 69,613
Cemetery 62,826 58,509
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Total revenues 154,578 128,122
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Costs and expenses:
Funeral 61,209 47,370
Cemetery 43,823 41,892
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Total costs and expenses 105,032 89,262
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Gross profit 49,546 38,860
Corporate general and administrative
expenses 4,144 3,181
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Operating earnings before performance-
based stock options 45,402 35,679
Performance-based stock options 76,762 --
--------- ---------
Operating earnings (loss) (31,360) 35,679
Interest expense (10,081) (10,071)
Investment and other income 1,676 781
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Earnings (loss) before income taxes (39,765) 26,389
Income taxes (13,719) 9,121
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Net earnings (loss) $ (26,046) $ 17,268
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Earnings (loss) per share:
Basic $ (0.27) $ 0.20 (a)
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Diluted $ (0.27) $ 0.20 (a)
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Weighted average shares outstanding (in thousands):
Basic 97,547 84,323 (a)
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Diluted 97,547 85,213 (a)
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Dividends per share $ 0.01 $ 0.01 (a)
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(a) Restated to reflect the Company's two-for-one stock split effective
April 24, 1998.
STEWART ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
Six Months Ended April 30,
--------------------------
1998 1997
Revenues: ---------- ----------
Funeral $ 178,670 $ 136,189
Cemetery 125,217 114,645
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Total revenues 303,887 250,834
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Costs and expenses:
Funeral 120,070 93,775
Cemetery 88,154 82,902
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Total costs and expenses 208,224 176,677
-------- --------
Gross profit 95,663 74,157
Corporate general and administrative
expenses 8,168 7,036
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Operating earnings before performance-
based stock options 87,495 67,121
Performance-based stock options 76,762 --
-------- --------
Operating earnings 10,733 67,121
Interest expense (20,027) (19,033)
Investment and other income 3,034 1,566
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Earnings (loss) before income taxes
and cumulative effect of change in
accounting principles (6,260) 49,654
Income taxes (2,160) 17,379
-------- --------
Earnings (loss) before cumulative
effect of change in accounting
principles (4,100) 32,275
Cumulative effect of change in
accounting principles, net of a
$2,230 income tax benefit -- (2,324)
-------- --------
Net earnings (loss) $ (4,100) $ 29,951
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Basic earnings (loss) per share:
Earnings (loss) before cumulative
effect of change in accounting
principles $ (0.04) $ 0.38 (a)
Cumulative effect of change in
accounting principles -- (0.02)(a)
-------- --------
Net earnings (loss) $ (0.04) $ 0.36 (a)
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Diluted earnings (loss) per share:
Earnings (loss) before cumulative
effect of change in accounting
principles $ (0.04) $ 0.38 (a)
Cumulative effect of change in
accounting principles -- (0.03)(a)
-------- --------
Net earnings (loss) $ (0.04) $ 0.35 (a)
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Weighted average shares outstanding (in thousands):
Basic 97,473 84,009 (a)
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Diluted 97,473 85,003 (a)
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Dividends per common share $ 0.02 $ 0.02 (a)
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(a) Restated to reflect the Company's two-for-one stock split effective
April 24, 1998.
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.
June 9, 1998 /s/ KENNETH C. BUDDE
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Kenneth C. Budde
Executive Vice President
President-Corporate Division
Chief Financial Officer
