STEWART ENTERPRISES INC, 10-Q, 1999-03-17

STEWART ENTERPRISES INC
10-Q, 1999-03-17
PERSONAL SERVICES

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==============================================================================

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________

FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1999

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO ____
______________________

COMMISSION FILE NUMBER: 0-19508
______________________

STEWART ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)

LOUISIANA 72-0693290
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identificaion No.)

110 VETERANS MEMORIAL BOULEVARD
METAIRIE, LOUISIANA 70005
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (504) 837-5880

______________________

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----

The number of shares of the Registrant's Class A Common Stock, no par value
per share, and Class B Common Stock, no par value per share, outstanding as of
March 12, 1999 was 108,152,625 and 3,555,020, respectively.

===============================================================================

<PAGE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION PAGE

Item 1. Financial Statements

Consolidated Statements of Earnings -
Three Months Ended January 31, 1999 and 1998 ........... 3

Consolidated Balance Sheets -
January 31, 1999 and October 31, 1998 .................. 4

Consolidated Statement of Shareholders' Equity -
Three Months Ended January 31, 1999 .................... 6

Consolidated Statements of Cash Flows -
Three Months Ended January 31, 1999 and 1998 ........... 7

Notes to Consolidated Financial Statements ............... 9

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .. 14

Item 3. Quantitative and Qualitative Disclosures
About Market Risk .............................. 19

PART II. OTHER INFORMATION

Item 1. Legal Proceedings .............................. 20

Item 5. Other Information .............................. 20

Item 6. Exhibits and Reports on Form 8-K ............... 23

SIGNATURES ............................................... 25
<PAGE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)

THREE MONTHS ENDED JANUARY 31,
------------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues:
Funeral .................................... $ 111,483 $ 86,918
Cemetery.................................... 71,438 62,391
---------- ----------
182,921 149,309
---------- ----------
Costs and expenses:
Funeral..................................... 73,258 58,861
Cemetery.................................... 50,673 44,331
---------- ----------
123,931 103,192
---------- ----------
Gross profit ............................... 58,990 46,117
Corporate general and administrative expenses.. 4,015 4,024
---------- ----------
Operating earnings.......................... 54,975 42,093
Interest expense .............................. (14,400) (9,946)
Investment and other income.................... 1,184 1,358
---------- ----------
Earnings before income taxes................ 41,759 33,505
Income taxes .................................. 15,242 11,559
---------- ----------
Net earnings................................ $ 26,517 $ 21,946
========== ==========

Net earnings per share:
Basic....................................... $ .27 $ .23
========== ==========
Diluted..................................... $ .27 $ .22
========== ==========

Weighted average shares outstanding (in thousands):
Basic........................................ 98,045 97,401
========== ==========
Diluted...................................... 98,721 98,134
========== ==========
Dividends per share............................. $ .02 $ .01
========== ==========

See accompanying notes to consolidated financial statements.
</TABLE>

<TABLE>
<CAPTION>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)

JANUARY 31, OCTOBER 31,
ASSETS 1999 1998
------ ----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalent investments............. $ 21,353 $ 30,733
Marketable securities ........................... 6,246 6,120
Receivables, net of allowances................... 179,755 171,849
Inventories...................................... 49,327 48,833
Prepaid expenses................................. 5,856 3,870
----------- -----------
Total current assets.......................... 262,537 261,405
Receivables due beyond one year, net of allowances.. 280,331 257,773
Intangible assets .................................. 582,962 573,006
Deferred charges.................................... 105,172 100,432
Cemetery property, at cost.......................... 399,138 382,972
Property and equipment, at cost:
Land............................................. 76,528 75,032
Buildings........................................ 289,352 284,590
Equipment and other.............................. 136,699 127,951
----------- -----------
502,579 487,573
Less accumulated depreciation.................... 113,757 105,834
----------- -----------
Net property and equipment....................... 388,822 381,739
Long-term investments............................... 74,928 68,014
Merchandise trust, less estimated cost to deliver... 61,071 41,160
Other assets........................................ 6,505 5,301
----------- -----------
$ 2,161,466 $ 2,071,802
=========== ===========

(continued)
</TABLE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)

JANUARY 31, OCTOBER 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
------------------------------------ ----------- -----------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt............ $ 10,739 $ 11,219
Accounts payable................................ 22,541 19,048
Accrued payroll................................. 18,753 21,074
Accrued insurance............................... 13,123 12,420
Accrued interest................................ 6,361 13,440
Accrued other................................... 21,575 19,369
Income taxes payable............................ 14,903 8,245
Deferred income taxes........................... 13,003 13,967
----------- -----------
Total current liabilities.................... 120,998 118,782
Long-term debt, less current maturities ........... 961,487 913,215
Deferred income taxes ............................. 95,856 92,231
Deferred revenue................................... 100,846 98,775
Other long-term liabilities........................ 12,045 9,509
----------- -----------
Total liabilities............................ 1,291,232 1,232,512
----------- -----------
Commitments and contingencies (Notes 3 and 7)

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 94,522,739 and
94,472,844 shares at January 31, 1999
and October 31, 1998, respectively........ 94,523 94,473
Class B authorized 5,000,000 shares;
issued and outstanding 3,555,020 shares
at January 31, 1999 and October 31, 1998;
10 votes per share; convertible into an
equal number of Class A shares............ 3,555 3,555
Additional paid-in capital ..................... 493,063 492,177
Retained earnings .............................. 339,695 315,140
Cumulative foreign translation adjustment....... (65,402) (64,887)
Unrealized appreciation (depreciation) of
investments..................................... 4,800 (1,168)
----------- -----------

Total shareholders' equity................... 870,234 839,290
----------- -----------
$ 2,161,466 $ 2,071,802
=========== ===========

See accompanying notes to consolidated financial statements.

</TABLE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

UNREALIZED
COMMON STOCK CUMULATIVE APPRECIATION
------------------------------- ADDITIONAL FOREIGN (DEPRECIATION) TOTAL
SHARES - PAID-IN RETAINED TRANSLATION OF SHAREHOLDERS'
CLASSES A AND B (1) AMOUNT CAPITAL EARNINGS ADJUSTMENT INVESTMENTS EQUITY
--------------------- -------- --------- ---------- ------------ ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance October 31, 1998........ 98,028 $ 98,028 $ 492,177 $ 315,140 $ (64,887) $ (1,168) $ 839,290
Comprehensive income:
Net earnings.................. 26,517 26,517
Other comprehensive income:
Foreign translation
adjustment................ (515) (515)
Unrealized appreciation of
investments............... 9,398 9,398
Deferred income tax expense
on unrealized appreciation
of investments............ (3,430) (3,430)
---------- ---------- --------- ---------- ---------- ----------- ----------
Total other comprehensive
income.................... (515) 5,968 5,453
--------- ---------- --------- ---------- ---------- ----------- ----------
Total comprehensive income ... 26,517 (515) 5,968 31,970

Sales of common stock......... 50 50 886 936
Dividends ($.02 per share).... (1,962) (1,962)
--------- ---------- --------- ---------- ---------- ----------- ----------
Balance January 31, 1999........ 98,078 $ 98,078 $ 493,063 $ 339,695 $ (65,402) $ 4,800 $ 870,234
========= ========== ========= ========== ========== =========== ==========
___________________________

(1) Includes 3,555 shares (in thousands) of Class B Common Stock.

See accompanying notes to consolidated financial statements.
</TABLE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED JANUARY 31,
-------------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings......................................................... $ 26,517 $ 21,946
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization..................................... 10,332 7,226
Provision for doubtful accounts .................................. 7,653 6,729
Net gains on sales of marketable securities....................... (1,129) (1,030)
Benefit for deferred income taxes................................. (943) (1,401)
Changes in assets and liabilities net of effects from
acquisitions:
Increase in prearranged funeral trust receivables............... (9,377) (2,795)
Increase in other receivables................................... (28,279) (18,373)
Increase in deferred charges and intangible assets.............. (2,896) (5,932)
Increase in inventories and cemetery property................... (578) (255)
Increase in merchandise trust, less estimated costs
to deliver merchandise ....................................... (13,929) (4,880)
Increase (decrease)in accounts payable and accrued expenses..... 1,786 (4,179)
Increase (decrease) in deferred revenue......................... 3,635 (5,254)
Decrease in other............................................... (3,424) (1,779)
---------- --------
Net cash used in operating activities........................... (10,632) (9,977)
---------- --------

Cash flows from investing activities:
Proceeds from sales of marketable securities......................... 6,883 6,355
Purchases of marketable securities and long-term investments......... (9,429) (6,430)
Purchases of subsidiaries, net of cash, seller financing
and stock issued................................................... (31,186) (26,041)
Additions to property and equipment.................................. (10,785) (10,180)
Other................................................................ 309 1,846
---------- -------
Net cash used in investing activities........................... (44,208) (34,450)
---------- -------

(continued)
</TABLE>

<TABLE>
<CAPTION>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)

THREE MONTHS ENDED JANUARY 31,
-------------------------------
1999 1998
----------- ----------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from long-term debt........................... $ 58,562 $ 61,504
Repayments of long-term debt........................... (11,319) (24,772)
Issuance of common stock............................... 936 1,462
Dividends.............................................. (1,962) (975)
Purchase and retirement of common stock................ -- (24)
----------- ----------
Net cash provided by financing activities........... 46,217 37,195
----------- ----------

Effect of exchange rates on cash and cash equivalents..... (757) (849)
----------- ----------

Net decrease in cash...................................... (9,380) (8,081)
Cash and cash equivalents, beginning of period............ 30,733 31,640
----------- ----------
Cash and cash equivalents, end of period.................. $ 21,353 $ 23,559
=========== ==========

Supplemental cash flow information:
Cash paid during the period for:
Income taxes........................................ $ 8,200 $ 1,900
Interest............................................ $ 21,500 $ 13,900

Noncash investing and financing activity:
Subsidiaries acquired with common stock............. $ -- $ 200

See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)

(1) BASIS OF PRESENTATION

(a) The Company

Stewart Enterprises, Inc. (the "Company") is the third largest provider of
products and services in the death care industry in North America. Through its
subsidiaries, the Company offers a complete line of funeral merchandise and
services, along with cemetery property, merchandise and services.

As of January 31, 1999 the Company owned and operated 577 funeral homes and
143 cemeteries in 29 states within the United States, and in Puerto Rico,
Mexico, Australia, New Zealand, Canada, Spain, Portugal, the Netherlands,
Argentina, France and Belgium. For the three months ended January 31, 1999,
foreign operations contributed approximately 20% of total revenue and, as of
January 31, 1999, represented approximately 20% of total assets.

(b) Principles of Consolidation

The accompanying consolidated financial statements include the Company and
its subsidiaries. All significant intercompany balances and transactions have
been eliminated.

The information as of January 31, 1999, and for the three months ended
January 31, 1999 and 1998, is unaudited, but, in the opinion of management,
reflects all adjustments, which are of a normal recurring nature, necessary for
a fair presentation of financial position and results of operations for the
interim periods. The accompanying consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto contained in the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998.

The results of operations for the three months ended January 31, 1999 are
not necessarily indicative of the results to be expected for the fiscal year
ending October 31, 1999.

(d) Foreign Currency Translation

All assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars at the exchange rate in effect at the end of the
period, and revenues and expenses are translated at average exchange rates
prevailing during the period. The resulting translation adjustments are
reflected in a separate component of shareholders' equity, except for
translation adjustments arising from operations in highly inflationary
economies.

During the first quarter of fiscal year 1997, the Company changed its method
of reporting foreign currency translation adjustments for its Mexican
operations to the method prescribed for highly inflationary economies. Under
that method, foreign currency translation adjustments are reflected in results
of operations, instead of in shareholders' equity. As of January 1, 1999, the
Mexican economy is no longer considered highly inflationary by the SEC staff.
Accordingly, subsequent to January 1, 1999, gains and losses resulting from
translation of the financial statements of the Company's Mexican operations are
reflected in shareholders' equity, and the functional currency used by the
Company's Mexican operations is the Mexican peso. These changes did not have a
material effect on the Company's results of operations for fiscal year 1998 or
the first three months of fiscal year 1999. However, no assurance can be given
that a material change will not occur in the future due to events within Mexico
beyond the Company's control.
<PAGE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)

(1) BASIS OF PRESENTATION--(CONTINUED)

(e) Per-Share Data

Effective November 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 "Earnings Per Share," which requires the
presentation of basic and diluted earnings per share. Basic earnings per share
is computed by dividing net earnings by the weighted average number of common
shares outstanding during each period. Diluted earnings per share is computed
by dividing net earnings by the weighted average number of common shares
outstanding plus the number of additional common shares that would have been
outstanding if the dilutive potential common shares (in this case, exercise of
the Company's time-vest stock options) had been issued during each period. See
Note 5.

All share and per-share data have been adjusted for the Company's two-for-
one common stock split effected April 24, 1998.

(f) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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.

(2) ACQUISITIONS

During the three months ended January 31, 1999, the Company purchased 20
funeral homes and three cemeteries, compared to 18 funeral homes and two
cemeteries purchased during the three months ended January 31, 1998.

These acquisitions have been accounted for by the purchase method, and their
results of operations are included in the accompanying consolidated financial
statements from the dates of acquisition. The purchase price allocations for
certain of these acquisitions are based on preliminary information.

The following table reflects, on an unaudited pro forma basis, the combined
operations of the Company and the businesses acquired during the three months
ended January 31, 1999, as if such acquisitions had taken place at the
beginning of the respective periods presented. Appropriate adjustments have
been made to reflect the accounting basis used in recording the acquisitions.
These pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations that would have
resulted had the combinations been in effect on the dates indicated, that have
resulted since the dates of acquisition, or that may result in the future.

<PAGE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)

(2) ACQUISITIONS--(CONTINUED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED JANUARY 31,
------------------------------
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>

Revenues ............................................ $ 184,015 $ 152,388
========== ===========

Net earnings ........................................ $ 26,389 $ 21,602
========== ===========

Basic earnings per share............................ $ .27 $ .22
========== ==========

Diluted earnings per share........................... $ .27 $ .22
========== ==========
Weighted average shares outstanding (in thousands):
Basic ............................................ 98,045 97,401
========== ==========
Diluted .......................................... 98,721 98,134
========== ==========

The effect of acquisitions at dates of purchase on the consolidated
financial statements was as follows:

</TABLE>

THREE MONTHS ENDED JANUARY 31,
------------------------------
1999 1998
---------- -----------
(Unaudited)
<S> <C> <C>

Current assets ........................................ $ 575 $ 1,776
Cemetery property ..................................... 15,507 8,141
Property and equipment, net ........................... 1,602 3,935
Deferred charges and other assets ..................... -- 128
Intangible assets, net ................................ 15,514 25,633
Current liabilities ................................... (1,166) (1,962)
Long-term debt ........................................ (743) (11,402)
Other long-term liabilities ........................... (103) (8)
---------- -----------
31,186 26,241
Common stock used for acquisitions .................... -- 200
----------- -----------
Cash used for acquisitions ............................ $ 31,186 $ 26,041
=========== ===========
</TABLE>

<PAGE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)

(3) CONTINGENCIES

The Company was notified in September 1994 that a suit was brought by a
competitor regarding the Company's acquisition of certain corporations in
Mexico. The suit alleges that this acquisition violated the competitor's
previous option to acquire the same corporations. The suit seeks unspecified
damages. The Company believes that the suit is without merit and intends to
defend it vigorously. The Company believes it is entitled to indemnification
from the previous owners of these corporations should an unfavorable outcome
result. Management does not believe this matter will have a material adverse
effect on the financial position, net earnings or cash flows of the Company.

(4) RECENT ACCOUNTING STANDARDS

Effective November 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." SFAS
No. 131, "Disclosure about Segments of an Enterprise and Related Information,"
is required to be implemented during the Company's fiscal year ending
October 31, 1999, and SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," is required to be implemented in the first quarter of the
Company's fiscal year 2000. The effect of these pronouncements on the
Company's consolidated financial condition and results of operations is not
expected to be material.

(5) RECONCILIATION OF BASIC AND DILUTED PER-SHARE DATA

<TABLE>
<CAPTION>
EARNINGS SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) DATA
----------- ------------- ----------
<S> <C> <C> <C>
THREE MONTHS ENDED JANUARY 31, 1999
-----------------------------------
Net earnings ......................................... $ 26,517
===========
Basic earnings per share:
Net earnings available to common shareholders ...... $ 26,517 98,045 $ .27
=========
Effect of dilutive securities:
Time-vest stock options assumed exercised .......... -- 676
----------- ------------
Diluted earnings per share:
Net earnings available to common shareholders
plus time-vest stock options assumed exercised .. $ 26,517 98,721 $ .27
=========== ============ =========
</TABLE>

<TABLE>
<CAPTION>
EARNINGS SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) DATA
----------- ------------- ----------
<S> <C> <C> <C>
THREE MONTHS ENDED JANUARY 31, 1998
-----------------------------------
Net earnings ......................................... $ 21,946
===========
Basic earnings per share:
Net earnings available to common shareholders ...... $ 21,946 97,401 $ .23
==========
Effect of dilutive securities:
Time-vest stock options assumed exercised .......... -- 733
----------- ------------
Diluted earnings per share:
Net earnings available to common shareholders
plus time-vest stock options assumed exercised .. $ 21,946 98,134 $ .22

=========== ============ ==========
</TABLE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)

(5) RECONCILIATION OF BASIC AND DILUTED PER-SHARE DATA--(CONTINUED)

Options to purchase 1,410,536 shares of common stock at prices ranging from
$21.375 to $27.25 were outstanding during the first quarter of 1999, but were
not included in the computations of diluted earnings per share because the
exercise prices of the options were greater than the average market price of
the common shares. The options, which expire on October 31, 2001 and July
July 31, 2004, were still outstanding at January 31, 1999.

(6) INTEREST RATE SWAP

In order to hedge a portion of the interest rate risk associated with its
variable-rate debt, during the first quarter of 1999 the Company entered into a
three-year interest rate swap agreement involving a notional amount of $200
million. This agreement, which became effective March 4, 1999, effectively
converts $200 million of variable-rate debt bearing interest based on three-
month LIBOR to a fixed rate of 4.915%. The net amount to be paid or received
at the end of each 90-day settlement period under the swap agreement is
recorded as an adjustment to interest expense. The estimated fair value, based
on quoted market prices, of the interest rate swap as of January 31, 1999 was
$762,000.

(7) SUBSEQUENT EVENTS

Subsequent to January 31, 1999, the Company acquired or entered into letters
of intent or definitive agreements to acquire 56 funeral homes and 15
cemeteries for purchase prices aggregating approximately $114,998.

On February 2, 1999, the Company completed the sale of 13,627,500 shares of
Class A Common Stock, resulting in approximately $219,000 in net proceeds,
which were used principally to repay balances outstanding under its revolving
credit facilities, which amounts then became available to fund the Company's
continuing acquisition program and for general corporate purposes.
<PAGE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

For purposes of the following discussion, funeral homes and cemeteries owned
and operated for the entirety of both periods being compared are referred to as
"Existing Operations." Correspondingly, funeral homes and cemeteries acquired
or opened during either period being compared are referred to as "Acquired
Operations."

RESULTS OF OPERATIONS

Three Months Ended January 31, 1999 Compared to Three Months Ended January 31,
1998

Funeral Segment

THREE MONTHS ENDED
JANUARY 31,
-------------------- INCREASE
1999 1998 (DECREASE)
------- ------ ----------
(In millions)
<S> <C> <C> <C>
FUNERAL REVENUE
---------------
Existing Operations .......................... $ 80.8 $ 80.6 $ 0.2
Acquired Operations .......................... 21.8 1.2 20.6
Revenue from prearranged funeral trust funds
and escrow accounts ......................... 8.9 5.1 3.8
------- ------- -------
$ 111.5 $ 86.9 $ 24.6
======= ======= =======
FUNERAL COSTS
-------------
Existing Operations .......................... $ 55.3 $ 57.8 $ (2.5)
Acquired Operations .......................... 18.0 1.1 16.9
------- ------- -------
$ 73.3 $ 58.9 $ 14.4
======= ======= =======
Funeral Segment Profit ....................... $ 38.2 $ 28.0 $ 10.2
======= ======= =======
</TABLE>

Funeral revenue increased $24.6 million, or 28%, for the three months ended
January 31, 1999, compared to the corresponding period in 1998. The Company
experienced a $0.2 million increase in revenue from Existing Operations as a
result of a 3.9% increase in the average revenue per domestic funeral service
performed by Existing Operations (5.4% increase in total, excluding the effect
of foreign currency translation), primarily due to price increases and improved
merchandising. Partially offsetting this increase in revenue was a 6.6%
decrease in the number of domestic funeral services performed by Existing
Operations (also 6.6% decrease in total).

The $2.5 million, or 4%, decrease in funeral costs from Existing Operations
resulted principally from the implementation of certain cost control measures,
including contract negotiations with certain vendors. Existing Operations
achieved improved profit margins resulting primarily from the increased cost
control measures, including the Company's centralization and standardization of
certain financial and administrative functions in connection with the Company's
Shared Services Center.

The increase in revenue and costs from Acquired Operations resulted
primarily from the Company's acquisition or construction of funeral homes from
February 1998 through January 1999 which are not reflected in the 1998 period
presented above.

The $3.8 million increase in revenue from prearranged funeral trust funds
and escrow accounts was attributable to a 23% growth in the average balance in
such trust funds and escrow accounts, resulting primarily from current year
customer payments deposited into the funds and funds added through
acquisitions, coupled with an increase in the average yield on such funds.

Cemetery Segment

THREE MONTHS ENDED
--------------------
JANUARY 31,
--------------------
1999 1998 INCREASE
------- ------- --------
(In millions)
<S> <C> <C> <C>
CEMETERY REVENUE
----------------
Existing Operations .......................... $ 61.5 $ 59.2 $ 2.3
Acquired Operations .......................... 6.0 0.4 5.6
Revenue from merchandise trust funds and
escrow accounts ............................. 3.9 2.8 1.1
------- ------- --------
$ 71.4 $ 62.4 $ 9.0
======= ======= ========
CEMETERY COSTS
---------------
Existing Operations .......................... $ 45.3 $ 44.0 $ 1.3
Acquired Operations .......................... 5.4 0.3 5.1
------- ------- --------
$ 50.7 $ 44.3 $ 6.4
======= ======= ========
Cemetery Segment Profit ...................... $ 20.7 $ 18.1 $ 2.6
======= ======= ========
</TABLE>

Cemetery revenue increased $9.0 million, or 14%, for the three months ended
January 31, 1999, compared to the corresponding period in 1998. The Company
experienced a $2.3 million increase in revenue from Existing Operations
resulting primarily from price increases and improved merchandising.

The improved profit margin achieved by Existing Operations was attributable
principally to the increase in cemetery revenue discussed above and the
implementation of certain cost control measures, including the centralization
and standardization of certain financial and administrative functions at the
Shared Services Center.

The increase in revenue and costs from Acquired Operations resulted
primarily from the Company's acquisition or construction of cemeteries from
February 1998 through January 1999 which are not reflected in the 1998 period
presented above.

The $1.1 million increase in revenue from merchandise trust funds and escrow
accounts was attributable to a 26% growth in the average balance in the
merchandise trust funds and escrow accounts, resulting from current year
customer payments deposited into the funds, coupled with an increase in the
average yield on the merchandise funds.

Other

Interest expense increased $4.5 million during the first quarter of fiscal
year 1999 compared to the same period in 1998, as the result of an increase in
average borrowings due to acquisition expenditures, partially offset by a
decrease in average interest rates from 6.6% in 1998 to 6.1% in 1999.
Approximately $546.8 million, or 56%, of the $972.2 million outstanding
borrowings at January 31, 1999 was subject to short-term variable interest
rates averaging approximately 5.6%.

In December 1998, the Company entered into an interest rate swap agreement
on a notional amount of $200 million. Under the terms of the agreement,
effective March 4, 1999, the Company will pay a fixed rate of 4.915% and
receive 3-month LIBOR. The swap expires on March 4, 2002.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Cash and marketable securities of the Company were $27.6 million at January
31, 1999, a decrease of approximately $9.3 million from October 31, 1998. The
Company used cash of $10.6 million in its operations for the three months ended
January 31, 1999, compared to $10.0 million for the corresponding period in
1998, due principally to an increase in receivables offset by an increase in
net earnings and other working capital changes.

Long-term debt at January 31, 1999 amounted to $972.2 million, compared to
$924.4 million at October 31, 1998. The Company's long-term debt consisted of
$546.8 million under the Company's revolving credit facilities, $401.2 million
of long-term notes and $24.2 million of term notes incurred principally in
connection with the acquisition of funeral home and cemetery properties. All
of the Company's debt is uncollateralized, except for approximately $3.1
million of term notes incurred principally in connection with acquisitions.

The most restrictive of the Company's credit agreements require it to
maintain a debt-to-equity ratio no higher than 1.25 to 1.00. The Company has
managed its capitalization within that limit, and had a ratio of total debt to
equity of 1.1 to 1.0 as of January 31, 1999 and October 31, 1998. In February
1999, the Company completed the sale of 13.6 million shares of Class A Common
Stock, resulting in approximately $219 million in net proceeds, which was used
principally to repay balances outstanding under its revolving credit
facilities, which amounts then became available to fund the Company's
continuing acquisition program and for general corporate purposes. As of March
12, 1999, the Company had a debt to equity ratio of approximately 0.7 to 1.0
and $590.2 million of additional borrowing capacity within the 1.25 to 1.0
debt-to-equity parameter, $259.2 million of which was available under its
revolving credit facilities.

The Company's ratio of earnings to fixed charges was as follows for the
years and period indicated:

THREE MONTHS
ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
------------------------------------------------------- ------------

1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ------------
5.30 2.72(1) 3.98 3.65(2) 2.39(3) 3.76

________________________
(1) Pretax earnings for fiscal year 1995 includes a nonrecurring, noncash
charge of $17.3 million in connection with the vesting of performance
-based stock options. Excluding the charge, the Company's ratio of
earnings to fixed charges for fiscal year 1995 would have been 3.43.
(2) Excludes the cumulative effect of change in accounting principles.
(3) Pretax earnings for fiscal year 1998 includes a nonrecurring, noncash
charge of $76.8 million in connection with the vesting of performance
-based stock options. Excluding the charge, the Company's ratio of
earnings to fixed charges for fiscal year 1998 would have been 4.02.

For purposes of computing the ratio of earnings to fixed charges, earnings
consist of pretax earnings plus fixed charges (excluding interest capitalized
during the period). Fixed charges consist of interest expense, capitalized
interest, amortization of debt expense and discount or premium relating to any
indebtedness, and the portion of rental expense that management believes to be
representative of the interest component of rental expense. Fiscal year 1996
and prior amounts reflect the Company's previous accounting methods which were
in effect at that time.

During the three months ended January 31, 1999, the Company completed
acquisitions of 20 funeral homes and three cemeteries for purchase prices
aggregating approximately $37.1 million, which was funded primarily with
advances under the Company's revolving credit facilities. From the beginning
of this fiscal year through March 12, 1999, the Company has acquired or entered
into letters of intent or definitive agreements to acquire 94 businesses for an
aggregate purchase price of approximately $152.1 million, compared to $196.6
million previously reported by the Company as of January 15, 1999. During
February and March of 1999, the Company renegotiated several pending
acquisitions to better reflect current pricing and market conditions resulting
in purchase price reductions. Further, the Company terminated negotiations
with respect to one large transaction and added a number of additional
commitments at lower pricing. The Company plans to finance the purchase price
of pending acquisitions primarily by borrowings under its revolving credit
facilities. The application of proceeds from the above-mentioned equity
offering has made these amounts available under the revolving credit
facilities.

During the first quarter of 1999, Service Corporation International, one
of the Company's primary competitors for acquisitions, announced that it
planned to reduce significantly the level of its acquisition activity, and The
Loewen Group Inc., another primary competitor for acquisitions, announced that
it had terminated its acquisition activity and was offering a number of its
own properties for sale. The Company believes that the resulting decline in
competition for acquisitions has allowed it to negotiate prices for
acquisitions at lower multiples than those paid by the Company during fiscal
1998 and prior years. While the Company believes that it may be able to
consummate acquisitions during the remainder of fiscal 1999 at lower multiples
than it has paid historically, there can be no assurance that that will be the
case, and the lower prices may cause some potential sellers to decide not to
sell their businesses.

Although the Company has no material commitments for capital
expenditures, the Company contemplates capital expenditures, excluding
acquisitions, of approximately $45 million for the fiscal year ending
October 31, 1999, including construction of new funeral homes and refurbishing
of funeral homes recently acquired.

Management expects that future capital requirements will be satisfied
through a combination of internally generated cash flow and amounts available
under its revolving credit facilities. Additional debt and equity financing
may be required in connection with future acquisitions. In addition, the
Company monitors its mix of fixed and floating rate debt obligations in light
of changing market conditions and may from time to time decide to alter that
mix by, for example, refinancing balances outstanding under its floating rate
revolving credit facility with public or private fixed rate debt, or by
entering into interest rate swaps or similar interest rate hedging
transactions.

INFLATION

Inflation has not had a significant impact on the Company's operations over
the past three years, nor is it expected to have a significant impact in the
foreseeable future. For a discussion of the impact of inflation in the Mexican
economy on the Company's financial statements, see Note (1)(d) to the Company's
consolidated financial statements in Item 1.

OTHER

Year 2000 Issues

OVERVIEW. Year 2000 issues result from the past practice in the computer
industry of using two digits rather than four to identify the applicable year.
This practice can create breakdowns or erroneous results when computers perform
operations involving years later than 1999.

THE COMPANY'S STATE OF READINESS. The Company has devised and commenced an
extensive compliance plan with the objective of bringing all of the Company's
information technology (IT) systems and non-IT systems into Year 2000
compliance by the end of the second quarter of fiscal year 1999. The Company
has divided its systems into (i) critical systems, consisting of IT systems,
and (ii) non-critical systems, consisting of a mixture of IT and non-IT
systems. Each system will be evaluated and brought into compliance in five
phases:

* Phase I: Awareness - Prepare and present comprehensive report to
management

* Phase II: Assessment - Identify and evaluate all systems for Year
2000 compliance

* Phase III: Compliance - Complete necessary Year 2000 modifications

* Phase IV: Testing - Test all modified systems for Year 2000
compliance

* Phase V: Implementation - Return Year 2000 compliant systems to
daily operation

Phase I has been completed. Additionally, all of the Company's critical
systems have completed Phase II and 60% were found to be compliant or made to
be compliant by completing Phases III through V. The remaining 40% of the
Company's critical systems have commenced Phase III through Phase V and the
Company anticipates that these systems will be brought into compliance by the
end of the second quarter of fiscal 1999.

Fifty percent of the Company's non-critical systems have completed Phase II
and were either found to be compliant or were brought into compliance by
completing Phases III through V. The Company anticipates that the remaining
noncritical systems will be evaluated and brought into compliance by the end of
the second quarter of fiscal 1999.

In addition, the Company has distributed surveys to all of its significant
vendors, financial institutions and insurers regarding their Year 2000
compliance. The Company has received responses from all of those third parties
whose non-compliance could have a material adverse effect on the Company's
operations. None of their responses have indicated significant problems.

THE COSTS INVOLVED. Because many of the Company's computer systems have been
replaced in recent years as part of the Company's on-going goal to maintain
state of the art technology, the Company's Year 2000 compliance costs have been
relatively low. To date, the Company has incurred expenses of approximately
$75,000 for external consultants, software and hardware applications in
implementing its compliance plan. The Company does not separately track the
internal costs incurred for the year 2000 project. Such costs are principally
payroll-related costs for the Company's information technology group.
Management estimates that the total external cost to be incurred by the Company
to complete its compliance plan will be approximately $175,000. All costs
related to the Year 2000 compliance plan are included in the Information
Systems budget and are based on management's best estimates. There can be no
guarantee that actual results will not differ from those estimated or that such
difference will not be material.

RISKS. If the Company is not successful in its efforts to bring its systems
into Year 2000 compliance:

* The Company's ability to procure merchandise in a timely and cost-
effective manner may be impaired,

* Daily business procedures may be delayed due to the use of manual
procedures, and

* Some business procedures may be interrupted if no alternative
methodology is available.

Each of these items could have a material adverse effect on the Company's
operations.

The Company has no guarantee that the systems of third parties will be
brought into compliance on a timely basis. The non-compliance of a third
party's system could have a material adverse effect on the Company's
operations.

THE COMPANY'S CONTINGENCY PLAN. Although the Company believes that its Year
2000 plan is adequate to achieve full system compliance on a timely basis, the
Company is in the process of developing a contingency plan to address the
possibility of the Company's and third parties' noncompliance. The Company
anticipates completing its contingency plan by the end of June 1999.

Recent Accounting Standards

Statements of Financial Accounting Standards (SFAS) No. 131, "Disclosure
about Segments of an Enterprise and Related Information," is required to be
implemented during the Company's fiscal year ending October 31, 1999. SFAS No.
133 "Accounting for Derivative Instruments and Hedging Activities," is required
to be implemented in the first quarter of the Company's fiscal year 2000. The
effect of these pronouncements on the Company's consolidated financial
condition and results of operations is not expected to be material.
<PAGE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosure about market risk is presented in
Item 7A to the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1998, filed with the Securities and Exchange Commission on January
21, 1999.

In order to hedge a portion of the interest rate risk associated with its
variable-rate debt, during the first quarter of 1999 the Company entered into a
three-year interest rate swap agreement involving a notional amount of $200
million. This agreement, which became effective March 4, 1999, effectively
converts $200 million of variable-rate debt bearing interest based on three-
month LIBOR to a fixed rate of 4.915%. Also, in February 1999, the Company
applied approximately $215 million of the proceeds of its public equity
offering to the repayment of variable-rate debt. As of March 12, 1999, the
Company had outstanding $346 million of variable-rate debt, $146 million of
which was not hedged by the interest rate swap agreement. Each 0.5% change in
the average interest rate applicable to the Company's unhedged variable-rate
debt would result in a change of approximately $0.1 million in the Company's
pre-tax earnings.
<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There has been no change in the status of the Company's material legal
proceedings during the quarter ended January 31, 1999.

ITEM 5. OTHER INFORMATION

FORWARD-LOOKING STATEMENTS

Certain statements made herein or elsewhere by, or on behalf of, the Company
that are not historical facts are intended to be forward-looking statements
within the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.

The Company's strategic plan for the future includes the following goals:
(i) achievement of annual revenues of $1 billion which the Company expects
to accomplish by fiscal year 2000; and (ii) earnings per share growth of 20%
annually.

The Company's goals for fiscal year 1999 include revenue growth of at least
20%. Although the Company has a goal for earnings per share growth of 20% for
the future, the Company currently estimates earnings per share growth of 17%
for fiscal year 1999 and 19% for fiscal year 2000 due to the dilutive effect on
earnings per share of the sale of 13.6 million shares of Class A Common Stock
in February 1999. Such shares were sold at a lower price than had been
anticipated because of adverse market conditions caused primarily by Service
Corporation's announcement of declining earnings.

In addition, the Company is currently comfortable with Street expectations
of $225-$250 million in acquisitions for fiscal year 1999, which is in line
with the $266 million achieved in fiscal year 1998, but above the $185
million and $179 million achieved in fiscal years 1997 and 1996, respectively.
For additional in formation regarding factors affecting the Company's
acquisition program, see "Liquidity and Capital Resources" in Item 2. For
fiscal year 1999, the Company's gross margin improvement goal is approximately
50 to 100 basis points over its fiscal year 1998 gross margin.

Forward-looking statements are based on assumptions about future events and
are therefore inherently uncertain; actual results may differ materially from
those projected. See "Cautionary Statements" below.

CAUTIONARY STATEMENTS

The Company cautions readers that the following important factors, among
others, in some cases have affected, and in the future could affect, the
Company's actual consolidated results and could cause the Company's actual
consolidated results in the future to differ materially from the goals and
expectations expressed in the forward-looking statements above and in any other
forward-looking statements made by or on behalf of the Company.

(1) Achieving projected revenue growth depends in part upon sustaining the
level of acquisition activity experienced by the Company in the last three
fiscal years. Higher levels of acquisition activity will increase anticipated
revenues, and lower levels will decrease anticipated revenues. The level of
acquisition activity depends not only on the number of properties acquired, but
also on the size of the acquisitions; for example, one large acquisition could
increase substantially the level of acquisition activity and, consequently,
revenues. Several important factors, among others, affect the Company's
ability to consummate acquisitions:

(a) The Company may be unable to find a sufficient number of businesses
for sale at prices the Company is willing to pay.

(b) In most of its existing markets and in many new markets, including
foreign markets, that the Company desires to enter, the Company
competes for acquisitions with the other publicly-traded death care
firms. These competitors, and others, may be willing to pay higher
prices for businesses than the Company or may cause the Company to pay
more to acquire a business than the Company would otherwise have to
pay in the absence of such competition. Thus, the aggressiveness of
the Company's competitors in pricing acquisitions affects the
Company's ability to complete acquisitions at prices it finds
attractive.

(c) Achieving the Company's projected acquisition activity depends on the
Company's ability to enter new markets, including foreign markets.
Due in part to the Company's lack of experience operating in new areas
and to the presence of competitors who have been in certain markets
longer than the Company, such entry may be more difficult or expensive
than anticipated by the Company.

(2) Achieving the Company's revenue goals also is affected by the volume and
prices of the properties, products and services sold. The annual sales targets
set by the Company are very aggressive, and the inability of the Company to
achieve planned increases in volume or prices could cause the Company not to
meet anticipated levels of revenue. The ability of the Company to achieve
volume or price increases at any location depends on numerous factors,
including the local economy, the local death rate and competition.

(3) Another important component of revenue is earnings from the Company's
trust funds and escrow accounts, which are determined by the size of, and
returns (which include dividends, interest and realized capital gains) on, the
funds. The performance of the funds depends primarily on market conditions
that are not within the Company's control. The size of the funds depends on
the level of sales, funds added through acquisitions and the amount of returns
that may be reinvested.

(4) Future revenue also is affected by the level of prearranged sales in
prior periods. The level of prearranged sales may be adversely affected by
numerous factors, including deterioration in the economy, which causes
individuals to have less discretionary income.

(5) The Company first entered foreign markets in the fourth quarter of
fiscal year 1994, and no assurance can be given that the Company will continue
to be successful in expanding in foreign markets, or that any expansion in
foreign markets will yield results comparable to those realized through the
Company's expansion in the United States.

(6) In addition to the factors discussed above, earnings per share may be
affected by other important factors, including the following:

(a) The ability of the Company to achieve projected economies of scale in
markets where it has "clusters" or combined facilities.

(b) Whether acquired businesses perform at pro forma levels used by
management in the valuation process and whether, and the rate at
which, management is able to increase the profitability of acquired
businesses.

(c) The ability of the Company to manage its growth in terms of
implementing internal controls and information gathering systems, and
retaining or attracting key personnel, among other things.

(d) The amount and rate of growth in the Company's general and
administrative expenses.

(e) Changes in interest rates, which can increase or decrease the amount
the Company pays on borrowings with variable rates of interest.

(f) The Company's debt-to-equity ratio, the number of shares of common
stock outstanding and the portion of the Company's debt that has fixed
or variable interest rates.

(g) The impact on the Company's financial statements of nonrecurring
accounting charges that may result from the Company's ongoing
evaluation of its business strategies, asset valuations and
organizational structures.

(h) Changes in government regulation, including tax rates and their
effects on corporate structure.

(i) Changes in inflation and other general economic conditions both
domestically and internationally, affecting financial markets (e.g.
marketable security values as well as exchange rate fluctuations).

(j) Unanticipated legal proceedings and unanticipated outcomes of legal
proceedings.

(k) Changes in accounting policies and practices adopted voluntarily or
required to be adopted by generally accepted accounting principles.

(l) The ability of the Company and its significant vendors, financial
institutions and insurers to achieve Year 2000 compliance on a timely
basis.

The Company also cautions readers that it assumes no obligation to update or
publicly release any revisions to forward-looking statements made herein or any
other forward-looking statements made by, or on behalf of, the Company.
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3.1 Amended and Restated Articles of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1996)

3.2 By-laws of the Company, as amended (incorporated by reference to Exhibit
3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1997)

______________________________

Management Contracts and Compensatory Plans or Arrangements

10.1 Amendment No. 1 to Change of Control Agreement dated November 1, 1998,
between the Company and Joseph P. Henican, III

10.2 Amendment No. 1 to Change of Control Agreement dated November 1, 1998,
between the Company and William E. Rowe

10.3 Amendment No. 2 to Change of Control Agreement dated November 1, 1998,
between the Company and Kenneth C. Budde

10.4 Amendment No. 2 to Change of Control Agreement dated November 1, 1998,
between the Company and Richard O. Baldwin, Jr.

10.5 Amendment No. 1 to Change of Control Agreement dated November 1, 1998,
between the Company and Brian J. Marlowe

10.6 Amendment No. 2 to Change of Control Agreement dated November 1, 1998,
between the Company and Brent F. Heffron

10.7 Amendment No. 2 to Change of Control Agreement dated November 1, 1998,
between the Company and Raymond C. Knopke, Jr.

10.8 Amendment No. 2 to Change of Control Agreement dated November 1, 1998,
between the Company and Ronald H. Patron

10.9 Amendment No. 1 to Change of Control Agreement dated November 1, 1998,
between the Company and Gerard C. Alexander

10.10 Amendment No. 1 to Change of Control Agreement dated November 1, 1998,
between the Company and Charles L. Tilis

10.11 Amendment No. 2 to Change of Control Agreement dated November 1, 1998,
between the Company and Lawrence B. Hawkins

______________________________

12 Calculation of Ratio of Earnings to Fixed Charges

27 Financial Data Schedule

(b) Reports on Form 8-K

The Company filed a Form 8-K on December 18, 1998 reporting, under "Item 5.
Other Events," the earnings release for the year ended October 31, 1998.

The Company filed a Form 8-K on January 7, 1999 reporting, under "Item 5.
Other Events," a press release announcing the proposed public offering of
12,500,000 shares of Class A Common Stock, including 650,000 shares to be
offered by the selling shareholder.

The Company filed a Form 8-K on January 29, 1999 reporting, under "Item 5.
Other Events," a press release announcing the pricing of the public offering of
12,500,000 shares of Class A Common Stock, including 650,000 shares offered by
the selling shareholder at $16.75 per share. The Form 8-K also included under
"Item 7. Financial Statements and Exhibits," the Terms Agreement dated January
27, 1999 between the Company and the underwriters named therein and the
Underwriting Agreement Basic Provisions dated January 6, 1999 between the
Company and the underwriters named in the Terms Agreement.

<PAGE>

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

SIGNATURES

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.

March 16, 1999 /s/ KENNETH C. BUDDE
------------------------
Kenneth C. Budde
Executive Vice President
President-Corporate Division
Chief Financial Officer

March 16, 1999 /s/ MICHAEL G. HYMEL
------------------------
Michael G. Hymel
Vice President
Corporate Controller
Chief Accounting Officer
<PAGE>

<TABLE>
<CAPTION>
Exhibit 12

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS
YEARS ENDED OCTOBER 31, ENDED
1994 1995 1996 1997 1998 JANUARY 31, 1999
-------- -------- --------- --------- --------- ----------------

Earnings before income taxes ......... $ 42,198 $ 41,500(1) $ 82,075 $ 106,477(2) $ 64,964(3) $ 41,759

Fixed charges:
Interest expense .................... 8,877 22,815 26,051 38,031 43,821 14,400
Interest portion of lease expense ... 935 1,343 1,522 2,181 3,084 720
-------- -------- --------- --------- --------- --------
Total fixed charges .................. 9,812 24,158 27,573 40,212 46,905 15,120

Earnings before income taxes
and fixed charges .................. $ 52,010 $ 65,658(1) $ 109,648 $ 146,689(2) $ 111,869(3) $ 56,879
======== ======== ========= ========= ========= =========
Ratio of earnings to fixed charges ... 5.30 2.72(1) 3.98 3.65(2) 2.39(3) 3.76
======== ======== ========= ========= ========= =========
</TABLE>
_________________________

(1) Includes a nonrecurring, noncash charge of $17,252 recorded in
connection with the vesting of the Company's performance-based stock
options.
(2) Excludes cumulative effect of change in accounting principles of
$2,324 (net of $2,230 income tax benefit).
(3) Includes a nonrecurring, noncash charge of $76,762 recorded in
connection with the vesting of the Company's performance-based stock
options.
_________________________

During the periods presented the Company had no preferred stock outstanding.
Therefore, the ratio of earnings to combined fixed charges and preference
dividends was the same as the ratio of earnings to fixed charges for each of
the periods presented.

10.1

AMENDMENT NO. 1
TO
CHANGE OF CONTROL AGREEMENT

This Amendment No. 1 to Change of Control Agreement is made as of the
1st day of November, 1998, by and between Stewart Enterprises, Inc., a
Louisiana corporation (the "Company"), and Joseph P. Henican, III (the
"Employee").

W I T N E S S E T H:

WHEREAS, the Company has entered into a Change of Control Agreement
with the Employee dated as of December 5, 1995 (the "Change of Control
Agreement").

WHEREAS, the Company and the Employee have agreed to a change in the
Employee's bonus, as set forth herein.

NOW THEREFORE, the Company and the Employee agree as follows:

SECTION 1. CHANGE OF CONTROL AGREEMENT. Except as expressly amended
herein, all of the terms and provisions of the Change of Control Agreement
shall remain in full force and effect.

SECTION 2. AMENDMENT TO ARTICLE I, SECTION 1.1. Article I, Section
1.1 of the Change of Control Agreement is hereby amended to read in its
entirety as follows:

1.1 EMPLOYMENT AGREEMENT. After a Change of Control
(defined below), this Agreement supersedes the Employment
Agreement dated as of August 1, 1995 as amended by Amendment No.
1 dated as of October 31, 1998 between Employee and the Company
(the "Employment Agreement") except to the extent that certain
provisions of the Employment Agreement are expressly incorporated
by reference herein. After a Change of Control (defined below),
the definitions in this Agreement supersede definitions in the
Employment Agreement, but capitalized terms not defined in this
Agreement have the meanings given to them in the Employment
Agreement.

SECTION 3. AMENDMENT TO ARTICLE II, SECTION 2.2. Article II, Section
2.2, paragraph (b) of the Change of Control Agreement is hereby amended to
read in its entirety as follows:

(b) BONUS. An annual incentive bonus (the "Bonus") of
$500,000, to the extent not already received, shall be paid in
cash (1) no later than November 30 of each year or (2) if the
Employee elects to receive the Bonus in the calendar year
following the year in which it was earned, between January 1 and
January 15 of such following year.

SECTION 4. AMENDMENT TO ARTICLE II, SECTION 2.4. Article II, Section
2.4, paragraph (a) of the Change of Control Agreement is hereby amended to
read in its entirety as follows:

(a) TERMINATION BY COMPANY FOR REASONS OTHER THAN DEATH,
DISABILITY OR CAUSE; BY EMPLOYEE FOR GOOD REASON. If, after a
Change of Control and during the Employment Term, the Company
(or, if applicable the ultimate parent company), terminates the
Employee's employment other than for Cause, death or Disability,
or the Employee terminates employment for Good Reason, the
Company shall pay to the Employee in a lump sum in cash within 30
days of the Date of Termination an amount equal to three times
the sum of (i) the amount of Base Salary in effect at the Date of
Termination, plus (ii) the Employee's Bonus.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and signed as of the date indicated above.

STEWART ENTERPRISES, INC.

/s/ JAMES W. MCFARLAND
By:___________________________________
James W. McFarland
Compensation Committee Chairman

EMPLOYEE:

/s/ JOSEPH P. HENICAN, III
______________________________________
Joseph P. Henican, III

10.2