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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): SEPTEMBER 6, 2000
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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<PAGE>
ITEM 5. OTHER EVENTS
On September 6, 2000, the Company issued the following press release.
CONTACT: Kenneth C. Budde FOR IMMEDIATE RELEASE
Stewart Enterprises, Inc.
110 Veterans Memorial Boulevard
Metairie, Louisiana 70005
504/837-5880
STEWART ENTERPRISES ACHIEVES ITS GOALS FOR THE THIRD QUARTER OF FISCAL
YEAR 2000 AND EXPANDS STRATEGIES FOR REDUCING DEBT
_____________________________________________________________________________
METAIRIE, LA, September 6, 2000 . . . Stewart Enterprises, Inc. (Nasdaq NMS:
STEI) today announced net earnings of $18.1 million, or $.17 per share, on
revenues of $181.8 million for the three months ended July 31, 2000. For the
nine months ended July 31, 2000, the Company announced net earnings of $56.3
million, or $.53 per share, on revenues of $563.6 million.
William E. Rowe, President and Chief Executive Officer, stated, "We continue
to achieve earnings and produce operating cash flow consistent with the
parameters we established in 1999. By empowering people at every level of our
organization to focus on improving our cash flow, we have generated $55.2
million of operating cash flow thus far this fiscal year compared to negative
$2.9 million in the prior year."
Early in fiscal year 2000, the Company's management resolved to improve cash
flow and build cash reserves in order to de-leverage its balance sheet at the
appropriate time. Remaining debt maturities in fiscal 2000 are $2.3 million,
and debt maturities in fiscal 2001 are $29.6 million. The Company's $600
million bank credit facility, of which $529 million is outstanding as of July
31, 2000, matures in fiscal 2002, and $200 million of its public debt matures
in fiscal 2003. As of July 31, 2000, the Company had cash and marketable
securities of $91 million after reducing debt by $12 million during the
quarter. The Company is pursuing several strategies to deal with those
scheduled maturities, and the successful implementation of those strategies
should alleviate any liquidity issues over the long term.
-more-
Mr. Rowe continued, "We have implemented various initiatives to generate cash
and reduce debt. One initiative being considered is the possible sale of
certain foreign operations. We have engaged an investment-banking firm to
assist us in this process, and we are in discussions with several interested
parties. Also, in addition to management's regular communication with the
lead bank in our credit facility, we recently met with all of the banks in our
syndicate to discuss our plans for de-leveraging the balance sheet. We
initiated that meeting because we are committed to developing a workable plan
well in advance of our revolver's maturity date."
At the end of fiscal year 1999, management stated that fiscal year 2000 would
be a year of transition, from a period of rapid growth, fueled primarily by
acquisitions, to a period driven primarily by internal growth strategies and a
more intense focus on improving the operations and cash flow of our
businesses. In this regard, management stated its earnings expectations for
fiscal year 2000 would be in the range of $.68 to $.72 with operating cash
flow of about $75 million. Mr. Rowe stated, "Based on our performance thus
far, we see no reason that Stewart Enterprises will not achieve its targets
set in 1999 for fiscal year 2000 operating earnings and cash flow. We are
less certain of the effects and timing of the implementation of SAB 101, which
is further discussed below, and the potential sale of certain foreign
operations, which could result in a material charge but would generate
significant cash for debt reduction."
Cemetery revenues for the third quarter of 2000 decreased 10 percent to $73.4
million due principally to reduced prearranged cemetery sales. Brian J.
Marlowe, Chief Operating Officer, commented, "The Company anticipated reduced
prearranged cemetery sales and funeral merchandise sales as the sales force
adapted to adjustments made to the terms and conditions of preneed contracts.
These adjustments include increased average finance charges, shortened
contract lengths and larger down payment requirements. Additionally, there
has been uncertainty about operational changes being considered in conjunction
with the implementation of SAB 101 and how those may impact the mix of
products and services we sell. We think the changes we have made to the terms
and conditions of sale and the operational changes we are making in
conjunction with implementing SAB 101 will improve the quality of our
receivables and cash flow and help focus our sales force on the optimal
product mix to maximize cash flow and shareholder returns."
Funeral revenues for the third quarter of 2000 decreased 3 percent to $108.4
million compared to $112.1 million for the third quarter of 1999 due
principally to reduced prearranged funeral merchandise sales. The average
revenue per call from the Company's core domestic operations increased 6.0
percent during the quarter. Mr. Marlowe commented, "We experienced an
increase in average revenue during a period when we did not significantly
increase prices. Early implementation of the findings of our extensive
consumer market study and the funeral-arranger training we have begun to
implement have been positive drivers for our funeral business."
-more-
The Company and other industry participants continue to discuss directly with
the staff of the Securities and Exchange Commission the application of its
recently issued Staff Accounting Bulletin No. 101 - "Revenue Recognition in
Financial Statements" as it relates to preneed sales activities. SAB 101,
which applies to all companies and was not directed at the death care
industry, emphasizes among other matters the importance of physical delivery
of a product or service to justify the recognition of revenue.
Mr. Rowe commented, "We hoped to have a final resolution on SAB 101 by today.
However, the industry is still in discussions with the SEC on a number of
important points, which we hope to conclude in the near future. Nonetheless,
I would like to address generally certain concerns that may exist with respect
to the projected impact on earnings. It appears that the implementation of
SAB 101 will require a deferral of previously recorded revenue associated with
preneed sales that will result in a material, one-time, non-cash, cumulative
adjustment to earnings, although amounts deferred will be recognized in future
years as the products and services that have been bought and paid for are
ultimately delivered."
"The effect of implementation on future earnings is less clear, as several
material issues are still under discussion with the SEC. Though potentially
material to future earnings, SAB 101 will not, as some have speculated,
eliminate most or all of our future net earnings nor have an effect even
remotely close to that. Our Company will remain strong, and we will continue
to offer our products on an at-need and preneed basis, although we will modify
the products we promote and the methods of sale somewhat, and defer the
recognition of some of the revenues and expenses until delivery. Furthermore,
the implementation of SAB 101 will not impact the Company's cash flows and,
based on what we currently know, will not cause a violation of any financial
covenants in our debt agreements."
THIRD QUARTER RESULTS
* Revenues of $181.8 million compared to $193.7 million in the third
quarter of 1999.
* Gross profit of $45.9 million compared to $53.7 million for the third
quarter last year.
* EBITDA of $56.3 million compared to $63.9 million for the third
quarter last year.
* Depreciation and amortization of $11.9 million compared to $13.3
million for the third quarter of 1999.
* Net earnings of $18.1 million or $.17 per share, compared to $23.3
million or $.21 per share in the third quarter of 1999.
* Operating cash flow of $16.9 million compared to negative $4.5
million for the third quarter last year.
-more-
YEAR-TO-DATE RESULTS
* Revenues of $563.6 million compared to $566.2 million in the first
nine months of 1999.
* Gross profit of $144.4 million compared to $165.6 million for the
first nine months last year.
* EBITDA of $175.2 million compared to $194.9 million for the first
nine months last year.
* Depreciation and amortization of $40.6 million compared to $37.3
million for the first nine months of 1999.
* Net earnings of $56.3 million or $.53 per share, compared to $74.0
million or $.69 per share in the first nine months of 1999.
* Year-to-date 1999 earnings and diluted earnings per share exclude the
effect of the $50.1 million after-tax ($.47 per share) cumulative effect
of the change in accounting principle recorded in fiscal year 1999.
* Operating cash flow of $55.2 million compared to negative $2.9 million
for the corresponding period last year.
FUNERAL RESULTS - THIRD QUARTER 2000
* Funeral revenues decreased 3 percent to $108.4 million compared to
$112.1 million in the third quarter of 1999.
* Funeral revenues from the Company's core operations decreased 5
percent compared to the corresponding period in 1999 due primarily to
reduced preneed funeral merchandise sales.
* In addition, the Company experienced a 6.0 percent increase in the
average revenue per domestic funeral service performed by its core
operations, partially offset by a 3.9 percent decrease in the number
of domestic funeral services performed by those operations.
* Of the total funerals performed in the third quarter of 2000, 19.1
percent were delivered out of the Company's backlog of preneed
funerals, as compared to 19.8 percent in the third quarter of 1999.
* Domestic cremations as a percentage of total domestic funerals
performed were 37.0 percent compared to 34.6 percent in the comparable
period of 1999.
FUNERAL RESULTS - YEAR-TO-DATE
* Funeral revenues increased 4 percent to $346.8 million compared to
$332.0 million in the first nine months of 1999.
* Funeral revenues from the Company's core operations decreased one
percent compared to the corresponding period in 1999 due primarily to
reduced preneed funeral merchandise sales.
* The Company experienced a 6.2 percent increase in the average revenue
per domestic funeral service performed by its core operations,
partially offset by a 1.9 percent decrease in the number of domestic
funeral services performed by those operations.
* Of the total funerals performed in the first nine months of 2000, 19.3
percent were delivered out of the Company's backlog of preneed
funerals, as compared to 18.6 percent in the first nine months of 1999.
* As of July 31, 2000, the Company had a backlog in excess of 400,000
preneed funerals, which are expected to generate nearly $1.5 billion in
future funeral revenue.
* Domestic cremations as a percentage of total domestic funerals
performed were 35.9 percent compared to 35.6 percent in the comparable
period of 1999.
CEMETERY RESULTS
* Cemetery revenues for the third quarter of 2000 decreased 10 percent
to $73.4 million compared to $81.6 million in the third quarter of 1999
as a result of reduced preneed cemetery property and merchandise sales.
* Cemetery revenues for the first nine months of 2000 decreased 7
percent to $216.8 million compared to $234.2 million in the first nine
months of 1999 as a result of reduced preneed cemetery property and
merchandise sales.
-more-
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.
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 626 funeral homes and 163 cemeteries in North America, South
America, Europe and the Pacific Rim.
Stewart Enterprises, Inc. will host its quarterly conference call for
investors to discuss third quarter results today at 10 a.m. Central
Standard Time. The teleconference dial-in number is (800) 982-3472. From
outside the continental United States, call (703) 871-3022. Interested
parties may also listen to the live conference call via the Internet
through Stewart Enterprises' website at HTTP://WWW.STEWARTENTERPRISES.COM.
To participate, please call the number or go to the website at least 15
minutes prior to the call. A replay of the call will be available on the
Company's website until October 6, 2000. All investor information is
available at HTTP://WWW.STEWARTENTERPRISES.COM.
_____________________________________________________________________________
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 economy, death rate,
competition and consumer preferences in the Company's domestic and foreign
markets; the Company's ability to increase prices, retain market share, and
meet preneed sales targets; financial market conditions, including stock and
bond prices and interest rates; the Company's ability to access capital
markets including the secondary equity and debt markets; the Company's
ability to achieve economies of scale and manage growth; the performance of
acquired businesses; the Company's success with its internal growth
strategies, operating initiatives, and cash flow initiatives; the effects and
timing of possible asset sales and the implementation of SAB 101; the
Company's ability to enter new markets; the effect of unanticipated legal
proceedings and unanticipated outcomes of legal proceedings; and changes in
accounting policies and practices adopted voluntarily or required to be
adopted by generally accepted accounting principles. Such factors, and
others, are more fully described in Item 5 of the Company's Form 10-Q for the
quarter ended April 30, 2000. The Company assumes no obligation to update
information contained herein.
###
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<TABLE>
<CAPTION>
STEWART ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended July 31,
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2000 1999
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<S> <C> <C>
Revenues:
Funeral $ 108,448 $ 112,099
Cemetery 73,375 81,622
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Total revenues 181,823 193,721
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Costs and expenses:
Funeral 81,024 80,668
Cemetery 54,864 59,379
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Total costs and expenses 135,888 140,047
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Gross profit 45,935 53,674
Corporate general and administrative expenses 4,796 5,012
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Operating earnings 41,139 48,662
Interest expense, net (14,410) (13,224)
Other income, net 1,738 1,328
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Earnings before income taxes 28,467 36,766
Income taxes 10,390 13,419
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Net earnings $ 18,077 $ 23,347
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Earnings per common share:
Basic $ 0.17 $ 0.21
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Diluted $ 0.17 $ 0.21
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Weighted average common shares outstanding (in thousands):
Basic 106,737 111,752
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Diluted 106,737 112,196
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Dividends per common share $ 0.02 $ 0.02
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</TABLE>
<TABLE>
<CAPTION>
STEWART ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
Nine Months Ended July 31,
----------------------------
2000 1999
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<S> <C> <C>
Revenues:
Funeral $ 346,835 $ 332,031
Cemetery 216,809 234,159
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Total revenues 563,644 566,190
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Costs and expenses:
Funeral 253,873 234,040
Cemetery 165,344 166,567
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Total costs and expenses 419,217 400,607
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Gross profit 144,427 165,583
Corporate general and administrative expenses 14,939 13,360
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Operating earnings 129,488 152,223
Interest expense, net (43,440) (38,718)
Other income, net 2,534 2,961
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Earnings before income taxes and cumulative effect
of change in accounting principle 88,582 116,466
Income taxes 32,332 42,510
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Earnings before cumulative effect of change in accounting principle 56,250 73,956
Cumulative effect of change in accounting principle,
net of a $28,798 income tax benefit - (50,101)
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Net earnings $ 56,250 $ 23,855
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Basic earnings per common share:
Earnings before cumulative effect of change in
accounting principle $ 0.53 $ 0.69
Cumulative effect of change in accounting principle - (0.47)
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Net earnings $ 0.53 $ 0.22
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Diluted earnings per common share:
Earnings before cumulative effect of change in
accounting principle $ 0.53 $ 0.69
Cumulative effect of change in accounting principle - (0.47)
------------- -------------
Net earnings $ 0.53 $ 0.22
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Weighted average common shares outstanding (in thousands):
Basic 106,522 107,068
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Diluted 106,540 107,604
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Dividends per common share $ 0.06 $ 0.06
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</TABLE>
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 6, 2000 /s/ KENNETH C. BUDDE
----------------------------
Kenneth C. Budde
Executive Vice President
Chief Financial Officer
