10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended October 31, 2003
OR

(  ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 1-15449

STEWART ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

LOUISIANA (State or other jurisdiction of incorporation or organization)	72-0693290 (I.R.S. Employer Identification 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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Class A Common Stock, No Par Value
Preferred Stock Purchase Rights
(Title of Class)

     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 (  )

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X)

     Indicate by check mark whether the Registrant is an accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934.
Yes (X) No (  )

     The aggregate market value of the voting stock held by non-affiliates (affiliates being, for this purpose only, directors, executive officers and holders of more than 5 percent of the Company’s Class A common stock) of the Registrant as of April 30, 2003, was approximately $259,000,000.

     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 January 2, 2004, was 104,175,441 and 3,555,020, respectively.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the proxy statement in connection with the 2004 annual meeting of shareholders are incorporated in Part III of this Report.

TABLE OF CONTENTS

PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 4(a). Executive Officers of the Registrant
PART II
	Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements with Accountants in Accounting and Financial Disclosure
	Item 9A. Controls and Procedures
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
	Item 14. Principal Accounting Fees and Services
PART IV
	Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
Exhibit Index
By-laws of the Company
Calculation of Ratio of Earnings to Fixed Charges
Code of Business Conduct and Ethics
Subsidiaries of the Company
Consent of PricewaterhouseCoopers LLP
Cert.of William E. Rowe Pursuant to Section 302
Cert.of Kenneth C. Budde Pursuant to Section 302
Certifications Pursuant to Section 906

Cautionary Note

     This annual report contains forward-looking statements of our management regarding factors that we believe may affect our performance in the future. Such statements typically are identified by terms expressing our future expectations or projections of revenues, earnings, earnings per share, cash flow, market share, capital expenditures, effects of operating initiatives, gross profit margin, debt levels, interest costs, tax benefits and other financial items. All forward-looking statements, although made in good faith, are based on assumptions about future events and are therefore inherently uncertain, and actual results may differ materially from those expected or projected. Important factors that may cause our actual results to differ materially from expectations or projections include those described under the heading “Cautionary Statements” in Item 7. Forward-looking statements speak only as of the date of this report, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

PART I

Item 1. Business

General

     Founded in 1910, we are the third largest provider of funeral and cemetery products and services in the death care industry in the United States. Through our subsidiaries, we provide a complete range of funeral merchandise and services, along with cemetery property, merchandise and services, both at the time of need and on a preneed basis. As of October 31, 2003, our operations included 299 funeral homes and 148 cemeteries in 29 states within the United States and in Puerto Rico.

     During the past four years, we have focused on improving our credit profile, reducing debt, increasing cash flow and selling our foreign operations. We refinanced a significant portion of our long-term debt, substantially extending our long-term maturities. We sold our foreign operations and used the proceeds, along with cash flow, to reduce our debt from $950.5 million as of November 1, 2000 to $467.2 million as of January 2, 2004. Having substantially achieved these financial goals at the end of fiscal year 2002, we began positioning ourselves for business expansion in fiscal year 2003. After the end of the first fiscal quarter of 2003, we announced that our business was adversely affected by decreased deaths, low levels of consumer confidence and depressed stock prices and returns on fixed income investments. As we await further improvements in the economy, financial markets and normalized mortality trends, we have remained focused on improving operational performance, generating cash and reducing debt. In that regard, in September 2003, we announced a new set of operating initiatives. The operating initiatives include growth in the number of funeral events performed, increased cemetery property sales volume, cost improvements and employee development initiatives. As part of our cost improvement initiatives, in December 2003 we announced a reduction and restructuring of our workforce. Also during the fourth quarter of 2003, we identified a number of small businesses to close or sell. For further discussion of these new operating initiatives, see “Business Strategy.”

     For fiscal year 2003, funeral operations accounted for approximately 57 percent of our total revenues, and cemetery operations accounted for the remaining 43 percent. Our funeral homes offer a wide range of services and products including funeral services, cremation, transportation services, removal and preparation of remains, caskets and flowers. Our cemetery operations sell cemetery property, merchandise and services. Cemetery property includes lots, lawn crypts and family and community mausoleums. Cemetery merchandise includes vaults, monuments and markers. Cemetery services include burial site openings and closings and inscriptions.

     We believe that we operate one or more of the premier death care facilities in each of our principal markets. Our funeral homes and cemeteries are located primarily in the Southern, Western, Mid-Atlantic, and Mid-Western states, generally in large metropolitan areas such as Miami, Orlando, Tampa and St. Petersburg, Florida; Dallas, Fort Worth and Houston, Texas; Los Angeles, San Diego and San Francisco, California; New Orleans, Louisiana; Baltimore, Maryland and the District of Columbia. According to the United States Bureau of the Census, many of these areas have a large population over age 65, which represents a principal target market for our preneed sales program as well as at-need sales. We believe that we are an industry leader in marketing preneed cemetery property and preneed funeral and cemetery merchandise and services, and we consider preneed sales to be an integral part of

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our long-term business strategy.

     Cemetery operations account for a significantly larger percentage of our total revenues than those of our three largest competitors. We believe cemeteries provide the best foundation for securing long-term market share in our industry. The sale of cemetery property to a family creates a relationship that builds heritage over time, as family members are buried in a plot or mausoleum and as other family members purchase additional cemetery property in order to be buried in the same cemetery. Our relationships with our cemetery property customers allow us to offer related products and services, such as cemetery merchandise and funeral services, at one of our businesses located on the cemetery grounds or nearby.

     We believe that our combination operations help to increase market share. By building new funeral homes on existing cemetery property, we are able to offer families the convenience of complete funeral home and cemetery planning, services and merchandise from a single location at a competitive price at the time of need or on a preneed basis. Approximately 47 percent of our cemeteries have a funeral home onsite that we operate in conjunction with the cemetery. In addition to our combination operations, approximately 38 percent of our cemeteries are located within the same market as, and operated in conjunction with, one or more of our nearby funeral homes. We frequently organize our operating units in “clusters,” which are geographically integrated groups of funeral homes and cemeteries, allowing us to cost-effectively pool resources, such as assets, personnel and services, and generate higher margins.

     Our business was founded by the Stewart family in 1910, and was incorporated as a Louisiana corporation in 1970. Our principal executive offices are located at 110 Veterans Memorial Boulevard, Metairie, Louisiana 70005, and our telephone number is 504-837-5880. Our website address is www.stewartenterprises.com, where all of our public filings are available free of charge on the same day they are filed with the Securities and Exchange Commission (“SEC”). The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The SEC’s website address is www.sec.gov.

The Death Care Industry

     Industry consolidation. Death care businesses in the United States have traditionally been relatively small, family-owned enterprises that have passed through successive generations within the family. The past decade witnessed a trend of family-owned firms consolidating with larger organizations. However, this trend slowed in 1999. As industry conditions precipitated a reduction in the number of major consolidators participating in the acquisition market, those that remained generally applied significantly tighter pricing criteria, and many potential sellers withdrew their businesses from the market rather than pursuing transactions at lower prices.

     During the first quarter of 1999, Service Corporation International, one of our primary competitors for acquisitions, announced plans to significantly reduce the level of its acquisition activity. The Loewen Group, Inc., now reorganized as Alderwoods Group, Inc., previously a primary competitor for acquisitions, entered into bankruptcy proceedings on June 1, 1999, after announcing that it had terminated its acquisition activity and was offering a number of its own properties for sale. In addition, Equity Corporation International, previously the fourth largest public death care company and another of our competitors for acquisitions, merged with Service Corporation International in 1999.

     Throughout fiscal year 1999, we continually reduced our acquisition pricing multiples. In the third quarter of fiscal year 1999, our acquisition activity began to decrease substantially from prior quarters as many potential sellers were not willing to sell their businesses at the lower prices.

     As the business model shifted, death care consolidators experienced diminishing access to capital. In response to these changes, we ceased our acquisition activity and developed strategies for improving our cash flow and

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reducing and restructuring debt. During the past four years, we focused on debt reduction and cash flow, and we have completed our transitional strategies of improving our cash flow, restructuring our debt, selling our foreign assets and substantially reducing our debt.

     We estimate that our industry, which consists of approximately 22,000 funeral homes and 10,500 cemeteries in the United States, collectively generates approximately $15 billion in annual revenue. Our industry continues to be characterized by a large number of locally-owned, independent operations, with approximately 80 percent of industry revenue being generated by independently-owned operations. At current stock prices, stock repurchases and debt reduction continue to be more attractive uses of our cash flow than acquisitions. However, we believe that growing our organization through acquisitions will continue to be a good business strategy, as we enjoy the important synergies and economies of scale from our infrastructure. When we choose to enter the acquisition arena again, we intend to acquire premier facilities that are profitable and have the potential to continue to grow in their markets.

     Importance of tradition; barriers to entry. We believe it is difficult for new competitors to enter existing markets successfully by opening new cemeteries and funeral homes. Entry into the cemetery market can be difficult due to several factors. Because families tend to return to the same cemetery for multiple generations to bury family members, it is difficult for new cemeteries to attract families. Additionally, mature markets, including many of the metropolitan areas where our cemeteries are located, are often served by an adequate number of existing cemeteries with sufficient land for additional plots, whereas land for new cemetery development is often scarce and expensive. Regulatory complexities and zoning restrictions also make entry into the cemetery market difficult. Finally, development of a new cemetery usually requires a significant capital investment that takes several years to produce a return. Entry into the funeral home market can be difficult for many of the same reasons. Families are often willing to move from an existing funeral home to a newer facility developed on the grounds of their preferred cemetery; however, absent that connection, families tend to choose the funeral home that previously served their family. Families also choose a funeral home because of its reputation, which can only be developed over time.

     Continuing need for products and services; increasing number of deaths. There is an inevitable need for our products and services. Although the number of deaths in the United States will reflect short-term fluctuations, deaths in the United States are expected to increase at a steady, moderate pace over the long-term. According to the United States Bureau of the Census, the number of deaths in the United States is expected to increase by approximately 1 percent per year, from 2.4 million in 2000 to 2.6 million in 2010. Furthermore, the average age of the population in the United States is increasing. According to the United States Bureau of the Census, the United States population over 50 years of age is expected to increase by approximately 2 percent per year, from 76.1 million in 2000 to 97.1 million in 2010. We believe the aging of the population is particularly important because it expands our target market for preneed sales, as persons over the age of 50 are the most likely group to make preneed funeral and cemetery arrangements.

     Growing demand for cremation. Consumer preferences in the death care industry tend to change slowly. One significant trend in the United States is an increasing preference of consumers for cremations. Industry research indicates that the percentage of cremations has increased steadily and that cremations will represent approximately 36 percent of the burial market in the United States by the year 2010, compared to 27 percent in 2001. The trend toward cremations has been a significant concern for traditional funeral home and cemetery operators because cremations have typically included few, if any, additional products or services other than the cremation itself. However, industry research has shown that consumers most commonly choose cremation over traditional funerals for reasons other than cost, and we believe that cremations also provide our company with an opportunity to offer families an array of additional products and services with an emphasis on customization.

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     Growing demand for customization. Our market research and operational experience indicate a growing demand for increased personalization of death care products and services, presenting an opportunity for enhancing our customer’s satisfaction and increasing our revenue per sale through our custom funeral planning program. We believe that our early identification of and response to this trend is a competitive advantage for our company, as described below in “Competitive Strengths.”

Competitive Strengths

     Leading market positions. We are the third largest provider of funeral and cemetery products and services in the United States and have been in business for more than 90 years. We believe that we operate one or more of the premier death care facilities in each of our principal markets, which are primarily in larger metropolitan areas in the Southern, Western, Mid-Atlantic and Mid-Western states. In our view, a “premier” facility is one that is among the most highly regarded facilities in its market area in terms of a number of factors such as tradition, heritage, reputation, physical size, volume of business, available inventory, name recognition, aesthetics and/or potential for development or expansion. While funeral homes and cemeteries in the United States perform an average of approximately 100 funerals and 165 burials per year, our facilities perform an average of approximately 260 funerals and 375 burials per year. In addition, more than 41 percent of our properties are located in California, Florida and Texas, which are three of the four states with the highest populations over age 65, an age group that represents a large portion of our target market.

     Strong cemetery operations. Our cemetery operations account for approximately 43 percent of our total revenues, which is a significantly larger percentage than any of our three largest competitors. We believe this is a competitive advantage because families generally return to the same cemetery for multiple generations to bury family members. Cemetery property often becomes an important part of a family’s heritage, and family members who relocate are often returned to their home cemetery to be buried. We build on our relationships with our cemetery customers by offering additional cemetery property to related family members and by offering related products and services such as cemetery merchandise and funeral services at one of our funeral homes located on the cemetery grounds or nearby. Approximately 39 percent of our total cemetery acreage is available for future development.

     Emphasis on combination operations. Approximately 47 percent of our cemeteries have a funeral home onsite that is operated in conjunction with the cemetery, which we refer to as a combination operation. This is a higher percentage of combination operations than any of our three largest competitors. We believe combination operations represent a competitive advantage because they offer families the convenience of complete death care services at a single location. A family that is planning a burial in one of our cemeteries often perceives our onsite funeral home to be a more desirable location for funeral services than an unaffiliated offsite funeral home. Thus, the call volume of the funeral home is enhanced by the heritage of the cemetery, and, over time, the volume of cemetery events increases as well. In addition, combination operations enhance our purchasing power, enable us to employ more sophisticated management systems and allow us to share facilities, equipment, personnel and a preneed sales force, resulting in lower average operating costs and expanded marketing and sales opportunities. As a result, our combination operations usually generate higher operating margins compared to our stand-alone funeral homes and cemeteries. In addition to our combination operations, approximately 38 percent of our cemeteries are located within the same market as, and operated in conjunction with, one or more of our nearby funeral homes.

     Expertise in preneed sales; strong backlog. We believe that we are distinguished from our competitors by our strong emphasis on, and more than 60-year history of experience with, preneed sales. Preneed plans enable families to specify in advance and prepay for cemetery property and funeral and cemetery services and products. We market our preneed properties, services and products domestically through a full-time staff of approximately 1,300 commissioned sales counselors. We estimate that as of October 31, 2003, the future value of our preneed backlog of funeral and cemetery products and services (including estimated earnings on funds held in trust and build-up in the face value of third-party insurance contracts, in each case using projected returns) represented approximately $2.1 billion of revenue to be recognized in the future as these prepaid products and services are

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delivered, calculated as discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7. Our expertise in preneed sales has historically developed out of, and now complements, our strong cemetery operations. This is because cemetery property, such as a burial plot, is usually the first purchase a family will make when considering preneed arrangements. We build on our relationships with our preneed cemetery property customers by offering them additional preneed products and services such as cemetery merchandise and funeral services. Our focus on preneed cemetery property sales is also important because these sales generate current revenues and higher current cash flows than other types of preneed sales.

     Emphasis on customization and personalization. During 1999 we took steps to gain a competitive advantage by placing our Company at the forefront of product offerings based on consumer preferences. We hired a major consulting firm to assist us in conducting an extensive market study evaluating changing trends in consumer preferences. With more than 2,400 interviews conducted, we believe this to be the most exhaustive recent study of consumer preferences in our industry. This project provided us with the consumer’s perspective on our operations and facilities. We gained valuable insight into how our employees, business practices and facilities can better meet consumer demand. Our implementation of new products and services based on the findings of this project continue to be positive drivers for our funeral business.

     Among other important findings, our market research indicates that consumer preferences are shifting towards more personalized memorial services and merchandise in the context of both traditional burials and cremations. We have responded to these changing preferences by, among other things, training our funeral arrangers to offer our customers a broad range of options, such as designing a funeral service to reflect the special interests or accomplishments of the deceased. We developed a custom funeral planning program and have begun to implement this program throughout our organization. By the end of fiscal year 2004, we will have implemented this program in 130 of our funeral homes. We are also changing the way our product offerings are displayed at our locations, making it easier for our customers to appreciate our wider selection. In our markets where these new business practices have been implemented, we believe that we have further differentiated ourselves from our competitors and increased our revenues per sale, and we believe that we have gained a sustainable competitive advantage by implementing these programs.

     Expertise in enhanced cremation and alternative service offerings. We acquired Sentinel Cremation Societies, Inc. of California in 1997, which operated thirteen service centers offering cremations and related products and services as a strategy for capturing the increasing market for cremations in the United States. Since that time, we have opened several additional alternative service firms, primarily in California, Oregon and Nevada, which offer value-priced cremation services. Our alternative service firm locations are generally leased and have lower overhead than traditional funeral homes. Although death care arrangements at these locations are typically more cost-effective for the consumer than services at a traditional funeral home, it is not our goal to be the low-price leader in these markets. While the average revenue for a cremation service is generally lower than that of a traditional full-service funeral, we have found that these revenues can be substantially enhanced by our emphasis on customization. For example, in addition to a personalized memorial service to celebrate the life of the deceased, an enhanced cremation may include a casket, an urn and a niche in a mausoleum or columbarium in which to place the remains. We continue to market our products and services to address the rising demand for cremations.

     Centralized support services; cost controls. Our Shared Services Center, which we opened in 1997, was developed for the standardization and centralization of all of our facilities’ administrative and support processes such as accounting, management reporting, payroll, trust administration, contract processing, accounts receivable collection and other services. It allows us to decrease our costs without diminishing service by creating significant savings on items such as trust administration fees, travel expenses, office supplies, overnight delivery and long distance. As we look at our opportunities for growth, we expect to leverage the efficiencies that we have achieved through our Shared Services Center and expect to manage much of our growth with our existing infrastructure. Additionally, at the beginning of fiscal year 2000 we developed our centralized formal training strategy and began implementation of standardized marketing programs to enhance sales effectiveness. While our centralization of resources and standardization of processes represent a competitive advantage, our management structure is designed

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to allow local funeral home directors and cemetery managers substantial flexibility in their operations and service to families in an effort to maintain the traditional structure and culture of an individually-owned operation. We believe that this is important in order to maintain the level of caring, personalized service expected by the families we serve.

     Experienced management. We have an experienced management team, many of whom owned and operated their own funeral homes and cemeteries and joined us when we acquired their businesses. Our eight top executives have an average of 32 years of experience in the death care industry and have served our company for an average of 16 years.

Business Strategy

     Implement recent operating initiatives. In fiscal year 2003, our executive management team pinpointed the key strategies that we believe will improve the future growth of our business. This led to our announcement in September 2003 of a set of new operating initiatives, which resulted in the creation of four task forces to address the following key areas: growth in the number of funeral events performed, increased cemetery property sales volume, cost improvements and employee development initiatives.

     Our funeral call volume task force is using the most successful tactics of our top performing funeral homes to develop strategies to drive funeral call growth throughout our organization with an increased focus on preneed funeral sales. We believe that the continuous addition of preneed funeral contracts to our backlog is a primary driver of sustainable long-term growth in the number of families served by our funeral homes. Following changes made in our sales organization during the summer of 2003, in the fourth quarter of 2003 we achieved a 15 percent increase in preneed funeral sales over the fourth quarter of 2002. Currently, the task force is evaluating suggestions received from employees throughout the company and will be incorporating these ideas throughout 2004.

     Our preneed cemetery property task force is strategically targeting locations with maximum potential, and developing specific plans to increase preneed property sales and attain new customers at each of the targeted locations. We view preneed property sales as the catalyst for growth in our cemetery segment as they create a new customer base for our businesses. These sales also result in high margins and produce positive cash flow. Recommendations from our preneed cemetery property task force were implemented in the third and fourth quarters of fiscal year 2003, and during the fourth quarter of 2003, our preneed sales organization achieved a 12 percent increase in property sales over the fourth quarter of 2002. We have transitioned to personalized selling, and in addition to requests generated by our media marketing campaigns, our salespeople have been successful in obtaining referrals from their existing customer base to assist new customers with their cemetery and funeral needs.

     To address cost reductions, our task force conducted in-depth reviews of cost centers outside of their areas of responsibility for the purpose of assuring that all resources were effectively utilized and determining where we could reduce costs without sacrificing long-term results. In December 2003, we restructured certain management functions and reduced our employee headcount by approximately 300 employees throughout the organization. In the markets in which we operate, declining deaths in recent years have resulted in reduced activity in many of our businesses, requiring fewer employees. Additionally, we restructured for a flatter organization to bring leadership closer to those individuals who have the greatest potential to improve the performance of each location. There are no planned reductions in the number of commissioned sales counselors. We believe the workforce reduction and the other cost reductions will not reduce the quality, service and value consistently provided to families through our funeral homes and cemeteries. These cost reduction initiatives are expected to reduce costs by $16 million to $20 million annually, partially offset by approximately $8 million to $10 million in normal inflation of costs remaining in the business. We will record a charge in the first quarter of fiscal year 2004 for severance and other costs associated with the workforce reductions in the range of $2.4 million to $2.6 million ($1.5 million to $1.6 million after tax, or $.01 per share). While we believe the implementation of these initiatives will address our most significant opportunities for near-term cost reductions, we are continuing to examine cost-saving opportunities within the company.

     The fourth initiative is to enhance employee satisfaction through professional growth, which includes the

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implementation of a mentoring program and succession plan for all key employee positions.

     In December 2003, we announced that we plan to close or sell a number of small businesses, primarily funeral homes, most of which were acquired as part of a group of facilities, that are performing below acceptable levels and no longer fit our operating profile. We have worked hard over the past few years to improve the performance of all our businesses in order to meet changing consumer needs and to manage costs in a difficult operating environment, and for the most part, these efforts have been successful. However, for various reasons — such as size, location or competitive environment — a number of our businesses do not demonstrate a capacity for improving performance through our operating strategies, and in fact, have contributed very little to our profitability. Many of these are key-man businesses, and many are subject to volatile swings in market share. We believe that the closing or sale of these businesses will enable management to focus on our most productive operations where our operating initiatives may bring about the greatest benefits in increased revenues and cash flow.

     Maintain backlog through preneed marketing. As part of the operating initiatives described above, we have increased our focus on preneed sales. We consider maintaining our backlog through preneed marketing to be an integral part of our long-term business strategy. Our primary objective is to balance our preneed sales levels and our cash investment while maintaining a sustainable and predictable level of growth in our backlog. The aging of the population represents a significant opportunity for us to expand our customer base through preneed marketing, as persons over 50 years of age are most likely to make these purchases.

     Focus on cash flow. In addition to pursuing further cost improvements, we plan to continue to focus on our cash flow through a number of initiatives begun in fiscal year 2000. In fiscal year 2000, we restructured our preneed sales program to focus on increasing cash flow. We increased finance charges, required larger down payments and shortened installment payment terms, and decreased the overall level of preneed sales but improved the quality of those sales and the associated receivables. We also suspended our dividend and implemented a more rigorous internal process for reviewing capital expenditures. We plan to continue these initiatives and continue reducing our costs by, among other things, obtaining volume discounts from suppliers and leveraging our operating costs through clustering and combination operations. Additionally, we have been incentivizing local managers to decrease costs by tying their compensation more closely to the profitability of the locations they manage.

     Deploy cash flow. We plan to continue to evaluate options for deployment of our cash flow as opportunities arise. In June 2003, we announced that our Board of Directors approved a new stock repurchase program that will allow us to invest up to $25.0 million in repurchases of our Class A common stock. As of January 2, 2004, we had repurchased 738,500 shares of our Class A common stock at an average price of $3.99 per share. At current stock prices, we believe stock repurchases and debt reduction continue to be more attractive uses of our cash flow than alternatives such as acquisitions and new business development. However, we will continue to consider acquiring high-quality cemeteries and funeral homes that are priced within our guidelines and that fit our new business model, opening new funeral homes on cemetery properties we own or entering into agreements to construct funeral homes in third-party cemeteries. As we await further improvements in the economy, financial markets and normalized mortality trends, we will remain focused on improving operational performance, generating cash and reducing debt.

     Increase enhanced cremation products and services. In fiscal years 2003 and 2002, 39 percent of the funeral services we performed in the United States and Puerto Rico were cremations, compared to 38 percent in fiscal year 2001. The cremation rate in the United States has been increasing. According to industry estimates, 27 percent of deaths in the United States during 2001 resulted in cremations, and cremations are expected to represent 36 percent of the burial market in the United States by the year 2010. As described above in “Competitive Strengths — Expertise in enhanced cremation and alternative service offerings,” we have been addressing this trend by providing enhanced cremation products and services at all of our funeral homes.

Operations

     General. We believe that we operate one or more of the premier death care facilities in each of our principal

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markets. In our view, a “premier” facility is one that is among the most highly regarded facilities in its market area in terms of a number of factors such as tradition, heritage, reputation, physical size, volume of business, available inventory, name recognition, aesthetics and/or potential for development or expansion.

     We operate most of our funeral homes and cemeteries in “clusters.” Clusters are groups of funeral homes and cemeteries located close enough to one another that their operations can be integrated to achieve economies of scale. For example, clustered facilities can share vehicles, embalming services, inventories of caskets and other merchandise and, most significantly, personnel, including prearrangement sales personnel; thus, we are able to decrease our costs and expand our sales and marketing effectiveness at each location. By virtue of their proximity to one another, clustered facilities also create opportunities for more integrated and sophisticated management of operations.

     Funeral operations. Funeral operations accounted for approximately 57 percent of our revenues for fiscal year 2003. Our funeral homes offer a complete range of funeral services and products both at the time of need and on a preneed basis. Our services and products include family consultation, removal and preparation of remains, the use of funeral home facilities for visitation, worship and funeral services, transportation services, flowers and caskets. In addition to traditional funeral services, all of our funeral homes offer cremation products and services. Most of our funeral homes have a non-denominational chapel on the premises, which allows family visitation and religious services to take place at the same location. As of October 31, 2003, we operated 299 funeral homes.

     Cemetery operations. Cemetery operations accounted for approximately 43 percent of our revenues for fiscal year 2003. Our cemetery operations involve the sale of cemetery property and related merchandise, including lots, lawn crypts, family and community mausoleums, monuments, markers and burial vaults, along with the sale of burial site openings and closings and inscriptions. Cemetery property and merchandise sales are made both at the time of need and on a preneed basis. We also maintain cemetery grounds under perpetual care contracts and local laws. As of October 31, 2003, we operated 148 cemeteries.

     Combination funeral home and cemetery operations. Approximately 47 percent of our cemeteries have a funeral home onsite that is operated in conjunction with the cemetery, which is a higher percentage of combination operations than any of our three largest competitors. Many of these facilities are in our key markets, including New Orleans, Louisiana; Dallas, Fort Worth and Houston, Texas; Miami, Orlando, Tampa and St. Petersburg, Florida; and Los Angeles and San Diego, California.

     Combination operations help to increase market share by allowing us to offer families the convenience of complete funeral and cemetery planning and services from a single location at a competitive price at the time of need or on a preneed basis. Our experience demonstrates that a family planning a burial in our cemetery often views our associated funeral home as a more desirable location for funeral services than an unaffiliated offsite funeral home. Thus, the funeral home’s sales benefit from the heritage of the cemetery, and over time, the cemetery’s activity increases as well. In addition, combination operations enhance our purchasing power, enable us to employ more sophisticated management systems and allow us to share facilities, equipment, personnel and a preneed sales force, resulting in lower average operating costs and expanded sales and marketing opportunities. Although it generally takes several years before a newly constructed funeral home becomes profitable, our experience with combination operations has demonstrated that the combination of a funeral home with a cemetery can significantly increase the market share and profitability of both.

     We have three primary strategies for growth through the use of combination operations. One strategy is to create combination operations by constructing funeral homes on the grounds of our cemeteries. Another is to enter into operating partnerships in which we construct funeral homes on the grounds of unaffiliated cemeteries, which allows us to enjoy many of the benefits of a combination operation without the capital investment of purchasing the cemetery. The cemetery revenue of our partners is enhanced as they benefit by being able to compete more effectively with other cemeteries or combination operations in the market and by providing a better service to their parishioners or other constituencies. The third strategy is to acquire combination operations.

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     Through an operating partnership with the Catholic Archdiocese of New Orleans, we constructed a mausoleum for the Catholic Church on the grounds of its combination operation in New Orleans in fiscal year 1987. We own the mausoleum and manage the sales relating to the mausoleum for the Church. Additionally, in fiscal year 1994 through an operating partnership with the Firemen’s Charitable and Benevolent Association, a non-profit organization, we constructed a funeral home and mausoleum on the grounds of its cemetery in New Orleans. We own and operate the funeral home in combination with the cemetery and manage sales for the mausoleum. In 1997, we entered into an agreement with the Archdiocese of Los Angeles to construct and operate funeral homes on land we lease from the Archdiocese at the site of up to nine cemeteries owned and operated by the Archdiocese. As of October 31, 2003, five of these funeral homes had been completed, and two have begun the permitting process.

     Over the last 50 years, through our mausoleum construction business, we have developed relationships with the Catholic Church in approximately 70 dioceses in 39 states. We plan to pursue more of these partnerships with the Catholic Church, other faith-based organizations and non-profit entities. We also plan to develop additional combination operations on our own cemetery properties as well as pursuing the acquisition of privately-owned combination operations.

     Cremation. In fiscal year 2003, 39 percent of the funeral services we performed in the United States and Puerto Rico were cremations. The increasing preference of consumers for cremations is a significant trend in the United States. Industry research indicates that the percentage of cremations has steadily increased and that cremations will represent approximately 36 percent of the burial market in the United States by the year 2010, compared to 27 percent in 2001. We have been addressing this trend by providing enhanced cremation products and services at all of our funeral homes, including funeral services and memorialization for families choosing cremation. We are also addressing this trend through our alternative service firm strategy as discussed above in “Competitive Strengths - Expertise in enhanced cremation and alternative service offerings.”

     Preneed arrangements. We market death care products and services domestically on a preneed basis through a full-time staff of approximately 1,300 commissioned sales counselors. Preneed plans enable families to specify in advance and prepay for funeral and cemetery arrangements. Prearrangements spare families the emotional strain of making death care decisions at the time of need. The products and services included in preneed contracts are set at prices prevailing at the time the agreement is signed rather than when the products and services are delivered. As described under the heading “Summary of Current Accounting for Preneed Sales” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” customer payments related to these contracts are generally placed in trust funds and invested or are used to purchase insurance policies to cover the cost of the future delivery of products and services. When the service or merchandise is delivered, we realize the full contract amount plus all accumulated trust earnings associated with that contract or the buildup in the face value of the insurance contract, generally offsetting increases in our costs due to inflation.

     We estimate that as of October 31, 2003, the future value of our preneed backlog (including estimated earnings on funds held in trust and build-up in the face value of third-party insurance contracts, in each case using projected returns) represented approximately $2.1 billion of revenue to be recognized in the future as these prepaid products and services are delivered, calculated as discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7.

     Trust funds and escrow accounts. We maintain three types of trust funds and escrow accounts: (1) preneed funeral merchandise and services, (2) preneed cemetery merchandise and services and (3) perpetual care. For further discussion of these trust funds and escrow accounts, see Notes 4 and 5 to the consolidated financial statements included in Item 8 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7. As of October 31, 2003, the market value of our preneed funeral merchandise and services trust funds and escrow accounts totaled approximately $463.5 million, the market value of our preneed cemetery merchandise and services trust funds and escrow accounts totaled approximately $187.5 million, and the market value of our perpetual care trust funds totaled approximately $202.1 million.

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     We believe that the balances in our trust funds and escrow accounts, along with insurance proceeds, installment payments due under contracts and future earnings on the balances, will be sufficient to cover our estimated cost of providing the related preneed services and products in the future (see “Cautionary Statements” included in Item 7).

     Generally, our wholly-owned subsidiary, Investors Trust, Inc. (“ITI”), a Texas corporation with trust powers, serves as investment advisor on our investment portfolio and our prearranged funeral, merchandise and perpetual care trust funds and escrow accounts. ITI provides investment advisory services exclusively to us. ITI is registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. As of October 31, 2003, ITI had approximately $893.8 million in assets under management. Lawrence B. Hawkins, one of our executive officers and a professional investment manager, serves as President of ITI. ITI operates with the assistance of third-party professional financial consultants pursuant to a formal investment policy established by the Investment Committee of our Board of Directors. The policy emphasizes conservation, diversification and preservation of principal while seeking appropriate levels of current income and capital appreciation.

     Management. We have an experienced management team, many of whom joined us through acquisitions. Our management structure is designed to allow local funeral home directors and cemetery managers substantial flexibility in deciding how their businesses will be managed and how their products and services will be priced and merchandised. At the same time, financial and strategic goals are established by management at the corporate level. We provide business support services primarily through our Shared Services Center, which opened in 1997 and provides centralized and standardized accounting, management reporting, payroll, contract processing, accounts receivable collection and other services for all of our facilities. In December 2003, we announced plans to restructure certain management functions and reduce our employee headcount by approximately 300 employees throughout the organization as discussed above.

     Currently, we are divided into four operating divisions in the United States, each of which is managed by a division president and chief financial officer. These divisions are further divided into regions, each of which is managed by an area vice president. We also have a Corporate Division, which manages our corporate services, accounting, financial operations and strategic planning. Early in fiscal year 2000, we formed a Sales and Marketing Division to centralize responsibility for sales teams in all operating divisions and to allow for more comprehensive training and sharing of information. From time to time, we may increase, reduce or realign our divisions and regions.

     During fiscal year 2003, Frank B. Stewart, Jr., who had served as Chairman of our Board of Directors for 19 years, became Chairman Emeritus, and William E. Rowe, the company’s President and Chief Executive Officer, was elected as Chairman. Mr. Rowe also assumed responsibility for the day-to-day operations of the business, which was previously the responsibility of the company’s chief operating officer.

     Foreign operations. In fiscal year 2001, we began to sell our foreign operations as part of our strategy to reduce debt and focus on our core businesses. During fiscal year 2001, we sold our Mexican, Australian, New Zealand, Belgian and Dutch operations comprised of 94 funeral homes and 2 cemeteries. During fiscal year 2002, we sold our remaining foreign operations located in Spain, Portugal, France, Canada and Argentina, which consisted of 196 funeral homes and 8 cemeteries.

     Financial information about industry and geographic segments. For financial information about our industry and geographic segments for fiscal years 2003, 2002 and 2001, see Note 19 to our consolidated financial statements included in Item 8.

Competition

     Our funeral home and cemetery operations generally face intense competition in local markets that typically are served by numerous funeral home and cemetery firms. We also compete with monument dealers, casket retailers,

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low-cost funeral providers and crematories, and other non-traditional providers of limited services or products. Market share is largely a function of goodwill, family heritage and tradition, although competitive pricing, professional service and attractive, well-maintained and conveniently-located facilities are also important. Because of the significant role of goodwill and tradition, market share increases are usually gained over a long period of time. Extensive marketing through media advertising, direct mailings and personal sales calls has increased in recent years, especially with respect to the sales of preneed funeral services. Information about our sales and marketing approach can be found above under the heading “Business Strategy.” Traditional cemetery and funeral service operators face competition from the increasing number of cremations in the United States. Additional information about the trend towards cremation and our strategies to address that trend can be found under the headings “The Death Care Industry,” “Competitive Strengths” and “Business Strategy.”

Regulation

     Our funeral home operations are regulated by the Federal Trade Commission (the “FTC”) under the FTC’s Trade Regulation Rule on Funeral Industry Practices, 16 CFR Part 453 (the “Funeral Rule”), which went into effect on April 30, 1984, and was revised effective July 19, 1994. The FTC is reviewing the Funeral Rule and has conducted hearings to receive input from industry and consumer groups. At this time, the FTC has not issued any proposed changes to the regulation.

     The Funeral Rule defines certain acts or practices as unfair or deceptive and contains certain requirements to prevent these acts or practices. The preventive measures require a funeral provider to give consumers accurate, itemized price information and various other disclosures about funeral goods and services and prohibit a funeral provider from: (1) misrepresenting legal, crematory and cemetery requirements; (2) embalming for a fee without permission; (3) requiring the purchase of a casket for direct cremation; and (4) requiring consumers to buy certain funeral goods or services as a condition for furnishing other funeral goods or services.

     Our operations are also subject to extensive regulation, supervision and licensing under numerous federal, state and local laws and regulations. For example, state laws impose licensing requirements for funeral homes and funeral directors and regulate preneed sales. Our embalming facilities are subject to stringent environmental and health regulations. We have a department that monitors compliance, and we believe that we are in substantial compliance with the Funeral Rule and all such laws and regulations. Federal, state and local legislative bodies and regulatory agencies frequently propose new laws and regulations, some of which could have a material effect on our operations and on the death care industry in general. We cannot predict the outcome of any proposed legislation or regulation or the effect that any such legislation or regulation might have on us.

Employees

     We currently employ approximately 6,000 persons, and we believe that we maintain a good relationship with our employees. Approximately 98 of our employees are represented by labor unions or collective bargaining units. In December 2003, we announced a reduction and restructuring of our workforce, which reduced the number of our employees by approximately 300. Additional information about our restructuring and workforce reduction can be found under the heading “Business Strategy.”

Item 2. Properties

     As of October 31, 2003, approximately 73 percent of our 299 funeral home locations were owned by our subsidiaries, and approximately 27 percent were held under operating leases. The leased properties have terms ranging from 1 to 16 years, except for six leases that expire between 2032 and 2039. Generally, we have a right of first refusal and an option to purchase the leased premises. An aggregate of $4.1 million of our term notes are secured by mortgages on some of our funeral homes; these notes were either assumed by us upon our acquisition of the property or represent seller financing for the acquired property.

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     As of October 31, 2003, we owned 148 cemeteries covering a total of approximately 10,286 acres. Approximately 39 percent of the total acreage is available for future development.

     Our corporate headquarters occupy approximately 21,500 square feet of leased office space in a building in suburban New Orleans. In addition, we own a 97,300 square foot building in suburban New Orleans that we use for our Shared Services Center, Human Resources, Communications, Internal Audit and Information Systems Departments.

     As of October 31, 2002, we had sold all of our foreign operations. See the section above entitled “Operations - Foreign operations.”

Item 3. Legal Proceedings

     We and certain of our subsidiaries are party to a number of legal proceedings that have arisen in the ordinary course of business. While the outcome of these proceedings cannot be predicted with certainty, we do not expect these matters to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

     We carry insurance with coverages and coverage limits that we believe to be appropriate for our business. Although we give no assurance that this insurance is sufficient to protect us against all contingencies, we believe that our insurance protection is reasonable in view of the nature and scope of our operations.

Item 4. Submission of Matters to a Vote of Security Holders

None.

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Item 4(a). Executive Officers of the Registrant

     The following table sets forth certain information with respect to our executive officers. Each of the following has served in the capacity indicated for more than five years, except as indicated below.

Name	Age		Position
William E. Rowe		57	Chairman of the Board, Chief Executive Officer and President (1)
Kenneth C. Budde		56	Executive Vice President, Chief Financial Officer and Director
Brent F. Heffron		54	Executive Vice President and President—Southern Division
Lawrence B. Hawkins		55	Executive Vice President and President—Investors Trust, Inc.
Michael K. Crane, Sr.		60	Senior Vice President and President—Central Division(2)
G. Kenneth Stephens, Jr.		42	Senior Vice President and President—Eastern Division(3)
Randall L. Stricklin		59	Senior Vice President and President—Western Division(4)
Everett N. Kendrick		62	Senior Vice President and President—Sales and Marketing Division(5)

(1)	Mr. Rowe has served as Chairman of the Board since September 2003, as Chief Executive Officer since November 16, 1999 and as President since November 1, 1994. He was also Chief Operating Officer from April 1994 until November 15, 1999.
(2)	Mr. Crane has served as Senior Vice President and President of our Central Division since May 11, 2000. Prior to that time, he served as Chief Operating Officer of the Southern Region of our Central Division since June 15, 1995.
(3)	Mr. Stephens has served as Senior Vice President and President of our Eastern Division since January 31, 2000. From January 1, 1997 to January 30, 2000, he served as Chief Operating Officer of the Southern Region of our Eastern Division.
(4)	Mr. Stricklin has served as Senior Vice President and President of our Western Division since April 20, 2000. From August 10, 1999 to April 19, 2000, he served as Chief Operating Officer of the Southern Region of our Western Division. From November 1, 1998 to August 9, 1999, he served as Chief Operating Officer of the Catholic Mortuaries.
(5)	Mr. Kendrick has served as Senior Vice President and President of our Sales and Marketing Division since January 31, 2000. From December 1, 1996 to January 30, 2000, he served as Chief Operating Officer of the Northern Region of our Eastern Division.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

Market Information

     Our Class A common stock trades on the Nasdaq National Market under the symbol STEI. On January 2, 2004, the closing sale price as reported by the Nasdaq National Market was $5.76. The following table sets forth, for the periods indicated, the range of high and low sale prices, as reported by the Nasdaq National Market. As of January 5, 2004, there were 1,431 record holders of our Class A common stock. Record holders included persons holding Class A common stock on behalf of one or more beneficial owners who are not holders of record.

		High		Low
Fiscal Year 2003
	Fourth Quarter	$	4.70	$	3.79
	Third Quarter		4.78		2.90
	Second Quarter		5.54		2.38
	First Quarter		6.03		5.00
Fiscal Year 2002
	Fourth Quarter	$	5.80	$	4.26
	Third Quarter		6.75		4.58
	Second Quarter		6.52		5.10
	First Quarter		6.70		5.68

Dividends

     We declared quarterly dividends of $.02 per share on our Class A and Class B common stock during the first three quarters of fiscal year 2000. On October 5, 2000, our Board of Directors suspended the payment of quarterly dividends on our common stock. The declaration and payment of dividends is at the discretion of our Board of Directors and will depend upon our results of operations, financial condition, cash requirements, future prospects and other factors deemed relevant by the Board. Our credit agreement and senior subordinated notes restrict our ability to pay dividends on our common stock. See Note 13 to the consolidated financial statements included in this report.

Sales of Unregistered Equity Securities

     During fiscal year 2003, we did not sell any unregistered equity securities.

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Issuer Purchases of Equity Securities

					Total number of		Maximum approximate
					shares purchased		dollar value of shares
	Total number				as part of		that may yet be
	of shares		Average price		publicly-announced		purchased under the
Period	purchased		paid per share		plans or programs(1)		plans or programs
August 1, 2003 through August 31, 2003		181,500	$	3.95		181,500	$	24,283,308
September 1, 2003 through September 30, 2003		147,700	$	4.10		147,700	$	23,677,426
October 1, 2003 through October 31, 2003		409,300	$	3.98		409,300	$	22,049,945
Total		738,500	$	3.99		738,500	$	22,049,945

⁽¹⁾ On June 26, 2003, we announced that our Board of Directors had approved a new stock repurchase program that will allow us to invest up to $25.0 million in repurchases of our Class A common stock. The repurchases are limited to our Class A common stock and will be made in the open market or in privately negotiated transactions at such times and in such amounts as management deems appropriate, depending on market conditions and other factors.

Item 6. Selected Financial Data

     The following selected consolidated financial data for the fiscal years ended October 31, 1999 through October 31, 2003 are derived from our audited consolidated financial statements. The data set forth below should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7.

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Selected Consolidated Financial Data
(Dollars in thousands, except per share amounts)

			Year Ended October 31, (1)
			2003(2)			2002			2001			2000			1999
Statement of Earnings Data:
Revenues:
	Funeral		$	298,569		$	345,200		$	410,253		$	451,852		$	445,877
	Cemetery			223,489			236,121			256,680			282,949			310,231
		Total revenues		522,058			581,321			666,933			734,801			756,108
Gross profit:
	Funeral			70,682			88,151			91,645			116,689			126,875
	Cemetery			49,689			56,633			59,542			62,351			83,526
		Total gross profit		120,371			144,784			151,187			179,040			210,401
Corporate general and administrative expenses				(20,183	)		(17,261	)		(18,020	)		(19,763	)		(19,161	)
Loss on assets held for sale and other charges				—			(18,500	)(5)		(269,158	)(6)		—			—
Impairment of goodwill and long-lived assets				(107,300	)(3)		—			—			—			—
	Operating earnings (loss)			(7,112	)(3)		109,023	(5)		(135,991	)(6)		159,277			191,240
Interest expense				(53,478	)		(62,339	)		(63,572	)		(61,394	)		(54,708	)
Loss on early extinguishment of debt				(11,289	)(4)		—			(9,120	)(7)		—			—
Investment income				287			505			5,212			5,110			2,534
Other income, net				2,122			2,132			7,170			2,194			3,485
	Earnings (loss) before income taxes and cumulative effect of change in accounting principles		$	(69,470	)(3)(4)	$	49,321	(5)	$	(196,301	)(6)(7)	$	105,187		$	142,551
	Earnings (loss) before cumulative effect of change in accounting principles		$	(73,468	)(3)(4)	$	31,866	(5)	$	(158,656	)(6)(7)	$	66,794		$	90,520
Cumulative effect of change in accounting principles (net of $166,669 and $28,798 income tax benefit in 2001 and 1999, respectively)				—			—			(250,004	)(1)		—			(50,101	)(1)
Net earnings (loss)			$	(73,468	)(3)(4)	$	31,866	(5)	$	(408,660	)(6)(7)	$	66,794		$	40,419
Per Share Data:
Basic earnings (loss) per common share:
	Earnings (loss) before cumulative effect of change in accounting principles		$	(.68	)(3)(4)	$	.30	(5)	$	(1.48	)(6)(7)	$	.63		$	.84
	Cumulative effect of change in accounting principles			—			—			(2.33	)(1)		—			(.47	) (1)
	Net earnings (loss)		$	(.68	) (3)(4)	$	.30	(5)	$	(3.81	)(6)(7)	$	.63		$	.37
Diluted earnings (loss) per common share:
	Earnings (loss) before cumulative effect of change in accounting principles		$	(.68	)(3)(4)	$	.29	(5)	$	(1.48	)(6)(7)	$	.63		$	.84
	Cumulative effect of change in accounting principles			—			—			(2.33	)(1)		—			(.47	)(1)
	Net earnings (loss)		$	(.68	)(3)(4)	$	29	(5)	$	(3.81	)(6)(7)	$	.63		$	.37

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		Year Ended October 31, (1)
		2003(2)		2002		2001		2000		1999
Weighted average common shares outstanding (in thousands):
	Basic		108,220		107,861		107,355		106,600		107,452
	Diluted		108,220		108,299		107,355		106,603		107,834
Dividends declared per common share		$	—	$	—	$	—	$	.06	$	.08

(continued)

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Selected Consolidated Financial Data
(Dollars in thousands, except per share amounts)

			Year Ended October 31, (8)
			2000		1999
Pro forma amounts assuming 2001 change in accounting principles was applied retroactively:
	Net earnings		$	57,449	$	65,329
		Basic earnings per common share	$	.54	$	.61
		Diluted earnings per common share	$	.54	$	.61

		October 31,
		2003(2)		2002(9)		2001(1)(10)		2000		1999
Balance Sheet Data:
	Assets	$	2,898,989	$	3,015,584	$	3,238,407	$	2,476,191	$	2,283,880
	Long-term debt, less current maturities		488,180		542,548		684,036		920,670		938,831
	Shareholders’ equity		738,859		812,263		752,060		1,074,657		1,056,612

Selected Consolidated Operating Data

			Year Ended October 31,
			2003(2)		2002(9)		2001(10)		2000		1999
Operating Data:
	Funeral homes in operation at end of period			299		307		516		627		635
	At-need funerals performed			49,396		71,897		103,952		111,136		111,250
	Prearranged funerals performed			22,538		24,314		26,682		27,042		26,490
		Total funerals performed		71,934		96,211		130,634		138,178		137,740
	Prearranged funerals sold			28,563		31,270		36,417		48,844		58,430
	Backlog of prearranged funerals at end of period			347,785		349,110		392,986		446,158		436,499
	Cemeteries in operation at end of period			148		150		159		163		157
	Interments performed			53,830		57,405		60,347		60,636		57,263

(1)

Effective November 1, 2001, we implemented Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” which eliminated the amortization of goodwill. Effective November 1, 2000, we changed our methods of accounting for prearranged sales activities in accordance with Staff Accounting Bulletin (“SAB”) No. 101 (2001 change in accounting principles). Effective November 1, 1998, we changed our method of accounting for earnings realized on our irrevocable prearranged funeral trust funds and escrow accounts (1999 change in accounting principle). For further details, see Note 3 to our consolidated financial statements included in Item 8. Information presented for fiscal years 2003 and 2002 reflects the implementation of SFAS No. 142; information for fiscal year 2001 reflects the 2001 change in accounting principles; and information presented for fiscal years 2000 and 1999 reflects the 1999 change in accounting principle.

(2)

Factors that we expect to impact our results in fiscal year 2004 and that we believe are reasonably likely to cause variances from our fiscal year 2003 results are discussed in the section entitled “Forward-Looking Statements” in Item 7. Other factors not currently anticipated by us could also cause future results to vary materially from past performance.

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(3)	In the fourth quarter of 2003, we incurred $107.3 million in noncash impairment charges, which consisted of a goodwill impairment charge of $73.0 million ($66.9 million after tax, or $.62 per share) and an impairment charge related to certain long-lived assets of $34.3 million ($30.2 million after tax, or $.28 per share). See Note 12 to the consolidated financial statements included in Item 8.
(4)	In the third quarter of 2003, we incurred an $11.3 million ($7.3 million after tax, or $.07 per share) charge related to the redemption of our Remarketing Or Redeemable Securities (“ROARS”). See Note 13 to the consolidated financial statements included in Item 8.
(5)	In the third quarter of 2002, primarily as a result of the significant devaluation of the Argentine peso and the depressed economic conditions in Argentina, we re-evaluated the expected loss on the disposition of assets held for sale, and we incurred a noncash charge of $18.5 million ($11.2 million after tax, or $.10 per share). See Note 11 to the consolidated financial statements included in Item 8.
(6)	In the third quarter of 2001, we incurred a noncash charge of $269.2 million ($205.1 million after tax, or $1.91 per share) primarily related to the writedown of assets held for sale to their estimated fair values. See Note 11 to the consolidated financial statements included in Item 8.
(7)	During the third quarter of fiscal year 2001, we incurred a charge for the loss on early extinguishment of debt in connection with our debt refinancing that occurred in June 2001. See Note 13 to the consolidated financial statements included in Item 8.
(8)	The pro forma data presented for fiscal years 1999 and 2000 are reported as if the 2001 change in accounting principles had occurred at the beginning of each of those years.
(9)	During fiscal year 2002, we sold our operations in Spain, Portugal, France, Canada and Argentina, which consisted of 196 funeral homes and 8 cemeteries. As of October 31, 2002, the sale of all of our foreign operations had been completed. This resulted in a decrease in assets, the number of funerals and interments performed and the backlog. We used the proceeds from the sales along with cash flow to reduce our long-term debt.
(10)	As of October 31, 2001, assets increased and shareholders’ equity decreased as compared to October 31, 2000 due in part to the 2001 change in accounting principles and the writedown of assets held for sale to their estimated fair values. See Note 3 and Note 11 to the consolidated financial statements. Offsetting the increase to assets from the change in accounting principles was the sale of our operations in Mexico, Australia, New Zealand, Belgium and the Netherlands, which consisted of 94 funeral homes and 2 cemeteries. We used these proceeds, along with cash flow and the proceeds from the sale of some domestic assets, to reduce our long-term debt. The October 31, 2001 long-term debt, less current maturities balance excludes $2.6 million of debt associated with assets held for sale.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview of Fiscal Year 2003

     We are the third largest provider of funeral and cemetery products and services in the death care industry in the United States. As of January 2, 2004, we owned and operated 295 funeral homes and 148 cemeteries in 29 states within the United States and Puerto Rico.

     We sell cemetery property and funeral and cemetery products and services both at the time of need and on a preneed basis. Our revenues in each period are derived primarily from at-need sales, preneed sales delivered out of our backlog during the period (including the accumulated trust fund earnings or build-up in the face value of insurance contracts related to these preneed deliveries), preneed cemetery property sales and other items such as perpetual care trust earnings and finance charges.

     Historically, our growth has been primarily from acquisitions. This trend began to change in late fiscal year 1999. As industry conditions reduced the number of major consolidators participating in the acquisition market, those that remained generally applied significantly tighter pricing criteria, and many potential sellers withdrew their businesses from the market rather than pursue transactions at lower prices. As the business model shifted, death care consolidators experienced diminishing access to capital. In response to these changes, we ceased our acquisition activity and developed strategies for improving cash flow and reducing and restructuring debt. During the past four years, we have focused on debt reduction and cash flow. During fiscal year 2002, after having substantially achieved our financial goals, we began positioning ourselves for business expansion in fiscal year 2003.

     After the end of the first fiscal quarter of 2003, we reported that several external factors were adversely affecting us and our industry. Decreased deaths and intense price competition in many of our markets contributed to a decrease in events at our funeral homes and cemeteries. Continued low levels of consumer confidence in the national economy created a difficult preneed sales environment. Depressed stock prices and returns on fixed income investments continued to put pressure on our trust earnings. Based on these factors, we revised our performance outlook downward for fiscal year 2003. While we believe that most of the external factors adversely impacting our business are temporary, these factors have continued to impact our at-need results, preneed sales, trust portfolio performance and growth strategies.

     During 2003, we continued to experience a decline in the number of at-need services performed by our businesses. We track our at-need sales by market and regularly compare our performance with data from a variety of sources to gauge changes in market share. The data from these sources indicate to us that approximately 75 percent of the decline in the number of funeral services performed by our operations during the year resulted from a decline in the number of deaths in our markets, and approximately 25 percent of the decline was due to a loss in market share. See “Year Ended October 31, 2003 Compared to Year Ended October 31, 2002 — Funeral Segment” for further discussion. We expect to eventually see more normalized mortality trends in our markets, and we expect our at-need results to improve when that occurs.

     We believe that low levels of consumer confidence can negatively affect preneed sales. The consumer confidence index reached 10-year lows in February and March of 2003. The index improved in April of 2003 and remained at that level during most of our third and fourth fiscal quarters. We remain cautiously optimistic as we monitor this index and its effect on our preneed sales organization.

     The equity markets were weaker in the early part of our fiscal year, but since May 2003, have begun to improve. The Dow Jones Industrial Average is up approximately 20 percent this calendar year through early December 2003, and in the same time period, our trust portfolio, including unrealized gains and losses, increased approximately 15 percent. Because approximately 50 percent of our total trust portfolio is currently invested in a diversified group of equity securities, we would generally expect our portfolio performance to improve as the performance of the overall stock market improves.

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     As we await further improvements in the economy, financial markets and normalized mortality trends, we will remain focused on improving operational performance and generating cash. In that regard, in September 2003 we announced a set of new operating initiatives, which have resulted in the creation of four task forces to address the following key areas: growth in the number of funeral events performed, increased cemetery property sales volume, cost improvements and employee development initiatives. For further discussions of these initiatives, see “Business Strategy” included in Item 1.

     As part of our cost reduction initiatives, in December 2003 we announced plans to restructure and reduce our workforce. This and other cost-saving directives are expected to reduce costs and increase cash flow in fiscal year 2004 and beyond, and lead to increased earnings per share. We will record a charge in the first quarter of fiscal year 2004 for severance and other costs associated with the workforce reductions in the range of $2.4 million to $2.6 million ($1.5 million to $1.6 million after tax, or $.01 per share).

     In addition, during the fourth quarter of 2003, we identified a number of small businesses to close or sell, most of which were acquired as part of a group of facilities, that are performing below acceptable levels or no longer fit our operating profile. As a result, we recorded a $34.3 million impairment charge. Collectively, these businesses generated revenue of approximately $23.0 million and very little gross profit during fiscal year 2003. We believe that the closing or sale of these businesses will enable management to focus on our most productive operations where our operating initiatives have the potential to bring about the greatest benefits in increased earnings and cash flow.

     We plan to continue to evaluate our options for deployment of cash flow as opportunities arise. In June 2003, we announced that our Board of Directors approved a new stock repurchase program that will allow us to invest up to $25.0 million in repurchases of our Class A common stock. As of January 2, 2004, we had repurchased 738,500 shares of our Class A common stock at an average price of $3.99 per share. At current stock prices, we believe stock repurchases and debt reduction continue to be more attractive uses of our cash flow than other alternatives such as acquisitions and new business development. However, we will continue to consider acquiring high-quality cemeteries and funeral homes that are priced within our guidelines and that fit our new business model, opening new funeral homes on cemetery properties we own or entering into agreements to construct funeral homes in third-party cemeteries.

     For fiscal year 2003, we recorded a net loss of $73.4 million, or $.68 per share. The loss resulted primarily from a number of charges incurred in the third and fourth quarters of fiscal year 2003: (1) a loss on early extinguishment of debt of $11.3 million ($7.3 million after tax, or $.07 per share) related to the redemption of our Remarketable Or Redeemable Securities, (2) a charge to corporate general and administrative expenses of $2.5 million ($1.5 million after tax, or $.01 per share) for separation pay to former officers, (3) a noncash impairment of certain long-lived assets of $34.3 million ($30.2 million after tax, or $.28 per share), resulting from our decision to close or sell a number of small businesses and (4) a noncash impairment of goodwill of $73.0 million ($66.9 million after tax, or $.62 per share) related to our cemetery segment. Our earnings were also negatively affected by a decline in the number of funeral services performed, a decline in cemetery merchandise deliveries and a reduction in trust earnings.

     For additional information about the effect these factors had on our earnings during fiscal year 2003, see the discussion under the heading “Results of Operations” below. For a discussion of our forecasts for continuing operations in fiscal year 2004 and the principal assumptions underlying the forecasts, see the discussion under the heading “Forward-Looking Statements” below.

Preneed Sales

General

     Our funeral and cemetery businesses include prearranged sales funded through trust and escrow arrangements.

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The cemetery business includes maintenance of cemetery grounds funded through perpetual care trust funds. We defer all of the earnings realized by our preneed funeral and preneed cemetery merchandise trust funds and escrow accounts until the underlying merchandise or services are delivered. We recognize the earnings from our perpetual care trust funds as they are realized in the trust.

     From 1991 through 1999, we achieved an overall annual realized return of 8.0 percent to 9.0 percent in our trust funds. However, the average realized return on our domestic trust funds was 5.8 percent, 6.3 percent, 4.3 percent and 4.8 percent for fiscal years 2000, 2001, 2002 and 2003, respectively. These returns represent interest, dividends and realized capital gains or losses but not unrealized capital gains or losses. We defer recognition of all earnings and losses realized by preneed funeral and cemetery merchandise trust funds until the underlying products and services are delivered. Consequently, the lower investment returns realized reduced the trust earnings recognized as revenue in 2003 and may do so again in fiscal year 2004. We recognize all earnings and losses realized by our perpetual care trust funds currently including capital gains and losses in those jurisdictions where capital gains can be withdrawn and used for cemetery maintenance. As a result, depressed stock prices and returns on fixed-income investments put pressure on perpetual care trust earnings recognized in fiscal year 2003 and may do so again in fiscal year 2004. Because approximately 50 percent of our total trust portfolio is currently invested in a diversified group of equity securities, we would generally expect our portfolio performance to follow the overall stock market performance. For a discussion of the valuation allowance related to prearranged receivables, see Note 2(d) to the consolidated financial statements included in Item 8 and “Overview of Critical Accounting Policies – Valuation of Long-Lived Assets.”

     As disclosed in Note 4 to the consolidated financial statements included in Item 8, our preneed funeral and preneed cemetery merchandise trust funds and escrow accounts had net unrealized depreciation of $80.6 million and $44.9 million, respectively, as of October 31, 2003. Unrealized gains and losses in the funeral trust funds and cemetery merchandise trust funds have no immediate impact on our revenues, margins, earnings or cash flow, unless the fair market value of the funds were to decline below the estimated costs to deliver the underlying products and services. If that were to occur, we would record a charge to earnings to record a liability for the expected loss on the delivery of the contract. Over time, gains and losses realized in the funds are allocated to underlying preneed contracts and affect the amount of trust fund earnings we record when we deliver the underlying product or service. Accordingly, if current market conditions do not improve, our revenues, margins, earnings and cash flow would be negatively affected by the reduced revenue we would realize when we deliver the underlying products and services. As described in the preceding paragraph, this negatively impacted our results for 2003 and may do so again in 2004. We project that with approximately 1.0 percent to 3.0 percent annualized returns in the funds over the estimated lives of the associated preneed contracts, we would recover the net unrealized depreciation currently in the funds by the time the underlying products and services are delivered. As discussed in Note 5 to the consolidated financial statements included in Item 8, our perpetual care trust fund accounts had net unrealized depreciation of $23.7 million as of October 31, 2003. Unrealized gains and losses in the perpetual care trust funds do not affect earnings but could limit the capital gains available to us and could result in lower returns and lower current revenues than we have historically achieved.

     We estimate that as of October 31, 2003 the future value of our preneed backlog represented approximately $2.1 billion of revenue to be recognized in the future as these prepaid products and services are delivered. This represents the face value of the backlog plus the earnings that are projected on the funds held in trust and a build-up in the face value of insurance contracts. It assumes no future preneed sales and assumes maturities each year consistent with our experience, with the majority of existing contracts maturing over the next 15 years. As of October 31, 2003, the value of the preneed backlog, excluding any future earnings on the funds held in trust and any build-up in the face value of insurance contracts, but including earnings and losses realized to date on the funds held in trust, was approximately $1.6 billion.

     We believe that one of the primary drivers of sustainable long-term growth in the number of families served by our funeral homes and cemeteries are preneed funeral and cemetery property sales. Preneed property, products and services are typically sold on an installment basis with terms of approximately three to five years. In fiscal year

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2000, we changed the terms and conditions of our preneed sales contracts and commissions in order to enhance our cash flow. This resulted in an anticipated reduction in preneed sales, including preneed cemetery property sales. We modified our preneed payment plans early in fiscal year 2000 by increasing finance charges, requiring larger down payments and shortening installment payment terms. Effective the first day of the fourth quarter of fiscal year 2000, we also substantially reduced the commissions paid on sales of preneed cemetery services and preneed funeral and cemetery merchandise, which we believe had the largest impact on preneed sales. Although we reduced or eliminated commissions available to preneed sales counselors on certain sales, we now provide a minimum compensation guarantee. The change in commission structure provides an incentive to preneed sales counselors to focus on selling preneed cemetery property and preneed funeral services. We believe that these are the sales that build and maintain market share. In addition, the change better aligned operations with changes in accounting necessitated by the adoption of SAB No. 101 because, after the implementation of SAB No. 101, preneed cemetery property sales are the only preneed sales that we recognize on a current basis (after collection of 10 percent of the sales price). We also believe that these changes have improved the quality of preneed sales and receivables.

     With respect to the sale of cemetery property, whether preneed or at-need, we are generally required by state law to place into a perpetual care trust, a portion, usually 10 percent, of the proceeds we receive in order to fund maintenance of the cemetery grounds. As payments are received, we generally fund the perpetual care trust in the same proportion as the payment bears to the contract amount; for example, if we receive 20 percent of the contract price, we place in trust 20 percent of the total amount to be placed in trust for that contract. We withdraw realized earnings, including net realized capital gains in some jurisdictions, on these funds to use towards the maintenance of our cemeteries, but principal must generally be held in the trust in perpetuity.

     With respect to the preneed sale of cemetery and funeral products and services, state laws generally require either (1) a portion of the installment payments received be placed into a trust fund or (2) the use of an insurance policy underwritten by an insurance company to provide funds to cover the costs of delivering funeral products and services in the future. With respect to the preneed sale of cemetery merchandise, we are generally required to place in trust 30 percent to 50 percent of each installment received. With respect to the preneed sale of funeral and cemetery services, we are generally required to place in trust 70 percent to 90 percent of each installment received. The sale of caskets is treated in some jurisdictions in the same manner as the sale of cemetery merchandise and in some jurisdictions in the same manner as the sale of funeral services for these purposes. When insurance is used, we apply customer payments to pay premiums on the insurance policies. We typically act as agent for the insurance company and earn a commission. Generally, we can withdraw the principal of and earnings on the funds placed in trust only at the time that the related products and services are delivered.

Summary of Current Accounting for Preneed Sales

     In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” The FASB issued a revision to FIN 46 (“FIN 46R”) in December 2003. FIN 46 and FIN 46R are effective for the second quarter of fiscal year 2004. The ultimate resolution for the accounting for the trusts and associated trust investment income has not been determined and could potentially result in a material impact on our financial position and results of operations. See Note 3(c) to the consolidated financial statements included in Item 8 for further information.

     We sell prearranged funeral services and preneed funeral and cemetery merchandise under contracts that provide for delivery of the services and merchandise at the time of death. Revenue from preneed sales of services and merchandise is deferred until the period in which the service is performed and the merchandise is delivered. On the balance sheet, the full contract amount is included in prearranged deferred revenue, net (liability). The corresponding receivable due from the customer is reflected in prearranged receivables, net (asset), and the corresponding cash received from the customer is reflected part in prearranged receivables (for the portion placed in trust) and part in cash (for the portion we are allowed to retain). The costs to acquire the sales, primarily commissions and other direct costs, are reflected on the balance sheet as deferred charges (asset) and are charged to

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expense as the services are performed and products delivered. Indirect costs of marketing preneed services and merchandise are expensed in the period in which they are incurred.

     As the customer makes payments on the preneed contract, the portion of prearranged receivables representing the receivable due from the customer declines, and the portion representing the receivable from the trust increases. We record cash for the amount of cash received that is not required to be placed in trust. Realized earnings on the amounts held in trust represent a debit to prearranged receivables (asset) and a credit to prearranged deferred revenue (liability) and are not recognized as revenue until delivery of the service or merchandise.

     When the service or merchandise is delivered, we recognize as revenue the full contract amount plus all trust earnings associated with that contract, with a corresponding reduction recorded to prearranged deferred revenue (liability). We debit cash with the amount removed from trust that is attributable to the contract (consisting of the customer’s payments and related realized earnings, all of which is withdrawn at that time) and record a corresponding reduction in prearranged receivables (asset). Associated deferred charges (asset) are expensed, and the actual expenses incurred in delivering the services and merchandise are recognized.

     Additional information about our prearranged receivables and prearranged deferred revenue is contained in Note 4 to our consolidated financial statements included in Item 8.

     For preneed sales of interment rights (cemetery property), the associated revenue and all costs to acquire the sale are recognized in accordance with SFAS No. 66, “Accounting for Sales of Real Estate.” Under SFAS No. 66, recognition of revenue and costs must be deferred until 10 percent of the property sales price has been collected. A portion, generally 10 percent, of the sale proceeds are placed into perpetual care trust funds. We withdraw and recognize realized earnings from these funds on a monthly basis to offset the cost of maintaining our cemetery grounds. The perpetual care trust funds are not reflected on the financial statements because principal must remain in the trust in perpetuity.

     Some of our sales of preneed property, products and services are made under installment contracts bearing interest at prevailing rates. Finance charges are recognized as revenue under the effective interest method over the terms of the related installment receivables.

     Commissions and other direct costs that vary with and are primarily related to the acquisition of new prearranged services and prearranged merchandise sales are deferred and amortized as the contracts are delivered in accordance with SFAS No. 60, “Accounting and Reporting for Insurance Companies.” Indirect costs of marketing prearranged services are expensed in the period in which incurred. All direct costs to acquire the sales of preneed funeral and cemetery merchandise and services are included in deferred charges (asset). The costs to acquire all preneed merchandise and service sales are included in the operating section of the cash flow statement as prearranged acquisition costs.

     Prearranged services and merchandise generally are funded either through trust funds or escrow accounts established by us or through third-party insurance companies. When prearranged services and merchandise are funded through insurance policies purchased by customers from third-party insurance companies, we earn a commission on the sale of the policies. Insurance commissions, net of related expenses, are recognized at the point at which the commission is no longer subject to refund. Policy proceeds including the buildup in the face value of the insurance contracts are available to us as services and merchandise are delivered.

     Prearranged receivables are related to preneed sales of funeral and cemetery merchandise and services. Prearranged receivables represent the funds owed to us (1) from preneed funeral merchandise and services trusts and from preneed cemetery merchandise and services trusts, which represent amounts already paid by customers, and realized earnings on those amounts, (2) from customers and (3) from insurance companies. Prearranged deferred revenue represents the revenue we will recognize upon delivery of the preneed funeral and cemetery merchandise and services at the time of need. The net change in prearranged receivables and prearranged deferred revenue is

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recognized in the cash flow statement in the operating section as a change in prearranged activity.

     If a preneed funeral product or service contract is cancelled, we generally return to the customer the related principal that was placed in trust and retain the portion not placed in trust. In many jurisdictions, we can withdraw and retain all related earnings in the trust, but in other jurisdictions these earnings must be returned to the customer. If a preneed cemetery property, product or service contract is cancelled, we generally are not required to return any funds to the customer.

     The impact of preneed sales on near-term cash flow depends primarily on the commissions paid on the sale, the portion of the sale required to be placed into trust and the terms of the particular contract (such as the size of the down payment required and the length of the contract). We generally pay commissions to our preneed sales counselors based on a percentage of the total preneed contract price, but only to the extent cash is paid by the customer. If the initial cash installment paid by the customer is not sufficient to cover the entire commission, the remaining commission is paid from subsequent customer installments. However, because we are required to place a portion of each cash installment paid by the customer into trust, we may be required to use our own cash to cover a portion of the commission due on the installment from the customer. Accordingly, preneed sales are generally cash flow negative initially but become cash flow positive at varying times over the life of the contract, depending upon the trusting requirements and the terms of the particular contract.

     Cash expended for preneed funeral and cemetery merchandise and service sales, principally sales commissions, is capitalized in deferred charges on the balance sheet and amortized and expensed as cost of sales as the contracts are delivered.

Summary of Current Accounting for Trust and Escrow Account Earnings

     Preneed funeral merchandise and services trust funds and escrow accounts. We defer recognition of all earnings realized by preneed funeral merchandise and services trust funds and escrow accounts until the underlying funeral service or merchandise is delivered. We generally do not withdraw cash (principal and earnings) from these trust funds and escrow accounts until the merchandise or service is delivered. Principal and realized earnings in these funds and escrow accounts are reflected as prearranged receivables, net (asset) on the balance sheet. The full contract amount and realized earnings in these funds and escrow accounts are reflected as prearranged deferred revenue, net (liability) on the balance sheet. Unrealized gains and losses are not reflected on the balance sheet or income statement but are included in Note 4 to the consolidated financial statements included in Item 8.

     Preneed cemetery merchandise and services trust funds and escrow accounts. We defer all earnings realized by these trust funds and escrow accounts until the underlying merchandise or service is delivered. We generally do not withdraw cash (principal and earnings) from these trust funds and escrow accounts until the merchandise or service is delivered. Principal and realized earnings in these funds and escrow accounts are reflected as prearranged receivables, net (asset) on the balance sheet. The full contract amount and realized earnings in these funds and escrow accounts are reflected as prearranged deferred revenue, net (liability) on the balance sheet. Unrealized gains and losses are not reflected on the balance sheet or income statement but are included in Note 4 to the consolidated financial statements included in Item 8.

     Perpetual care trust funds. Pursuant to perpetual care contracts and laws, a portion, generally 10 percent, of the proceeds from cemetery property sales is deposited into perpetual care trust funds. The income from these funds, which have been established in most jurisdictions in which we operate cemeteries, is used for maintenance of our cemeteries, but principal, including in some jurisdictions net realized capital gains, must generally be held in perpetuity. We recognize the earnings on our perpetual care trust funds as they are realized in the trust. We generally withdraw the earnings on a monthly basis to offset the cost of maintaining our cemeteries. Principal in these funds is not reflected on the balance sheet because the principal must remain in the trust in perpetuity.

Overview of Critical Accounting Policies

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     The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions (see Note 2(b) to the consolidated financial statements included in Item 8). We believe that of our significant accounting policies (discussed in Note 2 to the consolidated financial statements included in Item 8), the following are both most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective or complex judgment.

Allowance for Doubtful Accounts

     Management must make estimates of the uncollectibility of our accounts receivable. We establish a reserve for uncollectible installment contracts and trade accounts based on a range of percentages applied to accounts receivable aging categories. These percentages are based on historical collection and write-off experience. If circumstances change, our estimates of the recoverability of amounts due to us could change by a material amount.

Depreciation of Long-Lived Assets

     Buildings and equipment are recorded at cost and are depreciated over their estimated useful lives, ranging from 10 to 40 years and from 3 to 10 years, respectively, primarily using the straight-line method. These estimates of the useful lives may be affected by such factors as changes in regulatory requirements or changing market conditions.

Valuation of Long-Lived Assets

     We periodically review for continued appropriateness the carrying value of our long-lived assets including our prearranged receivables, cemetery property and property and equipment. This review is based on our projections of anticipated undiscounted future cash flows. If indicators of impairment were present, we would evaluate the undiscounted cash flows estimated to be generated by those assets compared to the carrying amount of those items. The net carrying value of assets not recoverable would be reduced to fair value. While we believe that our estimates of undiscounted future cash flows are reasonable, different assumptions regarding such cash flows and comparable sales values could materially affect our evaluations.

     In the fourth quarter of 2003, we identified a number of small businesses to close or sell in fiscal year 2004. Based on our review of the carrying amount of these businesses compared to their fair value, we recorded a noncash charge of $34.3 million related to the impairment of these long-lived assets. Fair value was established based on our best estimate and is subject to revision in future periods as properties are actually sold or closed. See Note 12 to the consolidated financial statements included in Item 8.

     During the fourth quarter of fiscal year 2002, we recorded a valuation allowance of $20.0 million related to our prearranged receivable from our trust funds, which resulted in a reduction in prearranged receivables and a reduction in prearranged deferred revenue. This valuation allowance was deemed necessary due to a decline in the overall market value of the underlying trust funds. During fiscal year 2003, the valuation allowance was decreased $15.5 million due to an increase in the market value of the underlying trust funds. As a result, prearranged receivables and prearranged deferred revenue increased by $15.5 million. As of October 31, 2003, the valuation allowance was $4.5 million. See Note 4 to the consolidated financial statements included in Item 8.

Valuation of Goodwill

     In June 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets.” Although we were not required to implement SFAS No. 142 until the first quarter of fiscal year 2003, we implemented it in the first quarter of fiscal year 2002. Our evaluation of goodwill for our operations is performed at the funeral and cemetery segment levels, which constitute our reporting units. With the adoption of SFAS No. 142, goodwill of a reporting unit must

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be tested for impairment on at least an annual basis. We conduct our annual goodwill impairment analysis during the fourth quarter of each fiscal year. Impairment losses are recognized when the estimated fair value of goodwill associated with all of our cemeteries or funeral homes is less than their respective carrying values. In accordance with SFAS No. 142, we performed our annual goodwill impairment review during the fourth quarter of fiscal year 2003. As a result, a noncash goodwill impairment charge of $73.0 million related to the cemetery segment was recorded during the fourth quarter of fiscal year 2003. The tax benefit of $6.1 million associated with SFAS No. 142 relates to properties that have generated tax-deductible goodwill. According to SFAS No. 109, deferred taxes are not recorded on properties that do not generate goodwill amortization for tax purposes. See Note 3 and Note 12 to the consolidated financial statements included in Item 8 for a discussion of SFAS No. 142 and its impact on our financial condition and results of operations.

     In addition to an annual review, we assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value may be greater than fair value. Factors we consider important that could trigger an impairment review include the following:

• significant underperformance relative to historical or projected future operating results;

• significant changes in the manner of the use of our assets or the strategy for our overall business; and

• significant negative industry or economic trends.

     When we determine that the carrying value of goodwill may be greater than fair value, we measure any impairment based on our estimates of current fair value compared to the carrying value of the assets. If these estimates or their related assumptions change in the future, we may be required to record further impairment charges for these assets. Goodwill and other intangible assets amounted to $406.1 million and $491.3 million as of October 31, 2003 and 2002, respectively.

Accounting for Income Taxes

     As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax expense together with assessing temporary differences resulting from the different treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we include an expense within the tax provision in the statement of earnings. In the fourth quarter of 2003, we recorded an impairment of long-lived assets. Based on our assessment of the probability of realizing the $18.1 million in tax benefits associated with the potential losses generated from the impairment, we determined that a $14.0 million valuation allowance was appropriate. See Note 16 to the consolidated financial statements included in Item 8.

     Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. Based on estimates of taxable income in each jurisdiction in which we operate and the period over which deferred tax assets will be recoverable, we have not recorded a valuation allowance as of October 31, 2003 except as described above for the long-lived asset impairment. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to change our allowance, which could materially impact our financial condition and results of operations.

Results of Operations

     Because we held our foreign operations and several small domestic operations for sale, in the third quarter of 2001 we began segregating the operating results of these businesses from the operations we will retain. The following discussion segregates the financial results into two main categories in order to present our ongoing

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operating results and to provide more useful information for investors. “Operations to be Retained” consist of those businesses we have owned and operated for the entire current fiscal year and last and that we plan to retain (“Existing Operations”) and those businesses that have been opened during this fiscal year or last and that we plan to retain (“Opened Operations”). “Closed and Held for Sale Operations” consist of those that have been sold or closed during this fiscal year or last and the businesses that are currently being offered for sale. Although we determined in the fourth quarter of fiscal year 2003 to close or sell a number of businesses, they were not offered for sale until the first quarter of fiscal 2004. Accordingly, these operations are included in “Operations to be Retained” in the presentation that follows. In future reports, some of these operations are expected to qualify and be reflected separately as discontinued operations as appropriate.

Year Ended October 31, 2003 Compared to Year Ended October 31, 2002

Funeral Segment

	Year Ended
	October 31,
							Increase
	2003			2002			(Decrease)
	(In millions)
FUNERAL — OPERATIONS TO BE RETAINED
Revenue
Existing operations	$	293.7		$	299.5		$	(5.8	)
Opened operations		.5			.2			.3
	$	294.2		$	299.7		$	(5.5	)
Costs
Existing operations	$	222.5		$	216.9		$	5.6
Opened operations		.5			.3			.2
	$	223.0		$	217.2		$	5.8
Gross Profit
Existing operations	$	71.2		$	82.6		$	(11.4	)
Opened operations		—			(.1	)		.1
	$	71.2		$	82.5		$	(11.3	)
FUNERAL — CLOSED AND HELD FOR SALE OPERATIONS
Revenue	$	4.4		$	45.5		$	(41.1	)
Costs		4.9			39.8			(34.9	)
Gross Profit	$	(.5	)	$	5.7		$	(6.2	)
Total Funeral Revenue	$	298.6		$	345.2		$	(46.6	)
Total Funeral Costs		227.9			257.0			(29.1	)
Total Funeral Gross Profit	$	70.7		$	88.2		$	(17.5	)

     Total funeral revenue decreased $46.6 million for the year ended October 31, 2003 compared to the corresponding period in 2002 primarily due to a decrease in revenue from Closed and Held for Sale Operations. The decline in revenue from Closed and Held for Sale Operations resulted primarily from the completion of the sale of our foreign operations in 2002. The decline in total funeral revenue is also due to a decrease in funeral revenue from Operations to be Retained, primarily driven by a reduction in the number of funeral services performed coupled with a reduction in trust earnings recognized upon the delivery of preneed funerals. The reduction in trust earnings resulted from lower investment returns realized in our preneed funeral trust funds during the last few years.

     Funeral revenue from Operations to be Retained decreased $5.5 million, or 1.8 percent, for the year ended October 31, 2003, compared to the corresponding period in 2002. We experienced a 2.8 percent decline (2,009 events) in the number of funeral services performed by these businesses, partially offset by a 1.7 percent increase in the average revenue per funeral service performed by these businesses. The decrease in funeral revenue from Operations to be Retained was due to a $5.8 million, or 1.9 percent, decrease in funeral revenue from Existing Operations. We experienced a 2.9 percent decline (2,115 events) in the number of funeral services performed by these businesses, partially offset by a 1.7 percent increase in the average revenue per funeral service performed by

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these businesses. We track our at-need sales by market and regularly compare our performance with data from a variety of sources to gauge changes in market share. Our analysis of this data indicates to us that approximately 75 percent of the decline in the number of funeral services performed was due to a decline in the number of deaths in our markets for fiscal year 2003 and approximately 25 percent of the decline was due to a loss in market share.

     Funeral gross profit margin from Existing Operations decreased from 27.6 percent for the year ended October 31, 2002 to 24.2 percent for the corresponding period in 2003. The decline is primarily due to an increase in insurance costs coupled with the reduction in funeral revenue as discussed above. The cremation rate for our Existing Operations was 39.1 percent for the year ended October 31, 2003 compared to 38.6 percent for the corresponding period in 2002.

Cemetery Segment

	Year Ended
	October 31,
						Increase
	2003		2002			(Decrease)
	(In millions)
CEMETERY — OPERATIONS TO BE RETAINED
Revenue
Existing operations	$	222.7	$	231.6		$	(8.9	)
Costs
Existing operations	$	173.1	$	174.2		$	(1.1	)
Gross Profit
Existing operations	$	49.6	$	57.4		$	(7.8	)
CEMETERY — CLOSED AND HELD FOR SALE OPERATIONS
Revenue	$	.8	$	4.5		$	(3.7	)
Costs		.7		5.3			(4.6	)
Gross Profit	$	.1	$	(.8	)	$	.9
Total Cemetery Revenue	$	223.5	$	236.1		$	(12.6	)
Total Cemetery Costs		173.8		179.5			(5.7	)
Total Cemetery Gross Profit	$	49.7	$	56.6		$	(6.9	)

     Total cemetery revenue decreased $12.6 million, or 5.3 percent, for the year ended October 31, 2003, compared to the corresponding period in 2002. We experienced an $8.9 million, or 3.8 percent, decrease in revenue from Operations to be Retained, primarily due to a decline in merchandise deliveries and reduced perpetual care trust earnings.

     We believe the decline in merchandise deliveries during the year ended October 31, 2003 is due primarily to the fact that the merchandise delivered during fiscal year 2003 had a lower average value than the merchandise delivered during the comparable period in 2002. The decline in merchandise deliveries during fiscal year 2003 is also due in part to the decrease in the number of deaths in our markets in recent prior periods. Cemetery merchandise revenue is not recognized until the merchandise is delivered and installed. Typically, installation of cemetery merchandise occurs several months after the burial occurs. Thus, a decline in the number of deaths in one quarter can cause a decline in cemetery merchandise deliveries in subsequent quarters.

     We experienced an annualized average return, excluding unrealized gains and losses, of 4.2 percent in our perpetual care trust funds for the year ended October 31, 2003 resulting in revenue of $7.9 million, compared to 6.0 percent for the corresponding period in 2002 resulting in revenue of $11.3 million. We also experienced a decline in revenue from Closed and Held for Sale Operations due primarily to the completion of the sale of our foreign

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operations in fiscal year 2002.

     Cemetery gross profit margin from Existing Operations decreased from 24.8 percent for the year ended October 31, 2002 to 22.3 percent for the corresponding period in 2003. The decline is due to increased insurance costs coupled with the reduction in cemetery revenue as discussed above.

Other

     As a result of the adoption of SFAS No. 142 in fiscal year 2002, goodwill is not amortized but is tested annually for impairment. In accordance with SFAS No. 142, we performed our annual goodwill impairment review during the fourth quarter of fiscal year 2003. Our evaluation of goodwill is performed at the funeral and cemetery segments, which constitute our reporting units. As a result, a noncash goodwill impairment charge of $73.0 million related to the cemetery segment was recorded during the fourth quarter of fiscal year 2003. In calculating the goodwill impairment charge, the fair value of the funeral and cemetery segments was determined with assistance from an independent valuation advisor using a combination of the comparable company approach and discounted cash flow valuation methodology. For additional information on goodwill, see Notes 3 and 12 to the consolidated financial statements included in Item 8.

     During the fourth quarter of fiscal year 2003, we identified a number of small businesses to close or sell, mostly funeral homes, and determined that their carrying value exceeded their fair values. In accordance with SFAS No. 144, we recorded a noncash impairment charge of $34.3 million during the fourth quarter of fiscal year 2003. For additional information, see Note 12 to the consolidated financial statements included in Item 8. This charge, along with the goodwill impairment charge discussed above, are presented together in the “Impairment of goodwill and long-lived assets” line item in the consolidated statement of earnings.

     Corporate general and administrative expenses for the year ended October 31, 2003 increased $2.9 million compared to the same period in 2002. The increase is primarily due to a $2.5 million charge incurred during the third quarter of fiscal year 2003 for separation pay to two former executive officers. For additional information, see Note 18 to the consolidated financial statements included in Item 8. The increase is also due to increased legal fees and increased expenses related to the Stewart Enterprises, Inc. Supplemental Executive Retirement Plan (the “SERP”). The SERP, which became effective April 30, 2002, provides retirement benefits to certain executive officers that are intended to supplement the benefits available under our 401(k) Plan and in part replace other benefits previously available under the executive officers’ employment agreements.

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     Depreciation and amortization was $53.7 million for the year ended October 31, 2003 compared to $56.2 million for the same period in 2002. The decrease is due to the sale of our remaining foreign operations in fiscal year 2002.

     Interest expense decreased $8.8 million to $53.5 million for the year ended October 31, 2003 compared to $62.3 million for the same period in 2002. The decrease is due to a $113.2 million decrease in the average debt outstanding during the fiscal year ended October 31, 2003, partially offset by an approximate 30 basis point increase in our average interest rate.

     As of October 31, 2003 and January 2, 2004, our outstanding debt totaled $502.1 million and $467.2 million, respectively. On May 1, 2003, we exercised our right to redeem our outstanding $99.9 million Remarketable Or Redeemable Securities (“ROARS”) rather than allowing them to be remarketed and recorded a loss on early extinguishment of debt of $11.3 million. In order to redeem the ROARS, we used $50.0 million of additional Term Loan B financing and $50.0 million from our revolving credit facility. For additional information, see Note 13 to the consolidated financial statements included in Item 8. Of the total amount of debt outstanding, including the portion subject to the interest rate swap agreements in effect as of October 31, 2003, approximately 81 percent was fixed-rate debt, with the remaining 19 percent subject to short-term variable interest rates averaging approximately 4.0 percent.

     In order to hedge a portion of the interest rate risk associated with our variable-rate debt, effective March 11, 2002, we entered into two interest rate swap agreements, expiring on March 11, 2004 and March 11, 2005, each involving a notional amount of $50.0 million. The agreements effectively convert variable-rate debt bearing interest based on three-month LIBOR plus the applicable margin specified under our senior secured credit facility to fixed-rate debt bearing interest at the fixed swap rate plus such applicable margin. As of October 31, 2003, the effective rate of the debt hedged by the interest rate swaps was 7.025 percent and 7.64 percent on each $50.0 million swapped.

     Other income, net, amounted to $2.1 million for the years ended October 31, 2003 and 2002 and is comprised mostly of net gains on domestic funeral home sales. We have approximately $6.5 million of assets held for sale, consisting primarily of domestic funeral homes. In the fourth quarter of 2003, we identified a number of small businesses to close or sell, and as discussed in Note 12 to the consolidated financial statements included in Item 8, we recorded an impairment charge. These businesses were not offered for sale until the first quarter of 2004. Any further losses or gains related to the sale of these businesses which qualify as discontinued operations will be reflected as such in the future. Any future sales of assets which do not meet the discontinued operations criteria may generate gains or losses that would be reflected in continuing operations in future periods.

Preneed Sales and Deliveries

     The revenues from our preneed funeral and cemetery merchandise and service sales are deferred into our backlog and are not included in our operating results above. We added $162.6 million in preneed sales to our funeral and cemetery merchandise and service backlog during the year ended October 31, 2003 to be recognized in the future, net of cancellations, as these prepaid products and services are delivered, compared to $169.4 million for the corresponding period in 2002. Deliveries out of our preneed funeral and cemetery merchandise and service backlog, including accumulated trust fund earnings related to these preneed deliveries, amounted to $172.6 million for the year ended October 31, 2003, compared to $181.8 million for the year ended October 31, 2002.

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Year Ended October 31, 2002 Compared to Year Ended October 31, 2001

Funeral Segment

	Year Ended
	October 31,
						Increase
	2002		2001			(Decrease)
	(In millions)
FUNERAL — OPERATIONS TO BE RETAINED
Revenue
Existing operations	$	299.2	$	295.5		$	3.7
Opened operations		3.3		.3			3.0
	$	302.5	$	295.8		$	6.7
Costs
Existing operations	$	216.6	$	223.0		$	(6.4	)
Opened operations		3.0		.4			2.6
	$	219.6	$	223.4	(1)	$	(3.8	)(1)
Gross Profit
Existing operations	$	82.6	$	72.5		$	10.1
Opened operations		.3		(.1	)		.4
	$	82.9	$	72.4	(1)	$	10.5	(1)
FUNERAL — CLOSED AND HELD FOR SALE OPERATIONS
Revenue	$	42.7	$	114.5		$	(71.8	)
Costs		37.4		95.2	(1)		(57.8	)(1)
Gross Profit	$	5.3	$	19.3	(1)	$	(14.0	)(1)
Total Funeral Revenue	$	345.2	$	410.3		$	(65.1	)
Total Funeral Costs		257.0		318.6	(1)		(61.6	) (1)
Total Funeral Gross Profit	$	88.2	$	91.7	(1)	$	(3.5	) (1)

(1) Funeral costs for Operations to be Retained and Closed and Held for Sale Operations for the year ended October 31, 2001 include $9.2 million and $4.8 million of goodwill amortization, respectively, for a total of $14.0 million of goodwill amortization included in total funeral costs. Excluding goodwill amortization, funeral gross profit for Operations to be Retained for 2002 increased by $1.3 million when compared to the year ended October 31, 2001, and total funeral gross profit for 2002 decreased by $17.5 million when compared to the corresponding period in 2001.

      Total funeral revenue decreased $65.1 million for the year ended October 31, 2002 compared to the corresponding period in 2001 primarily due to a decrease in revenue from Closed and Held for Sale Operations, which was partially offset by an increase in revenue from Operations to be Retained. The decline in revenue from Closed and Held for Sale Operations resulted primarily from the sale of our operations in Mexico, Australia, New Zealand, Belgium and the Netherlands in the fourth quarter of 2001 and the sale of our operations in Spain, Portugal, France, Canada and Argentina in fiscal year 2002.

     Funeral revenue from Operations to be Retained increased $6.7 million, or 2.3 percent, for the year ended October 31, 2002, compared to the corresponding period in 2001. The average revenue per funeral service performed by these businesses increased 3.2 percent, partially offset by a .2 percent decline (120 events) in the number of funeral services performed. We experienced a $3.7 million, or 1.3 percent, increase in funeral revenue from Existing Operations primarily due to a 3.5 percent increase in the average revenue per funeral service performed, partially offset by a 1.5 percent decline (1,105 events) in the number of funeral services performed by these businesses. The increase in average revenue per funeral service is due primarily to customized funeral planning and personalization.

     We experienced a $3.0 million increase in funeral revenue and a $2.6 million increase in funeral costs from Opened Operations primarily due to the opening of an Archdiocese of Los Angeles facility which was not open for

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the entirety of both periods presented.

     Funeral gross profit margin from Existing Operations increased from 24.5 percent for the year ended October 31, 2001 to 27.6 percent for the corresponding period in 2002. This increase is due to the elimination of goodwill amortization from the implementation of SFAS No. 142. If we had implemented SFAS No. 142 in 2001, the pro forma funeral gross profit margin from Existing Operations adjusted for the elimination of goodwill amortization would have been 27.6 percent for the year ended October 31, 2001. Goodwill amortization for Existing Operations in the funeral segment amounted to $9.2 million for the year ended October 31, 2001. The cremation rate for our Existing Operations was 38.5 percent for the year ended October 31, 2002 compared to 37.7 percent for the same period in 2001.

Cemetery Segment

	Year Ended
	October 31,
							Increase
	2002			2001			(Decrease)
	(In millions)
CEMETERY — OPERATIONS TO BE RETAINED
Revenue
Existing operations	$	231.6		$	248.1		$	(16.5	)
Costs
Existing operations	$	174.2		$	184.2	(1)	$	(10.0	) (1)
Gross Profit
Existing operations	$	57.4		$	63.9	(1)	$	(6.5	) (1)
CEMETERY — CLOSED AND HELD FOR SALE OPERATIONS
Revenue	$	4.5		$	8.5		$	(4.0	)
Costs		5.3			12.9	(1)		(7.6	) (1)
Gross Profit	$	(.8	)	$	(4.4	) (1)	$	3.6	(1)
Total Cemetery Revenue	$	236.1		$	256.6		$	(20.5	)
Total Cemetery Costs		179.5			197.1	(1)		(17.6	) (1)
Total Cemetery Gross Profit	$	56.6		$	59.5	(1)	$	(2.9	) (1)

⁽¹⁾ Cemetery costs for Operations to be Retained and Closed and Held for Sale Operations for the year ended October 31, 2001 include $4.8 million and $.5 million of goodwill amortization, respectively, for a total of $5.3 million of goodwill amortization included in total cemetery costs. Excluding goodwill amortization, cemetery gross profit for Operations to be Retained for 2002 decreased by $11.3 million when compared to the year ended October 31, 2001, and total cemetery gross profit for 2002 declined by $8.2 million when compared to the corresponding period in 2001.

     Total cemetery revenue decreased $20.5 million, or 8.0 percent, for the year ended October 31, 2002, compared to the corresponding period in 2001. We experienced a $16.5 million, or 6.7 percent, decrease in revenue from Operations to be Retained primarily due to a reduction in preneed cemetery property sales and merchandise deliveries and a decline in the average return earned on perpetual care trust funds. We experienced an annualized average return of 6.0 percent in our perpetual care trust funds for the year ended October 31, 2002, compared to 7.1 percent for the corresponding period in 2001. We also experienced a $4.0 million decline in revenue from Closed and Held for Sale Operations primarily related to the sale of our foreign operations.

     Cemetery gross profit margin from Existing Operations decreased from 25.8 percent for the year ended October 31, 2001 to 24.8 percent for the corresponding period in 2002. The decrease is due to the decline in preneed cemetery property sales and merchandise deliveries and the decrease in perpetual care trust earnings coupled with the high fixed-cost nature of the cemetery business. The decrease was moderated by the elimination of goodwill

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amortization from the implementation of SFAS No. 142. If we had implemented SFAS No. 142 in 2001, the pro forma cemetery gross profit margin from Existing Operations adjusted for the elimination of goodwill amortization would have been 27.7 percent for the year ended October 31, 2001. Goodwill amortization for Existing Operations in the cemetery segment amounted to $4.8 million for the year ended October 31, 2001.

Other

     Corporate general and administrative expenses for the year ended October 31, 2002 decreased $.8 million compared to the same period in 2001 primarily due to a reduction in professional and consulting fees partially offset by expenses associated with the Stewart Enterprises, Inc. Supplemental Executive Retirement Plan (the “SERP”), which was adopted effective April 1, 2002. The SERP provides retirement benefits to certain executive officers that are intended to supplement the benefits available under the Company’s 401(k) Plan and in part replace other benefits previously available under the executive officers’ employment agreements. Adoption of the SERP resulted in a charge to corporate general and administrative expenses of $1.1 million for fiscal year 2002.

     Depreciation and amortization was $56.2 million for the year ended October 31, 2002 compared to $79.2 million for the same period in 2001, which included $19.3 million of goodwill amortization. The decrease in depreciation and amortization is due to the implementation of SFAS No. 142 and the sale of certain of our foreign assets.

     Interest expense decreased $1.3 million to $62.3 million for the year ended October 31, 2002 compared to $63.6 million for the same period in 2001. The decrease is due to a $192.9 million decrease in the average debt outstanding during the fiscal year ended October 31, 2002, offset by an approximate 194 basis point increase in our average interest rate. The increase in our average interest rate resulted from higher interest costs associated with debt incurred in our debt refinancing transactions which occurred on June 29, 2001.

     Investment income decreased $4.7 million to $.5 million for the year ended October 31, 2002 compared to the same period in 2001. This decrease is due primarily to a $53.1 million decrease in the average cash and cash equivalents balance and a decrease in the average investment rate earned on our cash and cash equivalent investments from 6.3 percent to 1.8 percent. The 6.3 percent earned for the year ended October 31, 2001 included returns on funds in foreign jurisdictions that earned 9.0 percent. The majority of the funds in foreign jurisdictions were sold with our Mexican operations.

     Other income, net, decreased $5.0 million to $2.1 million during the year ended October 31, 2002 compared to the same period in 2001. The decrease is principally due to the net gains on the sale of excess cemetery property and other domestic assets during 2001.

     As of October 31, 2002, our outstanding debt was $551.9 million. Of the total amount outstanding, including the portion subject to the interest rate swap agreements in effect as of October 31, 2002, approximately 94 percent was fixed-rate debt, with the remaining 6 percent subject to a short-term variable interest rate of approximately 5.1 percent.

     In order to hedge a portion of the interest rate risk associated with our variable-rate debt, effective March 11, 2002, we entered into two interest rate swap agreements, expiring on March 11, 2004 and March 11, 2005, each involving a notional amount of $50.0 million. For additional information regarding the interest rate swaps, see “Results of Operations – Year Ended October 31, 2003 Compared to Year Ended October 31, 2002 – Other” above.

Preneed Sales and Deliveries

     The revenues from our domestic preneed funeral and cemetery merchandise and service sales are deferred into our backlog and are not included in our operating results above. We added $169.4 million in preneed sales to our funeral and cemetery merchandise and service backlog during the year ended October 31, 2002 to be recognized in

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the future, net of cancellations, as these prepaid products and services are delivered, compared to $162.0 million for the corresponding period in 2001. Deliveries out of our preneed funeral and cemetery merchandise and service backlog, including accumulated trust fund earnings related to these preneed deliveries, amounted to $181.8 million for the year ended October 31, 2002, compared to $183.3 million for the year ended October 31, 2001.

Liquidity and Capital Resources

Cash Flow

     Our operations provided cash of $69.8 million for the year ended October 31, 2003 compared to $90.5 million for the comparable period in 2002. The decrease in operating cash flow is due primarily to a reduction in earnings before taxes, an increase in the investment in preneed activity and an increase in cash used to pay income taxes. The decrease was partially offset by a $23.3 million tax refund received related to the sale of our foreign operations in fiscal year 2003 compared to an $11.1 million tax refund received in fiscal year 2002 related to the sale of our foreign operations. Included in the provision for deferred income taxes and the increase in receivables as of October 31, 2003 is a $33.2 million change relating to a tax accounting change which defers revenues that had been previously includable in taxable income and for which we had a tax refund receivable as of October 31, 2003. We received the $33.2 million refund in December 2003. The drivers of the reduction in our earnings and the increase in the investment in preneed activity are discussed in detail in “Overview of Fiscal Year 2003,” “Preneed Sales” and “Results of Operations – Year Ended October 31, 2003 Compared to Year Ended October 31, 2002” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our expectations for cash flow for 2004 are discussed in “Forward-Looking Statements.”

     Our investing activities resulted in a net cash outflow of $15.4 million for the year ended October 31, 2003, compared to a net cash inflow of $53.4 million for fiscal year 2002. The change is due primarily to $69.8 million in proceeds from the sale of our foreign operations, domestic funeral home real estate and small domestic operations we received in fiscal year 2002 compared to $2.3 million received in fiscal year 2003.

     Our financing activities resulted in a net cash outflow of $64.1 million for the year ended October 31, 2003, compared to a net cash outflow of $138.6 million for the comparable period in 2002. The change is primarily due to the $155.0 million in proceeds from long-term debt received in fiscal year 2003 and the $12.7 million remarketing right paid in fiscal year 2003 in connection with the debt refinancing discussed under the heading “Contractual Obligations and Commercial Commitments.” The change is also due to repayments of long-term debt of $203.2 million in the year ended October 31, 2003, compared to $139.5 million in the comparable period of 2002.

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Contractual Obligations and Commercial Commitments

     As of October 31, 2003, our outstanding debt balance was $502.1 million. We received a $33.2 million tax refund in December 2003 due to a change in the tax accounting methods for cemetery merchandise revenue. We used this refund and cash on hand to reduce our outstanding debt balance to $467.2 million as of January 2, 2004. The following table details our known future cash payments (in millions) related to various contractual obligations as of October 31, 2003.

			Payments Due by Period
			Fiscal Year		Fiscal Years		Fiscal Years
Contractual Obligations	Total		2004		2005 - 2006		2007 – 2008		Thereafter
Current maturities of long-term debt (1)	$	13.9	$	13.9	$	—	$	—	$	—
Long-term debt (1)		488.2		—		186.9		300.7		.6
Operating lease agreements (2)		44.4		5.7		8.9		7.0		22.8
Non-competition and other agreements (3)		14.7		5.3		5.7		2.8		.9
	$	561.2	$	24.9	$	201.5	$	310.5	$	24.3

(1)	See below for a breakdown of our future scheduled principal payments and maturities of long-term debt by type as of October 31, 2003.
(2)	Our noncancellable operating leases are primarily for land and buildings and expire over the next 1 to 16 years, except for six leases that expire between 2032 and 2039. Our future minimum lease payments as of October 31, 2003 are $5.7 million, $4.7 million, $4.2 million, $3.7 million, $3.3 million and $22.8 million for the years ending October 31, 2004, 2005, 2006, 2007, 2008 and later years, respectively.
(3)	We have entered into non-competition agreements with prior owners and key employees of acquired subsidiaries that expire through 2012. During fiscal year 2001, we decided to relieve some of the prior owners and key employees of their obligations not to compete; however, we will continue to make the payments in accordance with the contract terms. This category also includes separation pay related to two former executive officers payable over the next 2 years.

     As stated above, we received a $33.2 million tax refund in December 2003, which was used to reduce the outstanding Term Loan B balance, and our outstanding debt balance as of January 2, 2004 was $467.2 million. We expect to be able to reduce our debt with approximately $16 million of remaining income tax benefits related to the sale of our foreign operations, the majority of which we expect to receive during 2004 and 2005. The following table reflects future scheduled principal payments and maturities of our long-term debt (in millions) as of October 31, 2003.

									Other,
									Principally
									Seller
Fiscal	Revolving				Senior				Financing of
Year Ending	Credit		Term		Subordinated		6.70%		Acquired
October 31,	Facility		Loan B		Notes		Public Notes		Operations		Total
2004	$	—	$	10.0	$	—	$	.1	$	3.8	$	13.9
2005		79.0		86.5		—		—		1.7		167.2
2006		—		18.9		—		—		.8		19.7
2007		—		—		—		—		.5		.5
2008		—		—		300.0		—		.2		300.2
Thereafter		—		—		—		—		.6		.6
Total long-term debt	$	79.0	$	115.4	$	300.0	$	.1	$	7.6	$	502.1

     On May 1, 2003, we used $50.0 million of additional Term Loan B financing along with $50.0 million from our

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revolving credit facility to redeem our $99.9 million outstanding ROARS. When the remarketing dealer elected to remarket the ROARS, we exercised our right to redeem the ROARS rather than allow them to be remarketed. We paid the remarketing dealer $12.7 million, the contractually specified value of the remarketing right. Net of the $1.5 million unamortized ROARS option premium and $.1 million in costs, we recorded a charge of $11.3 million ($7.3 million after tax, or $.07 per share) in the third quarter of fiscal year 2003. In connection with the redemption of the ROARS, we amended the loan covenants that govern our revolving credit and Term Loan B credit. The amendment to the credit agreement provides greater financial flexibility as discussed in Note 13 to the consolidated financial statements included in Item 8.

     We also have $15.1 million of outstanding letters of credit as of October 31, 2003, and we are required to maintain a bond to guarantee our obligations relating to funds we withdrew from our preneed funeral trusts in Florida. We substituted a bond to guarantee performance under certain preneed funeral contracts and agreed to maintain unused credit facilities in an amount that will equal or exceed the bond amount. As of October 31, 2003, the balance of the Florida bond was $41.1 million. We believe that cash flow from operations will be sufficient to cover our estimated cost of providing the related prearranged services and products in the future.

     As of October 31, 2003 and January 2, 2004, there was $79.0 million drawn on our $175.0 million revolving credit facility. As of October 31, 2003 and January 2, 2004, our availability under the revolving credit facility, after giving consideration to the aforementioned letters of credit, bond obligation and the required reserve, was $39.7 million and $40.0 million, respectively.

     We expect to be able to pay the $13.9 million of debt coming due in fiscal year 2004 using cash from operations or by drawing on our revolving credit facility. It is not our intention to pay all remaining amounts on our long term debt exclusively from cash flow from operations. We expect to be able to refinance the debt well in advance of the maturity dates. Any refinancing could result in additional interest and other costs depending primarily on financial markets and our credit profile at the time of refinancing.

Capital Expenditures

     For fiscal year 2003, capital expenditures amounted to $18.4 million, which included $16.3 million for maintenance capital expenditures and $2.1 million for new growth initiatives. For fiscal year 2004, we anticipate maintenance capital expenditures consistent with fiscal year 2003 and new growth initiatives of up to $10 million, including the construction of the Los Angeles funeral homes. We have no material commitments for capital expenditures in fiscal year 2004 other than approximately $1.9 million related to the Archdiocese of Los Angeles funeral homes.

Off-Balance Sheet Arrangements

     Our off-balance sheet arrangements as of October 31, 2003 consist of the following two items:

(1)	the $41.1 million bond we are required to maintain to guarantee our obligations relating to funds we withdrew from our preneed funeral trusts in Florida, which is discussed in Note 18 to the consolidated financial statements included in Item 8; and
(2)	our preneed funeral, merchandise and perpetual care trust funds, which are discussed both in Notes 4 and 5 to the consolidated financial statements included in Item 8 and at “Summary of Current Accounting for Trust and Escrow Account Earnings” above.

Ratio of Earnings to Fixed Charges

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     Our ratio of earnings to fixed charges was as follows:

Years ended October 31,
2003	2002			2001			2000		1999
— (1)		1.75	(2)		—	(3)(4)		2.57		3.43	(3)

(1)	Pretax earnings for fiscal year 2003 include a charge of $11.3 million for the loss on early extinguishment of debt in connection with redemption of the ROARS and a noncash charge of $107.3 million for the impairment charges related to goodwill and long-lived asset impairment. As a result of these charges, our earnings for the fiscal year ended October 31, 2003 were insufficient to cover our fixed charges, and an additional $69.8 million in pretax earnings would have been required to eliminate the coverage deficiency.
(2)	Pretax earnings for fiscal year 2002 include a noncash charge of $18.5 million in connection with the writedown of assets held for sale.
(3)	Excludes the cumulative effect of change in accounting principles.
(4)	Pretax earnings for fiscal year 2001 include a noncash charge of $269.2 million in connection with the writedown of assets held for sale and other charges and $9.1 million charge for the loss on early extinguishment of debt. As a result of these charges, our earnings for the fiscal year ended October 31, 2001 were insufficient to cover our fixed charges, and an additional $197.0 million in pretax earnings would have been required to eliminate the coverage deficiency.

     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. The ratio of earnings to fixed charges for the years ended October 31, 2003 and 2002 reflects the implementation of SFAS No. 142; fiscal year 2001 reflects the 2001 change in accounting principles; and fiscal years 2000 and 1999 reflect the 1999 change in accounting principle.

Inflation

     Inflation has not had a significant impact on our operations over the past three years, nor is it expected to have a significant impact in the foreseeable future.

Recent Accounting Standards

     See Note 3 to the consolidated financial statements included in Item 8.

Forward-Looking Statements

     Certain statements made herein or elsewhere by us or on our behalf 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. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan” or “anticipate” and other similar words. These statements include any projections of earnings, revenues, asset sales, cash flow, debt levels or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements contained in this report include but are not limited to the financial projections made in this section and the assumptions underlying them, along with statements relating to (1) anticipated future performance of our preneed sales program, (2) anticipated future performance of funds held in trust, (3) anticipated mortality trends, (4) potential results of our new operating initiatives, (5) our current plans for deployment of our projected cash flow, (6) the

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anticipated impact of the recent workforce reduction and restructuring and (7) the success and timing of selling the small businesses we identified in the fourth quarter of fiscal year 2003.

     Accuracy of the forecasts is dependent upon assumptions about events that change over time and is thus susceptible to periodic change based on actual experience and new developments. The forecasts are based on a variety of estimates and assumptions made by our management with respect to, among other things, industry performance; general economic, market, industry and interest rate conditions; preneed and at-need sales activities and trends; fluctuations in cost of goods sold and other expenses; capital expenditures; and other matters that cannot be accurately predicted, may not be realized and are subject to significant business, economic and competitive uncertainties, all of which are difficult to predict and many of which are beyond our control. Accordingly, there can be no assurance that the assumptions made in preparing the forecasts will prove accurate, and actual results may vary materially from those contained in the forecasts. For these reasons, the forecasts should not be regarded as an accurate prediction of future results, but only of results that may be obtained if substantially all of our principal expectations are realized.

     We caution readers that we assume no obligation to update or publicly release any revisions to forward-looking statements made herein or any other forward-looking statements made by us or on our behalf.

     We project that earnings for continuing operations will be in the range of $.36 and $.40 per share for fiscal year 2004 including the $.01 per share impact for severance costs related to the workforce reductions announced in December 2003. We expect cash flow from operations to be between $77 million and $86 million, including the $33 million tax refund received in December 2003 due to a change in the tax accounting methods for cemetery merchandise revenue. Maintenance capital expenditures are expected to be between $16 million and $17 million.

     Our 2004 forecast for continuing operations is based on the following principal assumptions:

(1)	An increase in revenue of 1 to 3 percent for continuing operations and a corresponding increase in the associated direct costs.
(2)	The increase in revenue is expected to be driven by an increase in the average revenue per service performed of approximately 2 to 3 percent, excluding any impact from funeral trust earnings, and an increase in preneed property sales of 5 to 10 percent.
(3)	Increases in average revenue per service performed may be partially offset by a decrease in the number of families served by continuing operations in 2004 as compared to 2003. The upper end of the forecast range assumes that these businesses will serve the same number of families during fiscal year 2004 as in 2003, and the lower end assumes a possible reduction in the number of families served of up to 3 percent, which is in line with trends over the last few years.
(4)	Revenue from trust earnings, including earnings from funeral, merchandise and perpetual care trust funds, is expected to be about the same as that recognized in 2003.
(5)	Our cost-saving initiatives, including the reduction in workforce, are expected to reduce costs by $16 million to $20 million. These cost savings are expected to be partially offset by about $8 million to $10 million in normal inflation of costs remaining in the business, assuming an inflation rate of approximately 2 percent.
(6)	We expect to use cash flow from operations to maintain our facilities at a level comparable to 2003, to reduce debt and to repurchase stock, or for growth initiatives as appropriate.

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     These forecasts for continuing operations exclude the results of a number of small businesses that we have decided to close or sell, the results of which will be reported separately as discontinued operations as appropriate in future reports.

Cautionary Statements

     We caution readers that the following important factors, among others, in some cases have affected, and in the future, could affect, our actual consolidated results and could cause our 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 us or on our behalf.

Risks Related to Our Business

Earnings from and principal of trust funds and escrow accounts could be reduced by changes in stock and bond prices and interest and dividend rates or by a decline in the size of the funds.

     We maintain three types of trust funds and escrow accounts: (1) preneed funeral merchandise and services, (2) preneed cemetery merchandise and services and (3) perpetual care. Earnings and investment gains and losses on trust funds and escrow accounts are affected by financial market conditions that are not within our control. Earnings are also affected by the mix of fixed-income and equity securities that we choose to maintain in the funds, and we may not choose the optimal mix for any particular market condition. The size of the funds depends upon the level of preneed sales and maturities, the amount of ordinary income and investment gains or losses and funds added through acquisitions, if any. Declines in earnings from perpetual care trust funds would cause a decline in current revenues, while declines in earnings from other trust funds and escrow accounts could cause a decline in future cash flows and revenues. In addition, any significant or sustained investment losses could result in there being insufficient funds in the trusts to cover the cost of delivering services and merchandise or maintaining cemeteries in the future. Any such deficiency would have to be covered by cash flow, which could have a material adverse effect on our financial position and results of operations.

     Unrealized gains and losses in the funeral trust funds and cemetery merchandise trust funds have no immediate impact on our revenues, margins, earnings or cash flow, unless the fair market value of the funds were to decline below the estimated costs to deliver the underlying products and services. If that were to occur, we would record a charge to earnings to record a liability for the expected losses on the delivery of the associated contract. Over time, gains and losses realized in the funds are allocated to underlying preneed contracts and affect the amount of the trust fund earnings we record when we deliver the underlying product or service. Accordingly, if current market conditions do not improve, the funds may eventually realize losses, and our revenues, margins, earnings and cash flow would be negatively affected by the reduced revenue when we deliver the underlying products and services. This factor adversely affected our results in fiscal year 2003 and may do so again in fiscal year 2004. We project that with approximately 1.0 percent to 3.0 percent annualized returns in the funds over the estimated lives of the associated preneed contracts, our trust and escrow funds would recover the net unrealized depreciation currently in the funds by the time the underlying products and services are delivered. Unrealized gains and losses in the perpetual care trust fund do not affect earnings but could limit the capital gains available to us and could result in lower returns and lower current revenues than we have historically achieved.

Increased costs may have a negative impact on earnings and cash flows.

     Overall costs are expected to decline in 2004 due to our cost reduction operating initiatives, including the workforce restructuring and reduction that occurred in December 2003. The cost reduction initiatives are expected to reduce costs $16 million to $20 million. These cost savings are expected to be partially offset by about $8 million to $10 million in normal inflation of costs remaining in the business. We may not be successful in fully implementing these initiatives and may incur additional costs.

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     Insurance costs, in particular, have increased substantially. The terrorist attacks in the United States on September 11, 2001 and related subsequent events have resulted in higher insurance premiums. The volume of claims made in such a short span of time resulted in liquidity challenges that many insurers have passed on to their policyholders. Additionally, insurers have increased premiums to offset losses in equity markets due to recent economic conditions. While our insurance costs have increased materially, additional increases in insurance costs cannot be predicted.

We may experience declines in preneed sales due to numerous factors, including changes made to contract terms and sales force compensation and a weakening economy. Declines in preneed property sales would reduce current revenue. Declines in preneed funeral and cemetery service and merchandise sales would reduce our backlog and could reduce our future market share.

     In an effort to increase cash flow, we modified our preneed sales strategies early in fiscal year 2000 by increasing finance charges, requiring larger down payments and shortening installment payment terms. Later in fiscal year 2000, we changed the compensation structure for our preneed sales force. These changes, and the accompanying sales force attrition and adverse impact on sales force morale, caused preneed sales to decline. Although we do not anticipate making further significant changes in these areas, we may decide that further adjustments are advisable, which could cause additional declines in preneed sales. In addition, a weakening economy that causes customers to reduce discretionary spending could cause, and we believe has caused, a decline in preneed sales. Geopolitical concerns could continue to lower consumer confidence, which could also result in a further decline in preneed sales. Declines in preneed cemetery property sales would reduce current revenue, and declines in other preneed sales would reduce our backlog and future revenue and could reduce future market share. One of the new operating initiatives announced in 2003 was the creation of a preneed cemetery property task force, which is strategically targeting businesses with maximum preneed sales potential and developing specific plans to increase preneed property sales and attain new customers at each of the targeted locations. However, we can give no assurance that we will be successful in implementing this operating initiative.

Our ability to increase funeral call volume is influenced by many factors such as the decline in deaths, competition, our ability to identify changing consumer preferences and various other factors, some of which are beyond our control.

     One of the new operating initiatives announced in 2003 was the creation of a funeral call volume task force, which is using the most successful tactics of our top performing funeral homes to develop strategies to drive funeral call growth throughout our organization with an increased focus on preneed funeral sales. We can give no assurance that we will be successful in implementing this operating initiative. We discuss the risk of declining deaths, intense competition and our ability to identify changing consumer preferences in other risk factors herein.

Our ability to dispose of certain identified small businesses at prices consistent with our expectations depends on several factors, many of which are beyond our control. Any changes in expected sales prices or basis of these businesses could result in additional impairment charges or could adversely affect our ability to sell these businesses at prices we are willing to accept.

     In December 2003, we announced our plans to close or sell a number of small businesses, primarily small funeral homes, most of which were acquired as part of a group of facilities, that are performing below acceptable levels and no longer fit our operating profile. We believe that the closing or sale of those businesses will enable management to focus on our most productive operations where our operating initiatives may bring about the greatest benefits in increased revenues. We can give no assurance that we will be able to dispose of these businesses or that buyers will accept our terms, nor can we give any assurance that the selling prices of these businesses will not be materially different from our expectations. Any variance between the anticipated and actual sale prices or changes in the basis of these businesses would result in a change in the impairment charge recorded in the fourth quarter of 2003.

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Our ability to service our debt in the future depends upon our ability to generate sufficient cash, which depends upon many factors, some of which are beyond our control.

     Our ability to service our debt depends upon our ability to generate sufficient cash. We expect to be able to reduce our debt with approximately $16 million of remaining income tax benefits relating to the sale of our foreign operations, the majority of which we expect to receive during 2004 and 2005. Our ability to receive the expected income tax benefits within our expected time frame depends upon, among other things, the timing of our filing for capital loss carrybacks to apply against previously-taxed capital gains and the rate at which we realize additional capital gains. Our primary tax planning strategy is to produce these capital gains in our trust funds. Our ability to generate capital gains could be affected by a decline in market conditions. Our ability to generate cash flows from operations depends upon, among other things, the number of deaths in our markets, competition, the level of preneed sales and their maturities, our ability to control our costs, stock and bond market conditions, and general economic, financial and regulatory factors, most of which are beyond our control. It is not our intention to pay amounts due on our long-term debt maturing in fiscal year 2005 and beyond exclusively with cash flow from operations. We expect to refinance the debt well in advance of their maturities. If we are unsuccessful in refinancing this debt, we may not generate sufficient cash from operations to satisfy this debt as it becomes due. Our ability to refinance this debt, and potential increased interest and other costs associated with refinancings, depends primarily on financial markets and our credit profile at the time of the refinancing.

Increased preneed sales may have a negative impact on cash flow.

     Preneed sales of cemetery property and funeral and cemetery products and services are generally cash flow negative initially, primarily due to the commissions paid on the sale, the portion of the sales proceeds required to be placed into trust or escrow and the terms of the particular contract such as the size of the down payment required and the length of the contract. In fiscal year 2000, we changed the terms and conditions of preneed sales contracts and commissions and moderated our preneed sales effort in order to reduce the initial negative impact on cash flow. Nevertheless, we will continue to invest a significant portion of cash flow in preneed acquisition costs, which reduces cash flow available for other activities, and, to the extent preneed activities are increased, cash flow would be further reduced, and our ability to service debt could be adversely affected.

Price competition could reduce market share or cause us to reduce prices to retain or recapture market share, either of which could reduce revenues and margins.

     Our funeral home and cemetery operations generally face intense competition in local markets that typically are served by numerous funeral homes and cemetery firms. We have historically experienced price competition primarily from independent funeral home and cemetery operators, and from monument dealers, casket retailers, low-cost funeral providers and other non-traditional providers of services or products. From time to time, this price competition has resulted in losing market share in some markets. In other markets, we have had to reduce prices thereby reducing profit margins in order to retain or recapture market share. Increased price competition in the future could further reduce revenues, profit margins and the backlog and potentially impact our annual goodwill impairment analysis.

Increased advertising or better marketing by competitors, or increased activity by competitors offering products or services over the Internet, could cause us to lose market share and revenues or cause us to incur increased costs in order to retain or recapture our market share.

     In recent years, the marketing of preneed funeral services through television, radio and print advertising, direct mailings and personal sales calls has increased. Extensive advertising or effective marketing by competitors in local markets could cause us to lose market share and revenues or cause us to increase marketing costs. In addition, competitors may change the types or mix of products or services offered. These changes may attract customers, causing us to lose market share and revenue or to incur costs in response to competition in order to vary the types or mix of products or services offered by us. Also, increased use of the Internet by customers to research and/or

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purchase products and services could cause us to lose market share to competitors offering to sell products or services over the Internet.

Increases in interest rates would increase interest costs on our variable-rate long-term debt and could have a material adverse effect on our net income and earnings per share.

     As of January 2, 2004, $160.4 million of our long-term debt was subject to variable interest rates, although $81.4 million of that amount was fixed pursuant to the terms of interest rate swaps expiring in March of 2004 and 2005. Accordingly, any significant increase in interest rates could increase our interest costs on our variable-rate long-term debt or indebtedness incurred in the future, which could decrease our net income and earnings per share materially.

Covenant restrictions under our senior secured credit facility and senior subordinated note indenture limit our flexibility in operating our business.

     Our senior secured credit facility and the indenture governing the senior subordinated notes contain, among other things, covenants that restrict us and our subsidiary guarantors’ ability to finance future operations or capital needs or to engage in other business activities. They limit, among other things, our and our subsidiary guarantors’ ability to: borrow money; pay dividends or distributions; purchase or redeem stock; make investments; engage in transactions with affiliates; engage in sale leaseback transactions; consummate specified asset sales; effect a consolidation or merger or sell, transfer, lease, or otherwise dispose of all or substantially all assets; and create liens on assets. In addition, the senior secured credit facility contains specific limits on capital expenditures and the prepayment of debt other than that incurred under the senior secured credit facility and requires us to maintain specified financial ratios and satisfy financial condition tests.

     These covenants may require us to act in a manner contrary to our business objectives. In addition, events beyond our control, including changes in general economic and business conditions, may affect our ability to satisfy these covenants. A breach of any of those covenants could result in a default, allowing the lenders to declare all amounts owed immediately due and payable.

Our projections for 2004 do not include any earnings from acquisition activity. Several important factors, among others, may affect our ability to consummate acquisitions.

     Our projections for 2004 do not include any earnings from acquisition activity. The actual level of acquisition activity, if any, will depend not only on the number of properties acquired, but also on the size of the acquisitions. Several important factors, among others, may affect our ability to consummate acquisitions. We may not be able to find a sufficient number of businesses for sale at prices we are willing to pay, particularly in view of our new pricing parameters and cash flow criteria. Acquisition activity, if any, will also depend on our ability to enter into new markets. Due in part to our lack of experience operating in new areas and to the presence of competitors who have been in certain markets longer than we have, such entry may be more difficult or expensive than we anticipate.

Risks Related to the Death Care Industry

Declines in the number of deaths in our markets can cause a decrease in revenues. Changes in the number of deaths are not predictable from market to market or over the short term.

     Declines in the number of deaths could cause at-need sales of funeral and cemetery services, property and merchandise to decline, which could decrease revenues. This factor adversely affected our results in fiscal year 2003 and may do so again in fiscal year 2004. Although the United States Bureau of the Census estimates that the number of deaths in the United States will increase by approximately 1 percent per year from 2000 to 2010, longer lifespans could reduce the rate of deaths. Changes in the number of deaths can vary among local markets and from quarter to quarter, and variations in the number of deaths in our markets or from quarter to quarter are not predictable.

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However, generally the number of deaths fluctuate with the seasons with more deaths occurring during the winter months primarily resulting from pneumonia and influenza. These variations can cause revenues to fluctuate.

     Our comparisons of the change in the number of families served to the change in the number of deaths reported by the Centers for Disease Control and Prevention (“CDC”) from time to time may not necessarily be meaningful. The CDC receives weekly mortality reports from 122 cities and metropolitan areas in the United States within two to three weeks from the date of death and reports the total number of deaths occurring in these areas each week based on the reports received from state health departments. The comparability of our funeral calls to the CDC data is limited, as reports from the state health departments are often delayed, and the 122 cities reporting to the CDC are not necessarily comparable with the markets in which we operate.

The increasing number of cremations in the United States could cause revenues to decline because we could lose market share to firms specializing in cremations. In addition, basic cremations produce no revenues for cemetery operations and lesser funeral revenues and, in certain cases, lesser profit margins than traditional funerals.

     Our traditional cemetery and funeral service operations face competition from the increasing number of cremations in the United States. Industry studies indicate that the percentage of cremations has steadily increased and that cremations will represent approximately 36 percent of the United States burial market by the year 2010, compared to 27 percent in 2001. The trends toward cremation could cause cemeteries and traditional funeral homes to lose market share and revenues to firms specializing in cremations. In addition, basic cremations (with no funeral service, casket, urn, mausoleum niche, columbarium niche or burial) produce no revenues for cemetery operations and lower revenues than traditional funerals and, when delivered at a traditional funeral home, produce lower profit margins as well.

If we are not able to respond effectively to changing consumer preferences, our market share, revenues and profitability could decrease.

     Future market share, revenues and profits will depend in part on our ability to anticipate, identify and respond to changing consumer preferences. During fiscal year 2000, we began to implement strategies based on a proprietary, extensive study of consumer preferences we commissioned in 1999. However, we may not correctly anticipate or identify trends in consumer preferences, or we may identify them later than our competitors do. In addition, any strategies we may implement to address these trends may prove incorrect or ineffective.

Because the funeral and cemetery businesses are high fixed-cost businesses, positive or negative changes in revenue can have a disproportionately large effect on cash flow and profits.

     Companies in the funeral home and cemetery business must incur many of the costs of operating and maintaining facilities, land and equipment regardless of the level of sales in any given period. For example, we must pay salaries, utilities, property taxes and maintenance costs on funeral homes and maintain the grounds of cemeteries regardless of the number of funeral services or interments performed. Because we cannot decrease these costs significantly or rapidly when we experience declines in sales, declines in sales can cause margins, profits and cash flow to decline at a greater rate than the decline in revenues.

Changes or increases in, or failure to comply with, regulations applicable to our business could increase costs or decrease cash flows.

     The death care industry is subject to extensive regulation and licensing requirements under federal, state and local laws. For example, the funeral home industry is regulated by the Federal Trade Commission, which requires funeral homes to take actions designed to protect consumers. State laws impose licensing requirements and regulate preneed sales. Embalming facilities are subject to stringent environmental and health regulations. Compliance with these regulations is burdensome, and we are always at risk of not complying with the regulations.

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     In addition, from time to time, governments and agencies propose to amend or add regulations, which could increase costs or decrease cash flows. For example, federal, state, local and other regulatory agencies have considered and may enact additional legislation or regulations that could affect the death care industry. Several states and regulatory agencies have considered or are considering regulations that could require more liberal refund and cancellation policies for preneed sales of products and services, limit or eliminate our ability to use surety bonding, increase trust requirements and prohibit the common ownership of funeral homes and cemeteries in the same market. If adopted by the regulatory authorities of the jurisdictions in which we operate, these and other possible proposals could have a material adverse effect on us, our financial condition, our results of operations, our cash flows and our future prospects.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     The market risk inherent in our market risk sensitive instruments and positions is the potential change arising from increases or decreases in the prices of marketable equity securities and interest rates as discussed below. Generally, our market risk sensitive instruments and positions are characterized as “other than trading.” Our exposure to market risk as discussed below includes forward-looking statements and represents an estimate of possible changes in fair value or future earnings that would occur assuming hypothetical future movements in equity markets or interest rates. Our views on market risk are not necessarily indicative of actual results that may occur and do not represent the maximum possible gains and losses that may occur, since actual gains and losses will differ from those estimated, based on actual fluctuations in equity markets, interest rates and the timing of transactions.

Marketable Equity Securities

     As of October 31, 2003 and 2002, our marketable equity securities subject to market risk consisted principally of investments held by our prearranged funeral, merchandise and perpetual care trust funds and escrow accounts and had fair values of $450.5 million and $476.0 million, respectively, which were determined using final sale prices quoted on stock exchanges. Each 10 percent change in the average market prices of the equity securities held in such accounts would result in a change of approximately $45.1 million and $47.6 million, respectively, in the fair value of such accounts.

     Our prearranged funeral, merchandise and perpetual care trust funds and escrow accounts, which are managed by ITI, are detailed in Notes 4 and 5 to our consolidated financial statements included in Item 8. ITI operates pursuant to a formal investment policy as discussed in “Operations” included in Item 1.

Interest

     We have entered into various fixed- and variable-rate debt obligations, which are detailed in Note 13 to our consolidated financial statements included in Item 8.

     As of October 31, 2003 and 2002, the carrying values of our long-term fixed-rate debt, including accrued interest, were approximately $318.5 million and $430.1 million, respectively, compared to fair values of $357.6 million and $455.8 million, respectively. Fair values were determined using quoted market prices. Each approximate 10 percent change in the average interest rates applicable to such debt, 60 and 80 basis points for 2003 and 2002, respectively, would result in changes of approximately $3.1 million and $10.1 million, respectively, in the fair values of these instruments. If these instruments are held to maturity, no change in fair value will be realized.

     In order to hedge a portion of the interest rate risk associated with our variable-rate debt, effective March 11, 2002, we entered into two interest rate swap agreements, each involving a notional amount of $50.0 million. The first agreement effectively converts $50.0 million of variable-rate debt bearing interest based on three-month LIBOR to a fixed rate based on the swap rate of 3.65 percent and expires on March 11, 2004. The second agreement effectively converts $50.0 million of variable-rate debt bearing interest based on three-month LIBOR to a fixed rate based on the swap rate of 4.265 percent and expires on March 11, 2005. The estimated fair value of the

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interest rate swaps based on quoted market prices was ($2.6) million and ($4.0) million as of October 31, 2003 and October 31, 2002, respectively. A hypothetical 100 basis point increase in the average interest rates applicable to such debt would result in an increase of approximately $.8 million and $1.8 million in the fair value of these instruments as of October 31, 2003 and October 31, 2002, respectively.

     As of October 31, 2003 and 2002, the carrying values of our Term Loan B and revolving credit facility were $194.4 million and $135.7 million, respectively, compared to fair values of $195.9 million and $136.5 million, respectively. Of the $194.4 million outstanding under Term Loan B and the revolving credit facility on October 31, 2003, $94.4 million was not hedged by the interest rate swaps and was subject to short-term variable interest rates. Each approximate 10 percent, or 45 basis point, change in the average interest rate applicable to this debt would result in a change of approximately $.1 million in our pretax earnings. Fair value was determined using quoted market prices, where applicable, or future cash flows discounted at market rates for similar types of borrowing arrangements. Of the $135.7 million outstanding under Term Loan B on October 31, 2002, $35.7 million was not hedged by the interest rate swaps and was subject to short-term variable interest rates. Each approximate 10 percent, or 60 basis point, change in the average interest rate applicable to this debt would result in a change of approximately $.1 million in our pretax earnings.

     We monitor our mix of fixed- and variable-rate debt obligations in light of changing market conditions and from time to time may alter that mix by, for example, refinancing balances outstanding under our variable-rate senior secured credit facility with fixed-rate debt or by entering into interest rate swaps.

     As of October 31, 2003 and 2002, our fixed-income securities subject to market risk consisted principally of investments in our prearranged funeral, merchandise and perpetual care trust funds and escrow accounts and had aggregate quoted market values of $76.9 million and $127.0 million, respectively. Each 10 percent change in interest rates on these fixed-income securities would result in changes of approximately $2.4 million and $3.9 million, respectively, in the fair values of such securities based on discounted expected future cash flows. If these securities are held to maturity, no change in fair value will be realized.

     As of October 31, 2003 and 2002, our money market and other short-term investments subject to market risk, including amounts held in preneed funeral and cemetery merchandise and services trust funds, and in perpetual care trust funds, had carrying values approximating their fair values of $328.1 million and $167.9 million, respectively. Under our current accounting methods, a change in the average interest rate earned by our prearranged funeral and cemetery merchandise and services trust funds would not result in a change in our current pretax earnings. As such, as of October 31, 2003 and 2002, only $43.2 million and $30.4 million, respectively, of these short-term investments, which includes amounts in the perpetual care trust funds and other short-term investments not held in trust, were subject to changes in interest rates. Each 10 percent change in average interest rates applicable to such investments, 10 and 20 basis points for 2003 and 2002, respectively, would result in changes of approximately $.1 million, respectively, in our pretax earnings.

     The fixed-income securities, money market and other short-term investments owned by us are principally invested in our prearranged funeral, merchandise and perpetual care trust funds and escrow accounts, which are managed by ITI. ITI operates pursuant to a formal investment policy as discussed above.

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Trust Funds

     As of October 31, 2003, our marketable equity securities and fixed-income securities subject to market risk consisted principally of investments held by our prearranged funeral, cemetery merchandise and perpetual care trust funds and escrow accounts. We estimate that each 100 basis point increase or decrease in the yield, which excludes unrealized gains and losses, on the preneed funeral and cemetery merchandise and perpetual care trust funds, based on October 31, 2003 balances, would result in an approximate increase or decrease in our revenues associated with the delivery of prearranged products and services and earnings from the perpetual care trust funds of $2.1 million in 2004, $3.3 million in 2005 and $4.6 million in 2006.

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Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

	Page
Report of Independent Auditors		49
Consolidated Statements of Earnings for the Years Ended October 31, 2003, 2002 and 2001		50
Consolidated Balance Sheets as of October 31, 2003 and 2002		51
Consolidated Statements of Shareholders’ Equity for the Years Ended October 31, 2003, 2002 and 2001		53
Consolidated Statements of Cash Flows for the Years Ended October 31, 2003, 2002 and 2001		55
Notes to Consolidated Financial Statements		57

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REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and
Shareholders of Stewart Enterprises, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Stewart Enterprises, Inc. and Subsidiaries at October 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 3 to the financial statements, the Company changed its method of accounting for preneed activities related to merchandise and cemetery sales and services in 2001 and goodwill and other intangible assets in 2002.

PricewaterhouseCoopers LLP
New Orleans, Louisiana
December 16, 2003

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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share amounts)

		Year Ended October 31,
		2003			2002			2001
Revenues:
	Funeral	$	298,569		$	345,200		$	410,253
	Cemetery		223,489			236,121			256,680
			522,058			581,321			666,933
Costs and expenses:
	Funeral		227,887			257,049			318,608
	Cemetery		173,800			179,488			197,138
			401,687			436,537			515,746
	Gross profit		120,371			144,784			151,187
Corporate general and administrative expenses			20,183			17,261			18,020
Loss on assets held for sale and other charges (Note 11)			—			18,500			269,158
Impairment of goodwill and long-lived assets (Note 12)			107,300			—			—
	Operating earnings (loss)		(7,112	)		109,023			(135,991	)
Interest expense			(53,478	)		(62,339	)		(63,572	)
Loss on early extinguishment of debt (Note 13)			(11,289	)		—			(9,120	)
Investment income			287			505			5,212
Other income, net			2,122			2,132			7,170
	Earnings (loss) before income taxes and cumulative effect of change in accounting principles		(69,470	)		49,321			(196,301	)
Income tax expense (benefit)			3,998			17,455			(37,645	)
	Earnings (loss) before cumulative effect of change in accounting principles		(73,468	)		31,866			(158,656	)
Cumulative effect of change in accounting principles, net of $166,669 income tax benefit (Note 3)			—			—			(250,004	)
Net earnings (loss)		$	(73,468	)	$	31,866		$	(408,660	)
Basic earnings (loss) per common share:
	Earnings (loss) before cumulative effect of change in accounting principles	$	(.68	)	$	.30		$	(1.48	)
	Cumulative effect of change in accounting principles		—			—			(2.33	)
	Net earnings (loss)	$	(.68	)	$	.30		$	(3.81	)
Diluted earnings (loss) per common share:
	Earnings (loss) before cumulative effect of change in accounting principles	$	(.68	)	$	.29		$	(1.48	)
	Cumulative effect of change in accounting principles		—			—			(2.33	)
	Net earnings (loss)	$	(.68	)	$	.29		$	(3.81	)
Weighted average common shares outstanding (in thousands):
	Basic		108,220			107,861			107,355
	Diluted		108,220			108,299			107,355

See accompanying notes to consolidated financial statements.

-51-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)

			October 31,
			2003		2002
ASSETS
Current assets:
	Cash and cash equivalent investments		$	18,585	$	28,190
	Marketable securities			2,346		2,588
	Receivables, net of allowances			99,694		86,827
	Inventories			42,566		41,666
	Prepaid expenses			2,971		2,815
	Deferred income taxes, net			2,990		1,348
	Assets held for sale (Note 11)			6,464		8,966
		Total current assets		175,616		172,400
Receivables due beyond one year, net of allowances				77,292		76,653
Prearranged receivables, net				1,235,152		1,200,914
Goodwill				406,074		491,323
Deferred charges				253,598		253,083
Cemetery property, at cost				377,788		388,065
Property and equipment, at cost:
	Land			39,166		44,402
	Buildings			303,283		304,125
	Equipment and other			159,860		154,389
				502,309		502,916
	Less accumulated depreciation			188,403		168,600
	Net property and equipment			313,906		334,316
Deferred income taxes, net				58,323		95,794
Other assets				1,240		3,036
		Total assets	$	2,898,989	$	3,015,584

(continued)

-52-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)

				October 31,
				2003			2002
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Current maturities of long-term debt			$	13,935		$	9,396
	Accounts payable				7,274			11,113
	Accrued payroll				8,596			11,813
	Accrued insurance				19,243			14,764
	Accrued interest				11,428			14,642
	Other current liabilities				18,042			15,883
	Liabilities associated with assets held for sale (Note 11)				3,513			2,911
		Total current liabilities			82,031			80,522
Long-term debt, less current maturities					488,180			542,548
Prearranged deferred revenue, net					1,574,810			1,561,533
Other long-term liabilities					15,109			18,718
		Total liabilities			2,160,130			2,203,321
Commitments and contingencies (Note 18)
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 104,172,151 and 104,469,572 shares at October 31, 2003 and 2002, respectively			104,172			104,470
		Class B authorized 5,000,000 shares; issued and outstanding 3,555,020 shares at October 31, 2003 and 2002; 10 votes per share; convertible into an equal number of Class A shares			3,555			3,555
	Additional paid-in capital				676,439			677,087
	Retained earnings (accumulated deficit)				(42,864	)		30,604
	Accumulated other comprehensive loss:
		Unrealized depreciation of investments			(797	)		(965	)
		Derivative financial instrument losses			(1,646	)		(2,488	)
		Total accumulated other comprehensive loss			(2,443	)		(3,453	)
			Total shareholders’ equity		738,859			812,263
		Total liabilities and shareholders’ equity		$	2,898,989		$	3,015,584

See accompanying notes to consolidated financial statements.

-53-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollars in thousands, except per share amounts)

														Unrealized
								Retained			Cumulative			Appreciation			Derivative
						Additional		Earnings			Foreign			(Depreciation)			Financial			Total
			Common			Paid-In		(Accumulated			Translation			of			Instrument			Shareholders’
			Stock			Capital		Deficit)			Adjustment			Investments			Gains (Losses)			Equity
Balance October 31, 2000			$	106,832	(1)	$	673,658	$	407,398		$	(103,553	)	$	(9,678	)	$	—		$	1,074,657
Comprehensive income (loss):
	Net loss								(408,660	)											(408,660	)
	Other comprehensive income (loss):
		Reclassification adjustment for realized loss on foreign translation										74,754									74,754
		Foreign translation adjustment										1,842									1,842
		Cumulative effect of change in accounting for unrealized appreciation of investments under SAB No. 101													8,494						8,494
		Unrealized depreciation of investments, net of deferred tax benefit of $79													(126	)					(126	)
		Cumulative effect of change in accounting for derivative financial instrument, net of deferred tax expense of ($1,722)																2,970			2,970
		Unrealized depreciation on derivative instrument designated and qualifying as a cash flow hedging instrument, net of deferred tax benefit of $2,503																(4,317	)		(4,317	)
		Total other comprehensive income (loss)		—			—		—			76,596			8,368			(1,347	)		83,617
	Total comprehensive income income (loss)			—			—		(408,660	)		76,596			8,368			(1,347	)		(325,043	)
Issuance of common stock				794			1,652														2,446
Balance October 31, 2001			$	107,626	(1)	$	675,310	$	(1,262	)	$	(26,957	)	$	(1,310	)	$	(1,347	)	$	752,060
Balance October 31, 2001			$	107,626	(1)	$	675,310	$	(1,262	)	$	(26,957	)	$	(1,310	)	$	(1,347	)	$	752,060
Comprehensive income (loss):
	Net earnings								31,866												31,866
	Other comprehensive income (loss):
		Reclassification adjustment for realized loss on foreign translation										35,902									35,902
		Foreign translation adjustment										(8,945	)								(8,945	)
		Unrealized appreciation of investments, net of deferred tax expense of ($167)													345						345
		Expiration of derivative instrument designated and qualifying as a cash flow hedging instrument, net of deferred tax expense of ($781)																1,347			1,347
		Unrealized depreciation on derivative instrument designated and qualifying as a cash flow hedging instrument, net of deferred tax benefit of $1,524																(2,488	)		(2,488	)
		Total other comprehensive income (loss)		—			—		—			26,957			345			(1,141	)		26,161
	Total comprehensive income (loss)			—			—		31,866			26,957			345			(1,141	)		58,027
Issuance of common stock				399			1,777														2,176
Balance October 31, 2002			$	108,025	(1)	$	677,087	$	30,604		$	—		$	(965	)	$	(2,488	)	$	812,263

(continued)

-54-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollars in thousands, except per share amounts)

												Unrealized
									Retained			Appreciation			Derivative
						Additional			Earnings			(Depreciation)			Financial			Total
			Common			Paid-In			(Accumulated			of			Instrument			Shareholders’
			Stock			Capital			Deficit)			Investments			Gains (Losses)			Equity
Balance October 31, 2002			$	108,025	(1)	$	677,087		$	30,604		$	(965	)	$	(2,488	)	$	812,263
Comprehensive income (loss):
	Net loss									(73,468	)								(73,468	)
	Other comprehensive income:
		Unrealized appreciation of investments, net of deferred tax expense of ($124)											168						168
		Unrealized appreciation on derivative instrument designated and qualifying as a cash flow hedging instrument, net of deferred tax expense of ($558)														842			842
		Total other comprehensive income		—			—			—			168			842			1,010
	Total comprehensive income (loss)			—			—			(73,468	)		168			842			(72,458	)
Issuance of common stock				441			1,586												2,027
Purchase and retirement of common stock				(739	)		(2,234	)											(2,973	)
Balance October 31, 2003			$	107,727		$	676,439		$	(42,864	)	$	(797	)	$	(1,646	)	$	738,859

⁽¹⁾ Amount includes shares of Class A common stock with a stated value of $1 per share and includes 3,555 shares (in thousands) of Class B common stock.

See accompanying notes to consolidated financial statements.

-55-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share amounts)

				Year Ended October 31,
				2003			2002			2001
Cash flows from operating activities:
	Net earnings (loss)			$	(73,468	)	$	31,866		$	(408,660	)
	Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
		Loss on assets held for sale and other charges			—			18,500			269,158
		Impairment of goodwill and long-lived assets			107,300			—			—
		Loss on early extinguishment of debt			11,289			—			9,120
		Cumulative effect of change in accounting principles			—			—			250,004
		Depreciation and amortization			53,711			56,177			79,192
		Provision for doubtful accounts			8,027			11,499			15,190
		Net losses realized on marketable securities			—			485			63
		Net (gains) losses on sale of assets			(795	)		(808	)		626
		Provision (benefit) for deferred income taxes			33,620			13,617			(43,532	)
		Changes in assets and liabilities:
			(Increase) decrease in other receivables		(21,327	)		7,699			(9,137	)
			Decrease in deferred charges		7,003			5,943			1,565
			(Increase) decrease in inventories and cemetery property		1,107			(2,219	)		8,657
			Decrease in accounts payable and accrued expenses		(4,603	)		(5,597	)		(2,526	)
			Change in prearranged activity		(17,792	)		(13,816	)		(19,786	)
			Prearranged acquisition costs		(37,801	)		(31,240	)		(33,668	)
			Increase (decrease) in other		3,549			(1,617	)		806
		Net cash provided by operating activities			69,820			90,489			117,072
Cash flows from investing activities:
	Proceeds from sales of marketable securities and long-term investments				550			169			4,544
	Purchases of marketable securities and long-term investments				(14	)		(42	)		(1,920	)
	Proceeds from sale of assets, net				2,341			69,803			81,469
	Additions to property and equipment				(18,439	)		(18,630	)		(26,049	)
	Other				199			2,127			591
		Net cash provided by (used in) investing activities			(15,363	)		53,427			58,635

(continued)

-56-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share amounts)

			Year Ended October 31,
			2003			2002			2001
Cash flows from financing activities:
	Funeral trust withdrawal			—			—			40,000
	Retirement of Remarketable Or Redeemable Securities (“ROARS”)			(12,691	)		—			—
	Proceeds from long-term debt			155,000			—			725,000
	Repayments of long-term debt			(203,164	)		(139,502	)		(977,973	)
	Debt issue costs			(816	)		—			(34,271	)
	Issuance of common stock			582			858			915
	Purchase and retirement of common stock			(2,973	)		—			—
		Net cash used in financing activities		(64,062	)		(138,644	)		(246,329	)
Effect of exchange rates on cash and cash equivalents				—			(205	)		2,150
Net increase (decrease) in cash				(9,605	)		5,067			(68,472	)
Cash and cash equivalents, beginning of year				28,190			23,123			91,595
Cash and cash equivalents, end of year			$	18,585		$	28,190		$	23,123
Supplemental cash flow information:
	Cash paid (received) during the year for:
		Income taxes	$	(17,500	)	$	(12,700	)	$	7,100
		Interest	$	50,500		$	57,400		$	56,700
Noncash investing and financing activities:
	Issuance of common stock to fund employee benefit plan		$	1,445		$	1,318		$	1,531

See accompanying notes to consolidated financial statements.

-57-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(1) The Company

     Stewart Enterprises, Inc. (the “Company”) is a provider of funeral and cemetery products and services in the death care industry in the United States. Through its subsidiaries, the Company offers a complete range of funeral merchandise and services, along with cemetery property, merchandise and services, both at the time of need and on a preneed basis.

     As of October 31, 2003, the Company operated 299 funeral homes and 148 cemeteries in 29 states within the United States and Puerto Rico. In fiscal year 2001, the Company sold its operations in Mexico, Australia, New Zealand, Belgium and the Netherlands, which consisted of 94 funeral homes and 2 cemeteries. In fiscal year 2002, the Company sold its remaining foreign operations in Spain, Portugal, France, Canada and Argentina, which consisted of 196 funeral homes and 8 cemeteries.

(2) Summary of Significant Accounting Policies

     (a)  Principles of Consolidation

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

     (b)  Use of Estimates

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

     (c)  Fair Value of Financial Instruments

     Estimated fair value amounts have been determined using available market information and the valuation methodologies described below. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein may not be indicative of the amounts the Company could realize in a current market. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

     The carrying amounts of cash and cash equivalents and current receivables approximate fair value due to the short-term nature of these instruments. The carrying amount of receivables due beyond one year approximates fair value because they bear interest at rates currently offered by the Company for receivables with similar terms and maturities. The carrying amounts of marketable securities are stated at fair value as they are classified as available for sale under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” The fair value of the Company’s long-term variable- and fixed-rate debt is estimated using quoted market prices, where applicable, or future cash flows discounted at rates for similar types of borrowing arrangements as discussed in Note 13.

-58-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(2) Summary of Significant Accounting Policies—(Continued)

     (d)  Prearranged Trust Receivable

     The Company evaluates the collectibility of the prearranged trust receivable for impairment when the fair market value of the trust assets are below the recorded prearranged receivable balance. A prearranged trust receivable is deemed to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts from the trust at the time the receivables are due. In those instances that a receivable is deemed to be impaired, a valuation allowance is provided on the trust receivable to reduce it to the currently estimated recoverable amount with a corresponding reduction to the associated deferred revenue balance. There is no income statement impact as long as the deferred revenue is not below the estimated costs to deliver the underlying products or services. If the deferred revenue were below the estimated cost to deliver the underlying products or services, the Company would record a charge to earnings. During the fourth quarter of fiscal year 2002, the Company recorded a valuation allowance of $20,000 related to its prearranged receivables from its trust funds, which resulted in a reduction in prearranged receivables and prearranged deferred revenue. This valuation allowance was deemed necessary due to a decline in the overall market value of the underlying trust funds. During fiscal year 2003, the valuation allowance was decreased $15,500 due to an increase in the market value of the underlying trust funds, which resulted in an increase in prearranged receivables and prearranged deferred revenue. Accordingly, the valuation allowance as of October 31, 2003 was $4,500. See Note 4 for a discussion of the Company’s prearranged receivables and prearranged deferred revenue.

     (e)  Inventories

     Inventories are stated at the lower of cost (specific identification and first-in, first-out methods) or net realizable value. The portion of developed cemetery property that management estimates will be used in the next twelve months is included in inventories. Such estimates are based on the Company’s historical experience or results.

     (f)  Depreciation and Amortization

     Buildings and equipment are recorded at cost and are depreciated over their estimated useful lives, ranging from 10 to 40 years and from 3 to 10 years, respectively, primarily using the straight-line method. For the fiscal years ended October 31, 2003, 2002 and 2001, depreciation expense totaled approximately $25,224, $26,226 and $28,967, respectively.

     Goodwill or costs in excess of net assets of companies acquired, totaled approximately $406,074 and $491,323 as of October 31, 2003 and 2002, respectively. Accumulated amortization included in goodwill was $65,804 as of October 31, 2003 and 2002. The Company’s accounting for goodwill changed in the first quarter of fiscal year 2002 with the implementation of SFAS No. 142, “Goodwill and Other Intangibles.” SFAS No. 142 provides that goodwill is no longer amortized, but must be tested for impairment using a fair value approach rather than an undiscounted cash flow approach. The Company’s evaluation of goodwill is performed at the funeral and cemetery segments, which constitute the Company’s reporting units. The Company did not record any impairment loss upon implementation of SFAS No. 142 in fiscal year 2002. In the fourth quarter of each fiscal year, the Company compares the fair value with the book value for each reporting unit. As a result of the annual goodwill impairment review that occurred during the fourth quarter of fiscal year 2003, the Company recorded a noncash goodwill impairment charge of $73,000 in the fourth quarter of fiscal year 2003 related to its cemetery segment. Prior to the implementation of SFAS No. 142, the Company amortized goodwill principally over 40 years using the straight-line method. For further discussion of SFAS No. 142 and the goodwill impairment charge, see Note 3 and Note 12.

-59-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(2) Summary of Significant Accounting Policies—(Continued)

     (g)  Foreign Currency Translation

     In accordance with SFAS No. 52, “Foreign Currency Translation,” all revenues and expenses of the Company’s foreign subsidiaries were translated at average exchange rates prevailing during the period. The resulting translation adjustments were reflected in a separate component of shareholders’ equity. As discussed in Note 11, at the time of sale the Company realized comprehensive income and an increase to shareholders’ equity for the cumulative foreign currency translation adjustments related to the sale of the Company’s operations in Mexico, Australia, New Zealand, Belgium and the Netherlands in 2001 and Spain, Portugal, France, Canada and Argentina in 2002.

     In the first quarter of 2002, the Company recorded a $6,215 cumulative foreign translation adjustment related to its operations in Argentina. In previous years, the Argentine peso was valued at a one-to-one ratio with the U.S. dollar, and no foreign currency translation adjustment related to the Company’s operations in Argentina was necessary. Due to the depressed economic conditions existing in Argentina, the Argentine peso had significantly devalued, which necessitated the need for an adjustment.

     (h)  Stock-Based Compensation

     At October 31, 2003, the Company had five stock-based employee compensation plans, which are described in more detail in Note 17. The Company accounts for those plans under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” and has adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure — an Amendment of FASB Statement No. 123.” No stock-based employee compensation cost is reflected in net earnings, as all options granted under those plans had an exercise price equal to or greater than the market value of the underlying common stock on the grant date. The following table illustrates the effect on net earnings (loss) and net earnings (loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation.

		Year Ended October 31,
		2003			2002			2001
Net earnings (loss)		$	(73,468	)	$	31,866		$	(408,660	)
Total stock-based employee compensation expense determined under fair value-based method, net of tax			(2,932	)		(4,527	)		(5,043	)
Pro forma net earnings (loss)		$	(76,400	)	$	27,339		$	(413,703	)
Net earnings (loss) per common share:
	Basic - as reported	$	(.68	)	$	.30		$	(3.81	)
	Basic - pro forma	$	(.71	)	$	.25		$	(3.85	)
	Diluted - as reported	$	(.68	)	$	.29		$	(3.81	)
	Diluted - pro forma	$	(.71	)	$	.25		$	(3.85	)

-60-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(2) Summary of Significant Accounting Policies—(Continued)

     (i)  Funeral Revenue

     The Company sells prearranged funeral services and merchandise under contracts that provide for delivery of the services and merchandise at the time of death. Prearranged funeral services are recorded as funeral revenue in the period the funeral is performed. Prearranged funeral merchandise is recognized as revenue upon delivery. Prior to performing the funeral or delivery of the merchandise, such sales are deferred and reported as prearranged deferred revenue on the balance sheet.

     Commissions and other direct costs that vary with and are primarily related to the acquisition of new prearranged funeral service sales and prearranged funeral merchandise sales are deferred and amortized as the contracts are delivered in accordance with SFAS No. 60, “Accounting and Reporting for Insurance Companies.” Indirect costs of marketing prearranged funeral services are expensed in the period in which incurred.

     Prearranged funeral services and merchandise generally are funded either through trust funds or escrow accounts established by the Company or through third-party insurance companies. Principal amounts deposited in the trust funds or escrow accounts are available to the Company as funeral services and merchandise are delivered and are refundable to the customer in those situations where state law provides for the return of those amounts under the purchaser’s option to cancel the contract. Certain jurisdictions provide for non-refundable trust funds or escrow accounts where the Company receives such amounts upon cancellation by the customer. The Company defers all dividends and interest earned, and capital gains and losses realized by preneed funeral service trust funds or escrow accounts as prearranged deferred revenue on the balance sheet until the underlying service is delivered.

     Earnings are withdrawn from trust funds or escrow accounts only as funeral services and merchandise are delivered or contracts are cancelled, except in jurisdictions that permit earnings to be withdrawn currently and in unregulated jurisdictions where escrow accounts are used. Even so, such earnings withdrawn are not recognized as revenue until the related funeral services are performed or merchandise delivered. When prearranged funeral services and merchandise are funded through insurance policies purchased by customers from third-party insurance companies, the Company earns a commission if it acts as agent on the sale of the policies. Insurance commissions, net of related expenses, are recognized at the point at which the commission is no longer subject to refund. Policy proceeds, including the buildup in the face value of the insurance contracts, are available to the Company as funeral services and merchandise are delivered.

     Effective November 1, 2000, the Company changed its method of accounting for preneed funeral merchandise. See the discussion of these accounting changes in Note 3.

     Funeral services sold at the time of need are recorded as funeral revenue in the period the funeral is performed.

     (j)  Cemetery Revenue

     Effective November 1, 2000, the Company changed its method of accounting for preneed sales of interment rights, merchandise and cemetery services and cemetery merchandise trust earnings as discussed in Note 3.

     In certain jurisdictions in which the Company operates, local law or contracts with customers generally require that a portion of the sale price of preneed cemetery merchandise and services be placed in trust funds or escrow accounts. The Company defers all dividends and interest earned and capital gains and losses realized by preneed cemetery merchandise and services trust funds or escrow accounts as prearranged deferred revenue on the balance

-61-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(2) Summary of Significant Accounting Policies—(Continued)

sheet until the underlying merchandise or service is delivered. Principal and earnings are withdrawn only as the merchandise or services are delivered or contracts are cancelled.

     Pursuant to perpetual care contracts and laws, a portion, generally 10 percent, of the proceeds from cemetery property sales is deposited into perpetual care trust funds. The income from these funds, which have been established in most jurisdictions in which the Company operates cemeteries, is used for maintenance of those cemeteries, but principal, including in some jurisdictions net realized capital gains, must generally be held in perpetuity. Accordingly, the trust fund corpus is not reflected in the consolidated financial statements. The Company currently recognizes and withdraws all dividend and interest income earned and, where permitted, capital gains realized by perpetual care funds.

     Some of the Company’s sales of cemetery property and merchandise are made under installment contracts bearing interest at prevailing rates. Finance charges are recognized as cemetery revenue under the effective interest method over the terms of the related installment receivables.

     (k)  Allowance for Doubtful Accounts

     The Company establishes a reserve based on a range of percentages applied to accounts receivable aging categories. These percentages are based on historical collection and write-off experience.

     (l)  Income Taxes

     Income taxes are accounted for using the asset and liability method under which deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date. Management provides a valuation allowance against the deferred tax asset for amounts which are not considered more likely than not to be realized. For additional information, see Note 16.

     (m)  Earnings Per Common Share

     Basic earnings per common share is computed by dividing net earnings by the weighted average number of common shares outstanding during each period. Diluted earnings per common 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 as discussed in Note 15.

     On June 26, 2003, the Company announced that its Board of Directors had approved a new stock repurchase program that will allow the Company to invest up to $25,000 in repurchases of its Class A common stock. The repurchases are limited to the Company’s Class A common stock and will be made in the open market or in privately negotiated transactions at such times and in such amounts as management deems appropriate, depending

-62-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(2)  Summary of Significant Accounting Policies—(Continued)

on market conditions and other factors. These repurchases will reduce the weighted average number of common shares outstanding during each period. As of October 31, 2003, the Company had repurchased 738,500 shares of its Class A common stock at an average price of $3.99 per share.

     (n)  Derivatives

     The Company accounts for its derivative financial instruments under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133” and SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities.” The notional amounts of derivative financial instruments do not represent amounts exchanged between parties and, therefore, are not a measure of the Company’s exposure resulting from its use of derivatives. The amounts exchanged are calculated based upon the notional amounts as well as other terms of the instruments, such as interest rates, exchange rates or other indices. In accordance with SFAS No. 133, the Company accounts for its interest rate swaps as cash flow hedges whereby the fair value of the interest rate swaps are reflected as a liability in the accompanying consolidated balance sheet with the offset recorded to other comprehensive income. For further information regarding the Company’s interest rate swaps, see Note 13.

     (o)  Reclassifications

     Certain reclassifications have been made to the 2002 and 2001 consolidated financial statements. These reclassifications had no effect on net earnings (loss), shareholders’ equity or cash flows.

(3)  Change in Accounting Principles

     (a)  Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”

     In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 142, “Goodwill and Other Intangible Assets.” Although not required to implement SFAS No. 142 until the first quarter of fiscal year 2003, the Company implemented it in the first quarter of fiscal year 2002.

     SFAS No. 142 addresses financial accounting and reporting for goodwill and other intangible assets. SFAS No. 142 provides that goodwill is no longer amortized, but must be tested for impairment using a fair value approach rather than an undiscounted cash flow approach. The Company’s evaluation of goodwill is performed at the funeral and cemetery segments, which constitute the Company’s reporting units. SFAS No. 142 requires entities to perform the first goodwill impairment test by comparing the fair value with the book value of a reporting unit on all reporting units within six months of adopting the statement. Any impairment loss recognized in connection with adoption of SFAS No. 142 would have been recorded as a change in accounting principle. Impairment losses recognized as a result of an impairment test occurring subsequent to the first six months after adoption will be included in operating income. Goodwill of a reporting unit must be tested for impairment after the initial adoption of the statement on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company conducts its annual goodwill impairment analysis during the fourth quarter of each fiscal year. The Company did not record any impairment loss upon implementation of SFAS No. 142 in fiscal year 2002. As a result of the Company’s annual evaluation of goodwill in fiscal year 2003, the Company recorded a noncash goodwill impairment charge in the fourth quarter of fiscal year 2003 of $73,000. See Note 12 for additional information regarding the goodwill impairment charge.

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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(3)  Change in Accounting Principles—(Continued)

     Prior to the adoption of SFAS No. 142, the Company allocated goodwill amortization between its funeral and cemetery segments thereby impacting funeral and cemetery gross profit. As a result of the adoption of SFAS No. 142, the Company no longer amortizes goodwill, effective November 1, 2001. The following is a reconciliation of net loss and net loss per share for the year ended October 31, 2001, adjusted for the elimination of goodwill amortization required by SFAS No. 142.

		Year Ended
		October 31, 2001
Loss before cumulative effect of change in accounting principles		$	(158,656	)
Goodwill amortization (net of tax)			17,459
Adjusted loss before cumulative effect of change in accounting principles			(141,197	)
Cumulative effect of change in accounting principles			(250,004	)
Adjusted net loss		$	(391,201	)
Basic loss per common share:
	Loss before cumulative effect of change in accounting principles	$	(1.48	)
	Goodwill amortization		.17
	Adjusted loss before cumulative effect of change in accounting principles		(1.31	)
	Cumulative effect of change in accounting principles		(2.33	)
	Adjusted net loss	$	(3.64	)
Diluted loss per common share:
	Loss before cumulative effect of change in accounting principles	$	(1.48	)
	Goodwill amortization		.17
	Adjusted loss before cumulative effect of change in accounting principles		(1.31	)
	Cumulative effect of change in accounting principles		(2.33	)
	Adjusted net loss	$	(3.64	)

The changes in the carrying amount of goodwill for the year ended October 31, 2003 are as follows:

Balance as of October 31, 2002	$	491,323
Provision for goodwill impairment		(73,000	)
Other reductions, primarily provision for goodwill impairment related to potential dispositions		(12,249	)
Balance as of October 31, 2003	$	406,074

-64-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(3)  Change in Accounting Principles—(Continued)

     (b)  SAB No. 101

     Although not required to implement Staff Accounting Bulletin (“SAB”) No. 101 - “Revenue Recognition in Financial Statements” until the fourth quarter of fiscal year 2001, the Company elected to implement the new accounting guidance in the first quarter of fiscal year 2001. The accounting for the Company’s preneed sales activities was affected as follows:

     For preneed sales of interment rights (cemetery property), the associated revenue and all costs to acquire the sale are recognized in accordance with SFAS No. 66, “Accounting for Sales of Real Estate.” Under SFAS No. 66, recognition of revenue and costs must be deferred until 10 percent of the property sale price has been collected. Previously, the revenue and costs were recognized at the time the contract was executed with the customer.

     For preneed sales of cemetery merchandise, primarily vaults and markers, and preneed sales of cemetery service fees, primarily openings and closings of burial sites and installations of markers, the associated revenue and certain costs to acquire the sale are deferred until the merchandise is delivered or the service is performed. Previously, the revenue and costs were recognized at the time the contract was executed with the customer.

     Cemetery merchandise trust earnings are deferred until the underlying merchandise is delivered. Previously, the earnings were recognized as earned in the trust.

     Accounting for preneed funeral service sales and earnings on preneed funeral merchandise and services trust funds was not affected, as those revenues were recognized upon delivery of funeral merchandise and services under the Company’s historical accounting methods.

     Preneed funeral merchandise sales, primarily caskets, and associated direct selling costs, primarily commissions and direct obtaining costs, are deferred until the merchandise is delivered, at which time they will be reflected in funeral revenue and funeral cost of sales, respectively. Previously, these sales and associated direct costs were recognized as funeral revenue and funeral cost of sales, respectively, when the contract was executed with the customer.

     The method of accounting for perpetual care trusts was not affected. Earnings on those trusts continue to be recognized as they are earned in the trusts to help mitigate the costs of maintaining the Company’s cemeteries.

     All direct costs that vary with and are primarily related to the acquisition of new sales of preneed funeral and cemetery merchandise and cemetery services are now included in deferred charges (asset). Previously, these costs were expensed as incurred. Also included in deferred charges are the costs to acquire preneed funeral service sales, which is consistent with the Company’s historical accounting methods. The cost to acquire all preneed merchandise and service sales are included in the operating section of the cash flow statement as prearranged acquisition costs.

     The Company filed a Form 8-K dated March 14, 2001 which describes in detail its current accounting methods as compared to its previous accounting methods.

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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(3) Change in Accounting Principles—(Continued)

     The cumulative effect of these changes on prior years resulted in a decrease in net earnings for the year ended October 31, 2001 of $250,004 (net of a $166,669 income tax benefit), or $2.33 per share. The effect of the change in accounting principles for the year ended October 31, 2001 was an increase in net earnings of $14,317, or $.13 per share. Additionally, the Company corrected the application of purchase price allocations related to certain prior period acquisitions. These non-SAB No. 101 adjustments were immaterial to the Company’s financial position and current and prior period results.

     (c)  Other Changes

     In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 addresses the diversity in practice for recognizing asset retirement obligations (“ARO’s”). SFAS No. 143 requires that obligations associated with the retirement of a tangible long-lived asset be recorded as a liability when those obligations are incurred, with the amount of the liability initially measured at fair value. Upon initially recognizing a liability for ARO’s, an entity must capitalize the cost by recognizing an increase in the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss. SFAS No. 143 was effective for financial statements for fiscal years beginning after June 15, 2002. The implementation of SFAS No. 143 in fiscal year 2003 had no impact on the Company’s financial condition or results of operations.

     In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement superceded SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,” and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” for the disposal of a segment of a business. The provisions of the statement are effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The provisions of this statement generally are to be applied prospectively. See Note 12 for a discussion of the fiscal year 2003 long-lived asset impairment charge.

     In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections.” With the rescission of FASB Statements No. 4 and 64, only gains and losses from extinguishments of debt meeting the criteria in APB Opinion No. 30 would be classified as extraordinary items. This statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings or describe their applicability under changed conditions. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002. The adoption of SFAS No. 145 in fiscal year 2003 resulted in the reclassification of the loss on early extinguishment of debt in fiscal year 2001 from extraordinary items to other expense.

-66-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(3) Change in Accounting Principles—(Continued)

     In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The adoption of SFAS No. 146 had no impact on the Company’s financial condition or results of operations.

     In October 2002, the FASB issued SFAS No. 147, “Acquisitions of Certain Financial Institutions - An Amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9.” The provision of this statement related to the application of the purchase method of accounting is effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The provisions related to accounting for the impairment or disposal of certain long-term customer-relationship intangible assets are effective on October 1, 2002. Transition provisions for previously recognized unidentifiable intangible assets are effective on October 1, 2002, with earlier application permitted. The adoption of SFAS No. 147 had no impact on the Company’s financial condition or results of operations.

     In November 2002, the FASB issued FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34.” FIN 45 clarifies the requirements of SFAS No. 5, “Accounting for Contingencies,” relating to the guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. The disclosure provisions of FIN 45 are effective for the Company’s first quarter of fiscal 2003. However, the provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002, irrespective of a guarantor’s year-end. The Company has determined that it is subject to the disclosure provisions of FIN 45 and has included the required disclosures in Note 14.

     In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure - an Amendment of FASB Statement No. 123,” to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This statement also requires that those effects be disclosed more prominently by specifying the form, content and location of those disclosures. SFAS No. 148 improves the prominence and clarity of the pro forma disclosures required by SFAS No. 123 by prescribing a specific tabular format and by requiring disclosure in the “Summary of Significant Accounting Policies” or its equivalent. In addition, this statement improves the timeliness of those disclosures by requiring their inclusion in financial reports for interim periods. This statement is effective for financial statements for fiscal years ending after December 15, 2002 and is effective for financial reports containing condensed financial statements for interim periods beginning after December 15, 2002 with earlier application permitted. The Company adopted the

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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(3)  Change in Accounting Principles—(Continued)

disclosure provisions of SFAS No. 148 and presented the pro forma effects of SFAS No. 123 for fiscal years 2003, 2002 and 2001 in Note 2.

     In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” FIN 46 clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The FASB issued a revision to FIN 46 (“FIN 46R”) in December 2003. FIN 46 and FIN 46R apply immediately to variable interest entities (“VIEs”) created after January 31, 2003, and to VIEs in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period ending after March 15, 2004, to VIEs in which an enterprise holds a variable interest that it acquired before February 1, 2003. The Company will implement the provisions of FIN 46 in the second quarter of fiscal year 2004 and though no final decision has been made as of this time, it currently plans to consolidate into its balance sheets its preneed funeral, preneed cemetery merchandise and perpetual care trust funds and escrow accounts at fair value, as a result of such implementation. The ultimate resolution for the accounting for the trusts and the associated trust investment income has not been determined and could potentially result in a material impact on the Company’s financial position and results of operations. The Company has not been able to quantify the impact, if any, at this time.

     In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This statement is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. In addition, all provisions of this statement should be applied prospectively. The provisions of this statement that relate to SFAS No. 133 implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. The adoption of SFAS No. 149 had no impact on the Company’s financial condition or results of operations.

     In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This statement is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. These effective dates are not applicable to the provisions of paragraphs 9 and 10 of SFAS No. 150 as they apply to mandatorily redeemable noncontrolling interests, as the FASB has delayed these provisions indefinitely. The adoption of SFAS No. 150 had no impact on the Company’s financial condition or results of operations.

-68-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(4) Prearranged Receivables and Prearranged Deferred Revenue

     Prearranged receivables are comprised of funds owed to the Company for the preneed sale of funeral and cemetery merchandise and services (1) from preneed funeral merchandise and service trusts and from preneed cemetery merchandise and service trusts, which represent amounts already paid by customers, as well as realized earnings on those amounts, (2) from customers and (3) from insurance companies.

     Prearranged receivables are comprised of the following:

		October 31,
		2003			2002
Amounts due from preneed funeral trust and escrow accounts		$	544,159		$	538,180
Amounts due from preneed cemetery merchandise trust funds and escrow accounts			232,462			227,588
Amounts due from customers			135,914			152,987
Amounts due from insurance companies			327,117			302,159
Valuation allowance for amounts due from trust fund accounts			(4,500	)		(20,000	)
	Net prearranged receivables	$	1,235,152		$	1,200,914

     Amounts due from preneed funeral trust fund and escrow accounts are comprised of the following investments:

	October 31,
	2003			2002
U.S. Government, agencies and municipalities	$	3,205		$	8,158
Corporate bonds		27,108			53,571
Preferred stocks		65,918			81,195
Common stocks		235,298			281,666
Money market funds and other short-term investments		185,087			88,335
Mutual funds		21,264			20,258
Insurance contracts and other long-term investments		6,279			4,997
Total value at cost		544,159			538,180
Net unrealized depreciation		(80,627	)		(116,760	)
Total value at market	$	463,532		$	421,420

-69-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(4)  Prearranged Receivables and Prearranged Deferred Revenue—(Continued)

     Amounts due from preneed cemetery merchandise trust fund and escrow accounts are comprised of the following investments:

	October 31,
	2003			2002
U.S. Government, agencies and municipalities	$	331		$	1,509
Corporate bonds		14,057			33,389
Preferred stocks		31,510			29,877
Common stocks		113,323			137,924
Money market funds and other short-term investments		68,988			20,652
Mutual funds		4,111			4,112
Insurance contracts and other long-term investments		142			125
Total value at cost		232,462			227,588
Net unrealized depreciation		(44,943	)		(60,010	)
Total value at market	$	187,519		$	167,578

     The amounts due from customers represent installment contracts bearing interest at prevailing rates. The Company also has similar installment contracts for the preneed sale of cemetery property as discussed in Note 8. The total finance charges earned related to preneed funeral and cemetery merchandise and services, as well as preneed cemetery property, amounted to $16,944, $17,920 and $23,660 for fiscal years 2003, 2002 and 2001, respectively. Finance charges earned are included in funeral and cemetery revenue.

Prearranged Deferred Revenue

     Prearranged deferred revenue is comprised of the following:

		October 31,
		2003			2002
Prearranged deferred funeral service and merchandise revenue		$	1,054,798		$	1,053,852
Prearranged deferred cemetery property, merchandise and service revenue			524,512			527,681
Valuation allowance			(4,500	)		(20,000	)
	Net prearranged deferred revenue	$	1,574,810		$	1,561,533

     The prearranged deferred funeral service and merchandise revenue includes $327,117 and $302,159 related to insurance-funded sales as of October 31, 2003 and 2002, respectively. Both the prearranged deferred funeral service and merchandise revenue and prearranged deferred cemetery property, merchandise and service revenue include deferred trust earnings.

-70-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(5) Perpetual Care Trust Funds

     The following summary reflects the Company’s perpetual care trust fund account balances. Since principal cannot be withdrawn, these balances are not reflected in the accompanying financial statements. Funds held in trust are invested, and the earnings withdrawn from the trust fund accounts are used for the maintenance of cemetery grounds. For the years ended October 31, 2003, 2002 and 2001, such withdrawals included in cemetery revenue totaled $7,903, $11,275 and $14,454, respectively.

		October 31,
		2003			2002
Perpetual care trust funds:
	Investments at market value	$	202,076		$	179,167
	Amounts to be collected under existing agreements		7,298			7,358
		$	209,374		$	186,525
Investments consist of:
	U.S. Government, agencies and municipalities	$	3,375		$	5,286
	Corporate bonds		24,215			23,482
	Preferred stocks		56,494			64,535
	Common stocks		99,624			95,500
	Money market funds and other short-term investments		33,528			20,646
	Mutual funds		8,301			7,652
	Other long-term investments		213			73
	Total value at cost		225,750			217,174
	Net unrealized depreciation		(23,674	)		(38,007	)
	Total value at market	$	202,076		$	179,167

(6) Cash and Cash Equivalent Investments

     The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company deposits its cash and cash equivalent investments with high quality credit institutions. Such balances typically exceed applicable FDIC insurance limits. The October 31, 2003 and 2002 balances below include $2 of cash and cash equivalent investments of assets held for sale.

	October 31,
	2003		2002
Cash	$	18,574	$	28,071
Cash equivalent investments		11		119
	$	18,585	$	28,190

-71-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(7) Marketable Securities

     The market value of marketable securities as of October 31, 2003 and 2002 was $2,346 and $2,588, respectively, which included gross unrealized gains of $13 and gross unrealized losses of $1,277 for fiscal year 2003 and gross unrealized losses of $1,557 for fiscal year 2002. The Company realized net losses on marketable securities of $485 and $63 for the years ended October 31, 2002 and 2001, respectively. The cost of securities sold was determined by using the average cost method.

(8) Receivables

			October 31,
			2003			2002
Current receivables are summarized as follows:
	Installment contracts due within one year		$	34,632		$	33,755
	Trade, tax and other receivables			59,690			44,586
	Allowance for sales cancellations and doubtful accounts			(3,543	)		(3,369	)
	Amounts to be collected for perpetual care funds			(2,116	)		(2,129	)
				88,663			72,843
	Funeral receivables			11,031			13,984
		Net current receivables	$	99,694		$	86,827
Long-term receivables are summarized as follows:
	Installment contracts due beyond one year		$	89,053		$	87,750
	Allowance for sales cancellations and doubtful accounts			(6,579	)		(5,868	)
	Amounts to be collected for perpetual care funds			(5,182	)		(5,229	)
		Net long-term receivables	$	77,292		$	76,653

     With the implementation of accounting changes effective November 1, 2000, installment contracts due within one year and due beyond one year include receivables in the Company’s preneed cemetery property sales only. Receivables on preneed cemetery merchandise and service sales are included in prearranged receivables as discussed in Note 4.

     The Company’s receivables as of October 31, 2003 are expected to mature as follows:

Years ending October 31,
2004	$	99,694
2005		12,039
2006		12,157
2007		10,688
2008		9,402
Thereafter		33,006
	$	176,986

-72-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(9) Inventories and Cemetery Property

     Inventories are comprised of the following:

	October 31,
	2003		2002
Developed cemetery property	$	12,900	$	13,533
Merchandise and supplies		29,666		28,133
	$	42,566	$	41,666

     Cemetery property is comprised of the following:

	October 31,
	2003		2002
Developed cemetery property	$	83,873	$	89,620
Undeveloped cemetery property		293,915		298,445
	$	377,788	$	388,065

     The portion of developed cemetery property that management estimates will be used in the next twelve months is included in inventories. The Company evaluates the recoverability of the cost of undeveloped cemetery property by comparison with undiscounted expected future cash flows.

-73-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(10) Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes

     The following tables present the condensed consolidating historical financial statements as of October 31, 2003 and 2002, and for the three fiscal years ended October 31, 2003, 2002 and 2001, for the direct and indirect domestic subsidiaries of the Company that serve as guarantors of the senior subordinated notes, and the financial results of the Company’s subsidiaries that do not serve as guarantors. Non-guarantor subsidiaries include the Puerto Rican subsidiaries, all other non-domestic subsidiaries, Investors Trust, Inc. and certain immaterial domestic subsidiaries which are either intended to be used for foreign tax planning purposes or are prohibited by law from guaranteeing the senior subordinated notes.

Condensed Consolidating Statements of Earnings and Other Comprehensive Income

		Year Ended October 31, 2003
					Guarantor			Non-Guarantor
		Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Revenues:
	Funeral	$	—		$	277,709		$	20,860		$	—	$	298,569
	Cemetery		—			198,086			25,403			—		223,489
			—			475,795			46,263			—		522,058
Costs and expenses:
	Funeral		—			214,168			13,719			—		227,887
	Cemetery		—			155,519			18,281			—		173,800
			—			369,687			32,000			—		401,687
	Gross profit		—			106,108			14,263			—		120,371
Corporate general and administrative expenses			20,183			—			—			—		20,183
Impairment of goodwill and long-lived assets			—			95,028			12,272			—		107,300
	Operating earnings (loss)		(20,183	)		11,080			1,991			—		(7,112	)
Interest income (expense)			24,368			(75,192	)		(2,654	)		—		(53,478	)
Loss on early extinguishment of debt			(11,289	)		—			—			—		(11,289	)
Investment income			287			—			—			—		287
Other income, net			354			1,451			317			—		2,122
	Loss before income taxes		(6,463	)		(62,661	)		(346	)		—		(69,470	)
Income tax expense (benefit)			(2,206	)		2,361			3,843			—		3,998
	Net loss before equity loss in subsidiaries		(4,257	)		(65,022	)		(4,189	)		—		(73,468	)
Equity loss in subsidiaries			(69,211	)		—			—			69,211		—
	Net loss		(73,468	)		(65,022	)		(4,189	)		69,211		(73,468	)
	Other comprehensive income, net		1,010			—			—			—		1,010
	Comprehensive loss	$	(72,458	)	$	(65,022	)	$	(4,189	)	$	69,211	$	(72,458	)

-74-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(10) Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes-(Continued)

Condensed Consolidating Statements of Earnings and Other Comprehensive Income

		Year Ended October 31, 2002
					Guarantor			Non-Guarantor
		Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues:
	Funeral	$	—		$	285,754		$	59,446		$	—		$	345,200
	Cemetery		—			211,771			24,350			—			236,121
			—			497,525			83,796			—			581,321
Costs and expenses:
	Funeral		—			209,855			47,044			150			257,049
	Cemetery		—			156,446			23,042			—			179,488
			—			366,301			70,086			150			436,537
	Gross profit		—			131,224			13,710			(150	)		144,784
Corporate general and administrative expenses			17,411			—			—			(150	)		17,261
Loss on assets held for sale			—			688			17,812			—			18,500
	Operating earnings (loss)		(17,411	)		130,536			(4,102	)		—			109,023
Interest income (expense)			51,947			(86,959	)		(27,327	)		—			(62,339	)
Investment income			486			—			19			—			505
Other income, net			738			931			463			—			2,132
	Earnings (loss) before income taxes		35,760			44,508			(30,947	)		—			49,321
Income tax expense			8,838			5,527			3,090			—			17,455
	Net earnings (loss) before equity in subsidiaries		26,922			38,981			(34,037	)		—			31,866
Equity in subsidiaries			4,944			—			—			(4,944	)		—
	Net earnings (loss)		31,866			38,981			(34,037	)		(4,944	)		31,866
	Other comprehensive income, net		26,161			1,310			26,957			(28,267	)		26,161
	Comprehensive income (loss)	$	58,027		$	40,291		$	(7,080	)	$	(33,211	)	$	58,027

-75-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(10) Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes—(Continued)

Condensed Consolidating Statements of Earnings and Other Comprehensive Income

			Year Ended October 31, 2001
						Guarantor			Non-Guarantor
			Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues:
	Funeral		$	—		$	280,315		$	129,938		$	—		$	410,253
	Cemetery			—			224,137			32,543			—			256,680
				—			504,452			162,481			—			666,933
Costs and expenses:
	Funeral			—			215,682			102,926			—			318,608
	Cemetery			—			164,436			32,684			18			197,138
				—			380,118			135,610			18			515,746
	Gross profit			—			124,334			26,871			(18	)		151,187
Corporate general and administrative expenses				17,978			42			—			—			18,020
Loss on assets held for sale and other charges				—			29,430			239,728			—			269,158
	Operating earnings (loss)			(17,978	)		94,862			(212,857	)		(18	)		(135,991	)
Interest income (expense)				72,118			(90,947	)		(44,743	)		—			(63,572	)
Loss on early extinguishment of debt				(9,120	)		—			—			—			(9,120	)
Investment income				2,632			—			2,580			—			5,212
Other income, net				2,763			3,054			1,353			—			7,170
	Earnings (loss) before income taxes and cumulative effect of change in accounting principles			50,415			6,969			(253,667	)		(18	)		(196,301	)
Income tax expense (benefit)				(34,547	)		967			(4,059	)		(6	)		(37,645	)
	Earnings (loss) before cumulative effect of change in accounting principles			84,962			6,002			(249,608	)		(12	)		(158,656	)
	Cumulative effect of change in accounting principles			—			(214,356	)		(35,648	)		—			(250,004	)
		Net earnings (loss) before equity loss in subsidiaries		84,962			(208,354	)		(285,256	)		(12	)		(408,660	)
Equity loss in subsidiaries				(493,622	)		—			—			493,622			—
	Net loss			(408,660	)		(208,354	)		(285,256	)		493,610			(408,660	)
	Other comprehensive income, net			83,617			8,368			76,596			(84,964	)		83,617
	Comprehensive loss		$	(325,043	)	$	(199,986	)	$	(208,660	)	$	408,646		$	(325,043	)

-76-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(10) Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes—(Continued)

Condensed Consolidating Balance Sheets

			October 31, 2003
						Guarantor			Non-Guarantor
			Parent			Subsidiaries			Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
	Cash and cash equivalent investments		$	18,975		$	(478	)	$	88	$	—		$	18,585
	Marketable securities			1,048			26			1,272		—			2,346
	Receivables, net of allowances			41,826			42,335			15,533		—			99,694
	Inventories			325			35,514			6,727		—			42,566
	Prepaid expenses			713			2,221			37		—			2,971
	Deferred income taxes, net			1,434			1,556			—		—			2,990
	Assets held for sale			—			6,217			247		—			6,464
		Total current assets		64,321			87,391			23,904		—			175,616
Receivables due beyond one year, net of allowances				147			62,036			15,109		—			77,292
Prearranged receivables, net				—			1,192,751			42,401		—			1,235,152
Goodwill				—			375,617			30,457		—			406,074
Deferred charges				7,271			224,730			21,597		—			253,598
Cemetery property, at cost				—			354,555			23,233		—			377,788
Property and equipment, at cost				31,697			431,769			38,843		—			502,309
	Less accumulated depreciation			16,942			158,896			12,565		—			188,403
	Net property and equipment			14,755			272,873			26,278		—			313,906
Deferred income taxes, net				17,767			40,556			—		—			58,323
Investment in subsidiaries				74,118			—			—		(74,118	)		—
Other assets				104			1,136			—		—			1,240
	Total assets		$	178,483		$	2,611,645		$	182,979	$	(74,118	)	$	2,898,989
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Current maturities of long-term debt		$	13,935		$	—		$	—	$	—		$	13,935
	Accounts payable			348			6,543			383		—			7,274
	Accrued expenses and other current liabilities			20,865			33,001			3,443		—			57,309
	Liabilities associated with assets held for sale			—			3,496			17		—			3,513
		Total current liabilities		35,148			43,040			3,843		—			82,031
Long-term debt, less current maturities				458,180			—			30,000		—			488,180
Intercompany payables, net				(1,064,814	)		1,043,728			21,086		—			—
Prearranged deferred revenue, net				—			1,456,809			118,001		—			1,574,810
Other long-term liabilities				11,110			3,999			—		—			15,109
	Total liabilities			(560,376	)		2,547,576			172,930		—			2,160,130
Common stock				107,727			426			52		(478	)		107,727
Other				633,575			63,643			9,997		(73,640	)		633,575
Accumulated other comprehensive loss				(2,443	)		—			—		—			(2,443	)
	Total shareholders’ equity			738,859			64,069			10,049		(74,118	)		738,859
Total liabilities and shareholders’ equity			$	178,483		$	2,611,645		$	182,979	$	(74,118	)	$	2,898,989

-77-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(10)  Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes—(Continued)

Condensed Consolidating Balance Sheets

			October 31, 2002
						Guarantor		Non-Guarantor
			Parent			Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
	Cash and cash equivalent investments		$	24,752		$	3,209	$	229	$	—		$	28,190
	Marketable securities			755			26		1,807		—			2,588
	Receivables, net of allowances			27,703			45,150		13,974		—			86,827
	Inventories			407			32,987		8,272		—			41,666
	Prepaid expenses			706			2,032		77		—			2,815
	Deferred income taxes, net			591			757		—		—			1,348
	Assets held for sale			—			8,424		542		—			8,966
		Total current assets		54,914			92,585		24,901		—			172,400
Receivables due beyond one year, net of allowances				—			64,109		12,544		—			76,653
Prearranged receivables, net				—			1,154,742		46,172		—			1,200,914
Goodwill				—			451,656		39,667		—			491,323
Deferred charges				8,716			224,959		19,408		—			253,083
Cemetery property, at cost				—			364,830		23,235		—			388,065
Property and equipment, at cost				29,028			432,492		41,396		—			502,916
	Less accumulated depreciation			13,385			144,059		11,156		—			168,600
	Net property and equipment			15,643			288,433		30,240		—			334,316
Deferred income taxes, net				30,794			63,980		1,020		—			95,794
Investment in subsidiaries				143,240			—		—		(143,240	)		—
Other assets				1,981			1,055		—		—			3,036
	Total assets		$	255,288		$	2,706,349	$	197,187	$	(143,240	)	$	3,015,584
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Current maturities of long-term debt		$	9,396		$	—	$	—	$	—		$	9,396
	Accounts payable			880			9,836		397		—			11,113
	Accrued expenses and other current liabilities			24,062			27,744		5,296		—			57,102
	Liabilities associated with assets held for sale			—			2,896		15		—			2,911
		Total current liabilities		34,338			40,476		5,708		—			80,522
Long-term debt, less current maturities				512,548			—		30,000		—			542,548
Intercompany payables, net				(1,116,029	)		1,080,853		35,176		—			—
Prearranged deferred revenue, net				—			1,449,469		112,064		—			1,561,533
Other long-term liabilities				12,168			6,550		—		—			18,718
	Total liabilities			(556,975	)		2,577,348		182,948		—			2,203,321
Common stock				108,025			336		53		(389	)		108,025
Other				707,691			128,665		14,186		(142,851	)		707,691
Accumulated other comprehensive loss				(3,453	)		—		—		—			(3,453	)
	Total shareholders’ equity			812,263			129,001		14,239		(143,240	)		812,263
Total liabilities and shareholders’ equity			$	255,288		$	2,706,349	$	197,187	$	(143,240	)	$	3,015,584

-78-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(10)  Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes—(Continued)

Condensed Consolidating Statements of Cash Flows

			Year Ended October 31, 2003
						Guarantor			Non-Guarantor
			Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Net cash provided by operating activities			$	10,923		$	44,795		$	14,102		$	—	$	69,820
Cash flows from investing activities:
	Proceeds from sales of marketable securities and long-term investments			—			—			550			—		550
	Purchases of marketable securities and long-term investments			—			—			(14	)		—		(14	)
	Proceeds from sale of assets, net			(1,070	)		3,411			—			—		2,341
	Additions to property and equipment			(2,783	)		(14,967	)		(689	)		—		(18,439	)
	Other			—			199			—			—		199
		Net cash used in investing activities		(3,853	)		(11,357	)		(153	)		—		(15,363	)
Cash flows from financing activities:
	Retirement of ROARS			(12,691	)		—			—			—		(12,691	)
	Proceeds from long-term debt			155,000			—			—			—		155,000
	Repayments of long-term debt			(203,164	)		—			—			—		(203,164	)
	Intercompany receivables (payables)			51,215			(37,125	)		(14,090	)		—		—
	Debt issue costs			(816	)		—			—			—		(816	)
	Issuance of common stock			582			—			—			—		582
	Purchase and retirement of common stock			(2,973	)		—			—			—		(2,973	)
		Net cash used in financing activities		(12,847	)		(37,125	)		(14,090	)		—		(64,062	)
Net decrease in cash				(5,777	)		(3,687	)		(141	)		—		(9,605	)
Cash and cash equivalents, beginning of year				24,752			3,209			229			—		28,190
Cash and cash equivalents, end of year			$	18,975		$	(478	)	$	88		$	—	$	18,585

-79-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(10)  Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes—(Continued)

Condensed Consolidating Statements of Cash Flows

			Year Ended October 31, 2002
						Guarantor			Non-Guarantor
			Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Net cash provided by operating activities			$	56,082		$	32,498		$	1,909		$	—	$	90,489
Cash flows from investing activities:
	Proceeds from sales of marketable securities and long-term investments			—			—			169			—		169
	Purchases of marketable securities and long-term investments			—			—			(42	)		—		(42	)
	Proceeds from sale of assets, net			61,887			7,916			—			—		69,803
	Additions to property and equipment			(2,552	)		(15,197	)		(881	)		—		(18,630	)
	Other			1,391			378			358			—		2,127
		Net cash provided by (used in) investing activities		60,726			(6,903	)		(396	)		—		53,427
Cash flows from financing activities:
	Repayments of long-term debt			(138,390	)		—			(1,112	)		—		(139,502	)
	Intercompany receivables (payables)			22,939			(16,750	)		(6,189	)		—		—
	Issuance of common stock			858			—			—			—		858
		Net cash used in financing activities		(114,593	)		(16,750	)		(7,301	)		—		(138,644	)
Effect of exchange rates on cash and cash equivalents				—			—			(205	)		—		(205	)
Net increase (decrease) in cash				2,215			8,845			(5,993	)		—		5,067
Cash and cash equivalents, beginning of year				22,537			(5,636	)		6,222			—		23,123
Cash and cash equivalents, end of year			$	24,752		$	3,209		$	229		$	—	$	28,190

-80-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(10)  Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes—(Continued)

Condensed Consolidating Statements of Cash Flows

			Year Ended October 31, 2001
						Guarantor			Non-Guarantor
			Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Net cash provided by (used in) operating activities			$	68,672		$	80,570		$	(32,170	)	$	—	$	117,072
Cash flows from investing activities:
	Proceeds from sales of marketable securities and long-term investments			4,464			—			80			—		4,544
	Purchases of marketable securities and long-term investments			(16	)		—			(1,904	)		—		(1,920	)
	Proceeds from sale of assets, net			74,131			7,338			—			—		81,469
	Additions to property and equipment			—			(23,295	)		(2,754	)		—		(26,049	)
	Other			(997	)		1,197			391			—		591
		Net cash provided by (used in) investing activities		77,582			(14,760	)		(4,187	)		—		58,635
Cash flows from financing activities:
	Funeral trust withdrawal			—			40,000			—			—		40,000
	Proceeds from long-term debt			725,000			—			—			—		725,000
	Repayments of long-term debt			(927,503	)		—			(50,470	)		—		(977,973	)
	Intercompany receivables (payables)			52,280			(111,147	)		58,867			—		—
	Debt issue costs			(34,271	)		—			—			—		(34,271	)
	Issuance of common stock			915			—			—			—		915
		Net cash provided by (used in) financing activities		(183,579	)		(71,147	)		8,397			—		(246,329	)
Effect of exchange rates on cash and cash equivalents				—			—			2,150			—		2,150
Net decrease in cash				(37,325	)		(5,337	)		(25,810	)		—		(68,472	)
Cash and cash equivalents, beginning of year				59,862			(299	)		32,032			—		91,595
Cash and cash equivalents, end of year			$	22,537		$	(5,636	)	$	6,222		$	—	$	23,123

-81-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(11) Loss on Assets Held for Sale and Other Charges

     During the third quarter of fiscal year 2001, the Company adopted a formal plan to sell its foreign operations and certain domestic assets, primarily funeral home real estate and excess cemetery property. In addition, it reviewed non-competition agreements that it had entered into with sellers, key employees and others in connection with previous acquisitions, and it decided to relieve some of these individuals from the obligations not to compete, although payments would continue to be made in accordance with the contract terms.

     Based on its progress at that time and management’s and the Board of Directors’ decision to proceed with the sales of its foreign operations and certain domestic assets if acceptable prices and terms could be obtained, pursuant to SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of,” in the third quarter of 2001 the Company wrote down the aggregate value of these assets to their estimated fair value, which was based upon then current offers from interested parties or market prices of comparable properties, less cost to sell. As a result, the Company incurred an aggregate pretax noncash charge to earnings of $269,158 ($205,089 after tax, of which $187,329 related to foreign operations) in the third quarter of 2001. Primarily as a result of the significant devaluation of the Argentine peso and the depressed economic conditions in Argentina, the Company re-evaluated the expected loss on the disposition of the assets held for sale and recorded an aggregate pretax noncash charge to earnings of $18,500 ($11,200 after tax) in the third quarter of 2002.

     The portion of the charge to equity in the third quarter of fiscal year 2001 that related to foreign operations was equal to the entire foreign-related after-tax charge to earnings of $187,329. However, the Company had already reduced equity for the cumulative foreign translation adjustment incurred in each period that it had owned these businesses. Therefore, in the periods in which the sale of each of the foreign operations was consummated, the cumulative foreign translation adjustment relating to the operation sold was reversed and included in comprehensive income, resulting in a corresponding increase in equity. During the fourth quarter of fiscal year 2001, the Company sold its Mexican, Australian, New Zealand, Belgian and Dutch operations and realized comprehensive income and an increase in shareholders’ equity for the cumulative foreign currency translation related to these operations, which equaled $74,754. During fiscal year 2002, the Company sold its remaining foreign operations in Spain, Portugal, France, Canada and Argentina and realized comprehensive income and an increase in shareholders’ equity for the cumulative foreign translation adjustments related to these operations, which amounted to $35,902.

     In the consolidated statements of earnings, the impairment charges related to these writedowns and the writedowns of the non-competition agreements are reflected in the “loss on assets held for sale and other charges” line item. The related assets and liabilities associated with assets held for sale are shown in separate line items in the consolidated balance sheet titled “assets held for sale” and “liabilities associated with assets held for sale.” At October 31, 2003 and 2002, the assets held for sale (excluding $2 of cash and cash equivalent investments of the operations held for sale as of October 31, 2003 and 2002) and the liabilities associated with assets held for sale line items in the balance sheet represent the assets and liabilities, respectively, of certain domestic assets, primarily funeral home real estate.

-82-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(11) Loss on Assets Held for Sale and Other Charges—(Continued)

     A summary of the assets and liabilities included in these line items is as follows:

		October 31,
		2003		2002
Assets
Receivables, net of allowances		$	456	$	590
Inventories and other current assets			1,288		876
Net property and equipment			866		2,384
Prearranged receivables, net			2,660		2,460
Deferred charges and other assets			1,194		1,831
Cemetery property			—		825
	Assets held for sale	$	6,464	$	8,966
Liabilities
Current liabilities		$	—	$	561
Deferred income taxes, net			300		299
Prearranged deferred revenue, net			3,213		2,051
	Liabilities associated with assets held for sale	$	3,513	$	2,911

     The operating results of assets sold and held for sale included in the consolidated statements of earnings for the years ended October 31, 2003, 2002 and 2001 were as follows:

	Year Ended October 31,
	2003			2002		2001
Revenues	$	5,191		$	50,028	$	125,758
Operating earnings (loss)	$	(476	)	$	4,909	$	15,130

(12) Impairment of Goodwill and Long-Lived Assets

     In the fourth quarter of fiscal year 2003, the Company recorded a noncash impairment charge of $107,300 ($97,100 after tax, or $.90 per share), which consists of a goodwill impairment charge of $73,000 and an impairment charge related to certain long-lived assets of $34,300. These impairment charges are presented together in the “Impairment of goodwill and long-lived assets” line item in the Company’s consolidated statement of earnings for the year ended October 31, 2003.

     As a result of the Company’s adoption of SFAS No. 142 in fiscal year 2002, goodwill is not amortized but is tested annually for impairment. In accordance with SFAS No. 142, the Company performed its annual goodwill impairment review during the fourth quarter of fiscal year 2003. The evaluation of goodwill is performed at the funeral and cemetery segments, which constitute the Company’s reporting units. During 2003, the Company’s cemetery segment experienced reductions in gross profit that were not anticipated when the Company performed its evaluation of goodwill during the fourth quarter of 2002 due to declines in merchandise deliveries and reduced perpetual care trust earnings. When the Company performed its evaluation of goodwill during the fourth quarter of 2003 on the lower gross profit levels, a goodwill impairment charge of $73,000 related to the cemetery segment was required. In calculating the goodwill impairment charge, the fair value of the funeral and cemetery segments was determined with assistance from an independent valuation advisor using a combination of the comparable company approach and discounted cash flow valuation approach. For additional information regarding goodwill and the Company’s adoption of SFAS No. 142, see Note 3.

-83-

STEWART ENTERPRISES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(12) Impairment of Goodwill and Long-Lived Assets—(Continued)

     In accordance with SFAS No. 144, the Company reviews its long-lived assets for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable. SFAS No. 144 requires that long-lived assets to be held and used be recorded at the lower of carrying amount or fair value. Long-lived assets to be disposed of are to be recorded at the lower of carrying amount or fair value, less cost to sell. During the fourth quarter of fiscal year 2003, the Company announced that it plans to close or sell a number of small businesses, primarily small funeral homes, and determined that the carrying value of a number of these businesses, most of which were acquired as part of a group of facilities that are performing below acceptable levels and no longer fit the Company’s operating profile, exceeded their fair value. As a result, the Company recorded an impairment charge of $34,300 during the fourth quarter of fiscal year 2003. The fair market value was determined by specific offer or bid, or an estimate based on a multiple or percentage of historical results. Although the Company identified these businesses during the fourth quarter of fiscal year 2003, it did not meet all of the criteria in SFAS No. 144 to classify these operations as held for sale or discontinued operations in the fourth quarter of fiscal year 2003.

(13) Long-term Debt

			October 31,		October 31,
			2003		2002
Long-term debt:
	Senior secured credit facility:
		Revolving credit facility	$	79,000	$	—
		Term Loan B		115,380		135,750
	6.40% ROARS			—		101,563
	6.70% Notes			100		100
	10.75% senior subordinated notes due 2008			300,000		300,000
	Other, principally seller financing of acquired operations or assumption upon acquisition, weighted average interest rates of 5.9% and 6.5% as of October 31, 2003 and 2002, respectively, partially secured by assets of subsidiaries, with maturities through 2022			7,635		14,531
		Total long-term debt		502,115		551,944
		Less current maturities		13,935		9,396
			$	488,180	$	542,548

     On June 29, 2001, the Company refinanced a significant portion of its long-term debt, substantially extending its long-term debt maturities. In connection with the refinancing, the Company incurred charges in the third quarter of fiscal year 2001 in the amount of $9,120 for the loss on the early extinguishment of debt in connection with this debt refinancing. The new financing consisted of a $550,000 senior secured credit facility and $300,000 of senior subordinated notes. The senior secured credit facility consisted of (1) a $175,000 four-year revolving credit facility, (2) a $75,000 18-month asset sale term loan and (3) a $300,000 five-year Term Loan B. The $75,000 18-month asset sale term loan was repaid in full in August 2001. In May 2003 in connection with the redemption of the ROARS discussed below, the Company borrowed an additional $50,000 in Term Loan B and $50,000 from its revolving credit facility and amended the senior secured credit facility to provide further financial flexibility to the Company, as also further discussed below.

-84-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(13) Long-term Debt—(Continued)

     On the Term Loan B, as amended, $30,000 in prepayments were made in October 2001, $2,500 in scheduled payments were made in fiscal year 2002, $131,750 in prepayments were made in fiscal year 2002, $6,250 in scheduled payments were made in fiscal year 2003 and $14,120 in net prepayments were made in fiscal year 2003. The following annual amounts will mature each fiscal year for the Term Loan B, as amended: $10,000 for 2004, $86,500 for 2005 and $18,880 for 2006.

     The applicable margins for Eurodollar rate loans under the revolving credit facility and Term Loan B are generally subject to quarterly adjustments based upon the Company’s consolidated leverage ratio. The applicable margins range from 200.0 to 275.0 basis points for revolving loans and 312.5 to 337.5 basis points for Term Loan B. In addition, the Company will pay a commitment fee of 50.0 to 62.5 basis points, based on the Company’s consolidated leverage ratio, on the unused portion of the revolving credit facility. In December 1998, the Company entered into an interest rate swap agreement on a notional amount of $200,000. Under the terms of the agreement, effective March 4, 1999, the Company paid a fixed rate of 4.915 percent and received three-month LIBOR. This swap expired on March 4, 2002. On March 5, 2002, the Company entered into two interest rate swap agreements which became effective on March 11, 2002, each involving a notional amount of $50,000. The first agreement effectively converts $50,000 of variable-rate debt bearing interest based on three-month LIBOR to a fixed rate based on the swap rate of 3.65 percent and expires on March 11, 2004. The second agreement effectively converts $50,000 of variable-rate debt bearing interest based on three-month LIBOR to a fixed rate based on the swap rate of 4.265 percent and expires on March 11, 2005. The effective rate to the Company of the debt hedged by the interest rate swaps includes the fixed swap rates of 3.65 percent and 4.265 percent plus, in each case, the applicable margin under the Company’s senior secured credit facility relative to the underlying debt, which margin is based upon the Company’s consolidated leverage ratio, as defined in the senior secured credit facility. As of October 31, 2003, that margin was 337.5 basis points, resulting in effective rates of 7.025 percent and 7.64 percent on each $50,000 swapped. As of October 31, 2003, the Company had $194,380 outstanding under its revolving credit facility and Term Loan B, $94,380 of which was not hedged by the interest rate swap agreement and was subject to a short-term variable interest rate of approximately 4.0 percent.

     The senior secured credit facility contains affirmative and negative covenants. The covenants include required reserves, mandatory prepayments from the proceeds of certain asset sales and debt and equity offerings, limitations on liens, limitations on mergers, consolidations and asset sales, limitations on incurrence of debt, limitations on dividends, stock redemptions and the redemption and/or prepayment of other debt, limitations on investments and acquisitions, limitations on lease payments, limitations on negative pledges and limitations on transactions with affiliates. In addition, the credit agreement contains the following financial covenants: (1) a maximum leverage ratio, (2) a minimum fixed charge coverage ratio and (3) a minimum interest coverage ratio. The financial covenants are required to be calculated on a consolidated basis after giving pro forma effect to permitted asset dispositions and acquisitions.

     In connection with the redemption of the ROARS discussed below, the Company amended the loan covenants that govern its revolving credit and Term Loan B credit. The amendment relaxes certain financial ratio requirements and allows further flexibility with regard to higher spending limits on acquisitions, dividends and the repurchase of Company stock. Under the amendment, if there is no default or event of default, the Company may pay cash dividends and repurchase its stock, provided that the aggregate amount of the dividends and stock repurchased plus other types of restricted payments in any fiscal year does not exceed $15,000, or, if the Company’s consolidated leverage ratio is not greater than 3.00 to 1.00 both before and after the payment, $25,000. The amendment limits capital expenditures (excluding the costs of acquisitions as defined in the amendment) in any fiscal year to $35,000, with a provision for the carryover of permitted but unused amounts under specified

-85-

STEWART ENTERPRISES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(13) Long-term Debt—(Continued)

circumstances. The costs of acquisitions in any fiscal year are limited to $50,000, with a provision for the carryover of permitted but unused amounts under specified circumstances.

     The Company’s obligations under the senior secured credit facility are guaranteed by all of its existing and future direct and indirect subsidiaries formed under the laws of the United States, any state thereof or the District of Columbia, except for specified excluded subsidiaries.

     All obligations under the senior secured credit facility, including the guarantees, are secured by a first priority perfected security interest in (1) all capital stock and other equity interests of the Company’s existing and future direct and indirect domestic subsidiaries, other than certain domestic subsidiaries acceptable to the agents, (2) 65 percent of the voting equity interests and 100 percent of all other equity interests (other than qualifying shares of directors) of all direct existing and future foreign subsidiaries and (3) all other existing and future assets and properties of the Company and the guarantors, except for real property, vehicles and other specified exclusions.

     In December 1996, the Company issued $100,000 of 6.70 percent Notes due 2003. In connection with the refinancing transactions described above, the Company repurchased $99,900 of these Notes on June 29, 2001. As of October 31, 2003 and 2002, the carrying value, including accrued interest, and the fair value of these notes was $103. The remaining balance of the 6.70 percent Notes was paid in full in December 2003.

     In April 1998, the Company issued $200,000 of 6.40 percent Remarketable Or Redeemable Securities (“ROARS”) due May 1, 2013 (remarketing date May 1, 2003). In connection with the June 2001 refinancing transactions described above, the Company repurchased $100,103 of the ROARS on June 29, 2001. Outstanding 6.40 percent ROARS were required to be redeemed by the Company or remarketed by the remarketing dealer on May 1, 2003. On May 1, 2003, the Company used $50,000 of additional Term Loan B financing along with $50,000 from its revolving credit facility to redeem its $99,897 outstanding ROARS. When the remarketing dealer elected to remarket the ROARS, the Company exercised its right to redeem the ROARS rather than allow them to be remarketed. The Company paid the remarketing dealer $12,691, the contractually specified value of the remarketing right, which was based on the 10-year Treasury rate of 3.894 percent. Net of the $1,532 unamortized ROARS option premium and $130 in costs, the Company recorded a charge of $11,289 ($7,338 after tax, or $.07 per share) in the third quarter of fiscal year 2003.

     The 10.75 percent senior subordinated notes due in 2008 are general unsecured obligations of the Company, are subordinated in right of payment to all existing and future senior debt of the Company and are pari passu in right of payment with any future senior subordinated indebtedness of the Company. The notes are guaranteed by all of the domestic subsidiaries of the Company, other than certain specified subsidiaries (see Note 10). Interest on the notes accrues at the rate of 10.75 percent per annum and is payable semi-annually in arrears on January 1 and July 1. As of October 31, 2002, the carrying value, including accrued interest, and fair value of the senior subordinated notes were $310,750 and $336,418, respectively. As of October 31, 2003, the carrying value, including accrued interest, and fair value of the senior subordinated notes were $310,750 and $349,894, respectively.

     The indenture governing the 10.75 percent senior subordinated notes limits the Company’s and its subsidiaries’ ability to borrow money, create liens, pay dividends on or redeem or repurchase stock, make investments, sell stock in subsidiaries, restrict dividends or other payments from subsidiaries, enter into transactions with affiliates and sell assets or merge with other companies. The notes are redeemable at the option of the Company on or after July 1, 2005. In addition, prior to July 1, 2004, the Company may redeem up to 35 percent of the notes with the net cash proceeds from specified equity offerings. The Company must offer to

-86-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(13) Long-term Debt—(Continued)

purchase the notes at 101 percent of their face amount, plus accrued interest, if the Company experiences specific kinds of changes in control.

     Under the senior secured credit facility, as amended, if there is no default or event of default, the Company may pay cash dividends and repurchase its stock, provided that the aggregate amount of the dividends and stock repurchased plus other types of restricted payments in any fiscal year does not exceed $15,000, or, if the Company’s consolidated leverage ratio is not greater than 3.00 to 1.00 both before and after the payment, $25,000. In addition, Section 4.07 of the indenture governing the Company’s senior subordinated notes permits the payment of dividends if the aggregate dividends and other restricted payments since the issuance of the notes are less than the sum of, generally, 50 percent of the Company’s consolidated net income plus 100 percent of net cash proceeds from the sale of any equity interests, in each case since the issuance of the notes, plus $15,000; provided, that the Company is able to incur at least one dollar of additional indebtedness under the fixed charge coverage ratio covenant and there is no default or event of default. Under these restrictions and based on the Company’s leverage ratio as of October 31, 2003, the Company could use up to $15,000 to pay dividends or repurchase its stock during fiscal year 2004.

     As of October 31, 2003, the Company’s subsidiaries had approximately $7,635 of long-term debt that represents notes the subsidiaries issued as part of the purchase price of acquired businesses or debt the subsidiaries assumed in connection with acquisitions. Approximately $4,066 of this debt is secured by liens on the stock or assets of the related subsidiaries.

     Scheduled principal payments of the Company’s long-term debt for the fiscal years ending October 31, 2004 through October 31, 2008, are approximately $13,935 in 2004, $167,225 in 2005, $19,650 in 2006, $542 in 2007 and $300,198 in 2008. Scheduled principal payments thereafter are $565.

(14) Guarantees

     The Company’s obligations under its senior secured credit facility are guaranteed by all of its existing and future direct and indirect subsidiaries formed under the laws of the United States, any state thereof or the District of Columbia, except for specified excluded subsidiaries. The senior subordinated notes are guaranteed by all of the domestic subsidiaries of the Company, other than certain specified subsidiaries including the Puerto Rican subsidiaries, Investors Trust, Inc. and certain immaterial domestic subsidiaries. For additional information regarding the senior secured credit facility and senior subordinated notes, see Note 13.

     All obligations under the senior secured credit facility, including the guarantees and any interest rate protection and other hedging agreements with any lender or its affiliates, are secured by a first priority perfected security interest in (1) all capital stock and other equity interests of the Company’s existing and future direct and indirect domestic subsidiaries, other than certain domestic subsidiaries acceptable to the agents, (2) 65 percent of the voting equity interests and 100 percent of all other equity interests (other than qualifying shares of directors) of all direct existing and future foreign subsidiaries, and (3) all other existing and future assets and properties of the Company and the guarantors, except for real property, vehicles and other specified exclusions.

-87-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(14) Guarantees-(Continued)

     Louisiana law gives Louisiana corporations broad powers to indemnify their present and former directors and officers and those of affiliated corporations against expenses incurred in the defense of any lawsuit to which they are made parties by reason of their positions. The Company’s By-laws make mandatory the indemnification of directors and officers permitted by Louisiana law. The Company has in effect a directors’ and officers’ liability insurance policy that provides for indemnification of its officers and directors against losses arising from claims asserted against them in their capacities as officers and directors, subject to limitations and conditions set forth in such policy. The Company has also entered into indemnity agreements with each director and executive officer, pursuant to which the Company has agreed, subject to certain exceptions, to purchase and maintain directors’ and officers’ liability insurance. The agreements also provide that the Company will indemnify each director and executive officer against any costs and expenses, judgments, settlements and fines incurred in connection with any claim involving him or her by reason of his or her position as director or officer, provided that the director or executive officer meets certain standards of conduct.

     As of October 31, 2003, the Company has guaranteed long-term debt of its subsidiaries of approximately $4,066 that represents notes the subsidiaries issued as part of the purchase price of acquired businesses or debt the subsidiaries assumed in connection with acquisitions.

-88-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(15) Reconciliation of Basic and Diluted Per Share Data

		Loss			Shares		Per Share
Year Ended October 31, 2003		(Numerator)			(Denominator)		Data
Net loss		$	(73,468	)
Basic loss per common share:
	Loss available to common shareholders	$	(73,468	)		108,220	$	(.68	)
Effect of dilutive securities:
	Time-vest stock options assumed exercised		—			—
Diluted loss per common share:
	Loss available to common shareholders plus time-vest stock options assumed exercised	$	(73,468	)		108,220	$	(.68	)

		Earnings		Shares		Per Share
Year Ended October 31, 2002		(Numerator)		(Denominator)		Data
Net earnings		$	31,866
Basic earnings per common share:
	Net earnings available to common shareholders	$	31,866		107,861	$	.30
Effect of dilutive securities:
	Time-vest stock options assumed exercised		—		438
Diluted earnings per common share:
	Net earnings available to common shareholders plus time-vest stock options assumed exercised	$	31,866		108,299	$	.29

		Loss			Shares		Per Share
Year Ended October 31, 2001		(Numerator)			(Denominator)		Data
Loss before cumulative effect of change in accounting principles		$	(158,656	)
Basic loss per common share:
	Loss available to common shareholders	$	(158,656	)		107,355	$	(1.48	)
Effect of dilutive securities:
	Time-vest stock options assumed exercised		—			—
Diluted loss per common share:
	Loss available to common shareholders plus time-vest stock options assumed exercised	$	(158,656	)		107,355	$	(1.48	)

     Common stock equivalents are excluded in the calculation of weighted average shares outstanding when a company reports a net loss from continuing operations for a period. The number of potentially antidilutive shares excluded from the calculation of diluted earnings per share was 6,890,621 and 8,196,991 for the fiscal years ended October 31, 2003 and 2001, respectively, because of the net loss from continuing operations for these periods.

     Options to purchase 1,356,286 shares of common stock at prices ranging from $5.90 to $27.25 were outstanding but were not included in the computation of diluted earnings per share for the fiscal year ended October

-89-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(15) Reconciliation of Basic and Diluted Per Share Data—(Continued)

31, 2002 because the options’ exercise prices were greater than the average market price of the common shares. The options, which expire between July 31, 2004 and April 12, 2005, were still outstanding at the end of fiscal year 2002.

(16) Income Taxes

     Income tax expense (benefit) is comprised of the following components:

		U.S. and
Year Ended October 31,		Possessions			State			Foreign		Totals
2003:
	Current tax expense (benefit)	$	(31,670	)	$	2,048		$	—	$	(29,622	)
	Deferred tax expense		33,093			527			—		33,620
		$	1,423		$	2,575		$	—	$	3,998
2002:
	Current tax expense	$	759		$	2,070		$	1,009	$	3,838
	Deferred tax expense		12,103			1,514			—		13,617
		$	12,862		$	3,584		$	1,009	$	17,455
2001:
	Current tax expense (benefit)	$	(389	)	$	2,254		$	4,022	$	5,887
	Deferred tax expense (benefit)		(41,621	)		(2,788	)		877		(43,532	)
		$	(42,010	)	$	(534	)	$	4,899	$	(37,645	)

     The reconciliation of the statutory tax rate to the effective tax rate is as follows:

		Year Ended October 31,
		2003			2002			2001
Statutory tax rate			(35.00	)%		35.00	%		(35.00	)%
Increases (reductions) in tax rate resulting from:
	State and U.S. possessions		4.59			4.72			(.18	)
	Goodwill impairment and other		27.33			1.96			1.10
	Dividend exclusion		(2.70	)		(3.95	)		(1.39	)
	Investment in subsidiary – stock basis adjustment		(7.10	)		—			—
	Valuation allowance on impairment of assets		20.12			—			—
	Foreign tax rate differential		—			(1.16	)		(.47	)
	Foreign income previously untaxed		—			(1.18	)		18.14
	Foreign tax credit		(1.48	)		—			(.36	)
Effective tax rate			5.76	%		35.39	%		(18.16	)%

-90-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(16) Income Taxes—(Continued)

        Deferred tax assets and liabilities consist of the following:

		October 31,
		2003			2002
Deferred tax assets:
	Allowance for sales cancellations and doubtful accounts	$	2,593		$	2,163
	Deferred preneed sales and expenses		138,631			174,904
	Unrealized depreciation of investments		468			591
	Deferred compensation		2,833			1,041
	Capital loss carryover		12,875			18,052
	Deductible foreign taxes		2,059			2,059
	Non-compete amortization		4,019			4,091
	State income taxes		14,653			16,677
	Unrealized depreciation on derivative instruments		966			1,524
	Writedown of assets held for sale		3,478			4,027
	Tax loss on impairment of assets		18,080			—
	Other		1,789			1,021
			202,444			226,150
	Valuation allowance		(13,980	)		—
			188,464			226,150
Deferred tax liabilities:
	Purchase accounting adjustments		113,045			114,252
	Goodwill		12,740			13,390
	Depreciation		1,366			1,366
			127,151			129,008
		$	61,313		$	97,142
Current net deferred asset		$	2,990		$	1,348
Long-term net deferred asset			58,323			95,794
		$	61,313		$	97,142

     For the years ended October 31, 2002 and 2001, the Company’s loss before income taxes generated from properties in foreign jurisdictions was $31,007 and $254,243, respectively.

     The Company has a capital loss carryforward of $34,057 that is available until the end of fiscal year 2007.

     As discussed in Note 12, in the fourth quarter of fiscal year 2003, the Company recorded an impairment of long-lived assets. Based on its assessment of the probability of realizing the $18,080 in tax benefits associated with the potential losses generated from the impairment, the Company determined that a $13,980 tax valuation allowance was appropriate.

-91-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(17) Benefit Plans

Stewart Enterprises Employees’ Retirement Trust

     The Company has a defined contribution retirement plan, the “Stewart Enterprises Employees’ Retirement Trust (A Profit-Sharing Plan) (“SEERT”).” This plan covers substantially all employees with more than one year of service who have attained the age of 21. Contributions are made to the plan at the discretion of the Company’s Board of Directors. Additionally, employees who participate may contribute up to 15 percent of their earnings. The first 5 percent of such employee contributions are eligible for Company matching contributions at the rate of $.50 for each $1.00 contributed. The Company’s expense, including the Company’s matching contributions, for the fiscal years ended October 31, 2003, 2002 and 2001 was approximately $2,260, $3,050 and $3,060, respectively.

Non-qualified Supplemental Retirement and Deferred Compensation Plan

     The Company has a non-qualified key employee defined contribution supplemental retirement plan, which provides certain highly compensated employees the opportunity to accumulate deferred compensation which cannot be accumulated under the SEERT due to certain limitations. Contributions are made to the plan at the discretion of the Company’s Board of Directors. Additionally, employees who participate may contribute up to 15 percent of their earnings. The first 5 percent of such employee contributions are eligible for Company matching contributions at the rate of $.50 for each $1.00 contributed. The Company’s expense, including the Company’s matching contributions, for the fiscal years ended October 31, 2003, 2002 and 2001 was approximately $525, $275 and $275, respectively.

Supplemental Executive Retirement Plan

     On April 1, 2002, the Company adopted an unfunded, non-qualified defined benefit supplemental retirement plan, the “Stewart Enterprises, Inc. Supplemental Executive Retirement Plan (“SERP”)” to provide for the payment of pension benefits to a select group of highly-compensated management employees. The retirement plan is non-contributory and provides retirement benefits based on final average compensation, position and the participant’s age, years of service or years of participation in the SERP. The plan is construed in accordance with and governed by the laws of the State of Louisiana, except to the extent that the plan is governed by the Employee Retirement Income Security Act of 1974, as amended. The Company’s expense for the fiscal years ended October 31, 2003 and 2002 was $1,960 and $1,091, respectively. The Company’s liability as of October 31, 2003 and 2002 was $3,021 and $1,091, respectively.

1995 Incentive Compensation Plan

     In August 1995, the Board of Directors adopted, and in December 1995 and December 1996 amended, the 1995 Incentive Compensation Plan, which has been approved by the Company’s shareholders, pursuant to which officers and other employees of the Company may be granted stock options, stock awards, restricted stock, stock appreciation rights, performance share awards or cash awards by the Compensation Committee of the Board of Directors. Under the plan, the Compensation Committee may accelerate the exercisability of any option at any time at its discretion, and the options become immediately exercisable in the event of a change of control of the Company, as defined in the plan.

-92-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(17) Benefit Plans—(Continued)

     Under the plan from September 7, 1995 through January 12, 1998, the Company granted options to officers and other employees for the purchase of a total of 7,424,536 shares of Class A common stock at exercise prices equal to the fair market value at the grant dates, which ranged from $10.50 to $21.50 per share. As of October 31, 2001, 4,983,230 of these options had been repurchased or exercised and 2,441,306 either were forfeited or expired. There were no outstanding options remaining from these grants as of October 31, 2002.

     From July 1998 to February 1999, the Company granted new options under the 1995 Incentive Compensation Plan to officers and employees for the purchase of 3,682,250 shares of Class A common stock at exercise prices equal to the fair market value at the grant dates, which ranged from $16.00 to $27.25 per share. One-third of the options become exercisable in 20 percent annual increments beginning on July 17, 1999. The remaining two-thirds of the options become exercisable in full on the first day between the grant date and July 17, 2003 that the average of the closing sale prices of a share of Class A common stock over the 20 preceding consecutive trading days equals or exceeds $67.81, which represents a 20 percent annual compounded growth in the price of a share of Class A common stock over five years. Accounting principles generally accepted in the United States of America require that a charge to earnings be recorded for the performance-based options for the difference between the exercise price and the then current stock price when achievement of the performance objective becomes probable. All of the options expire on July 31, 2004. As of October 31, 2003, none of these options had been exercised, and 3,072,560 options had been forfeited.

     In January 2000, the Company granted new options under the 1995 Incentive Compensation Plan to officers and employees for the purchase of 4,018,168 shares of Class A common stock at exercise prices equal to the fair market value at the grant dates, which ranged from $5.50 to $6.00 per share. The options became exercisable in 25 percent annual increments beginning January 21, 2001. All of these options expire on January 21, 2005. As of October 31, 2003, 56,520 of these options had been exercised, and 1,096,704 options had been forfeited.

     From February 2003 to June 2003, the Company granted new options under the 1995 Incentive Compensation Plan to officers and employees for the purchase of 200,000 shares of Class A common stock at an exercise price of $5.16. The options became exercisable in 50 percent annual increments beginning February 14, 2004. All of these options expire on April 12, 2005. As of October 31, 2003, none of these options had been exercised or forfeited.

2000 Incentive Compensation Plan

     The Board of Directors adopted, and in April 2000 the shareholders approved, the 2000 Incentive Compensation Plan pursuant to which officers and other employees of the Company may be granted stock options, restricted stock or other stock-based awards by the Compensation Committee of the Board of Directors. From April 2000 through June 2003, the Company had granted options to officers and other employees for the purchase of a total of 3,389,532 shares of Class A common stock at exercise prices equal to the fair market value at the grant dates, which ranged from $2.22 to $6.96 per share. The options generally became exercisable in 25 percent annual increments beginning on April 12, 2001. The Compensation Committee may accelerate the exercisability of any option at any time at its discretion, and the options become immediately exercisable in the event of a change of

-93-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(17) Benefit Plans—(Continued)

control of the Company, as defined in the plan. All of these options expire on April 12, 2005. As of October 31, 2003, 47,608 of these options had been exercised, and 494,868 options had been forfeited.

Directors’ Stock Option Plan

     Effective January 2, 1996, the Board of Directors adopted, and in December 1996 amended, the Directors’ Stock Option Plan, which has been approved by the Company’s shareholders, pursuant to which each director of the Company who is not an employee of the Company was granted an option to purchase 72,000 shares of the Company’s Class A common stock. From January 2, 1996 through October 31, 1997, the Company granted a total of 360,000 options at exercise prices equal to the fair market value at the grant dates, which ranged from $12.34 to $18.25 per share. The options generally became exercisable in 25 percent annual increments beginning January 2, 1997, except for grants issued since the initial grant date, which options vested over the remainder of the original four-year period. As of January 2, 2001, 91,052 of these options had been exercised and 268,948 either were forfeited or expired. There were no outstanding options remaining from this grant as of October 31, 2002.

     In January 2000, the Company granted 14,400 new options to purchase shares of Class A common stock under the Directors’ Stock Option Plan to each director of the Company who is not an employee of the Company. A total of 72,000 options were granted at an exercise price of $6.00 per share. The options vested immediately. All of these options expire on January 31, 2005. As of October 31, 2003, none of these options had been exercised, and 14,400 options had been forfeited.

2000 Directors’ Stock Option Plan

     The Board of Directors adopted, and in April 2000 the shareholders approved, the 2000 Directors’ Stock Option Plan pursuant to which each director of the Company who is not an employee of the Company was granted an option to purchase 50,000 shares of the Company’s Class A common stock on April 13, 2000. The Company granted a total of 200,000 options at an exercise price equal to the fair market value at the grant date, which was $4.30 per share. On December 18, 2001, the Company granted 58,334 options at an exercise price equal to fair market value at grant date, which was $6.05 per share. The options generally became exercisable in 25 percent annual increments beginning on April 13, 2001. The Compensation Committee may accelerate the exercisability of any option at any time at its discretion, and the options become immediately exercisable in the event of a change of control of the Company, as defined in the plan. All of these options expire on January 31, 2005. As of October 31, 2003, none of these options had been exercised, and 50,000 options had been forfeited.

Employee Stock Purchase Plan

     On July 1, 1992, the Company adopted an Employee Stock Purchase Plan. This plan was terminated and replaced by the 2003 Employee Stock Purchase Plan (the “Plan”), which was approved by the Company’s shareholders at its 2003 annual meeting. The Company authorized 1,000,000 shares for issuance under the Plan. The Plan provides to eligible employees the opportunity to purchase the Company’s Class A common stock semi-annually on June 30 and December 31. The purchase price is established at a 15 percent discount from fair market value, as defined in the Plan. As of October 31, 2003, 74,334 shares had been acquired under this Plan.

-94-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(17) Benefit Plans—(Continued)

Statement of Financial Accounting Standards No. 123

     The Company has adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” and continues to apply APB Opinion No. 25 and related interpretations in accounting for its stock-based compensation plans. The following table is a summary of the Company’s stock options outstanding as of October 31, 2003, 2002 and 2001, and the changes that occurred during fiscal years 2003, 2002 and 2001.

	2003					2002					2001
	Number of			Weighted		Number of			Weighted		Number of			Weighted
	Shares			Average		Shares			Average		Shares			Average
	Underlying			Exercise		Underlying			Exercise		Underlying			Exercise
	Options			Prices		Options			Prices		Options			Prices
Outstanding at beginning of year		8,062,406		$	10.22		8,216,572		$	10.66		9,569,086		$	11.44
Granted		254,000		$	5.16		347,334		$	6.01		808,800		$	5.38
Exercised/Repurchased		(5,000	)	$	5.16		(45,050	)	$	4.27		(54,078	)	$	5.16
Forfeited		(1,523,782	)	$	23.34		(456,450	)	$	15.57		(2,107,236	)	$	12.33
Outstanding at end of year		6,787,624		$	7.09		8,062,406		$	10.22		8,216,572		$	10.66
Exercisable at end of year		4,957,194		$	7.79		3,361,888		$	8.39		1,826,303		$	10.17
Weighted-average fair value of options granted				$	1.80				$	2.52				$	2.68

     The following table further describes the Company’s stock options outstanding as of October 31, 2003.

	Options Outstanding					Options Exercisable
	Number		Weighted Average			Number
Range of	Outstanding		Remaining	Weighted Average		Exercisable		WeightedAverage
Exercise Prices	at 10/31/2003		Contractual Life	Exercise Price		at 10/31/2003		Exercise Price
$2.22 to $4.41		1,914,256	1.43 Years	$	4.25		1,434,572	$	4.25
$5.16 to $6.96		4,263,678	1.29 Years	$	5.54		2,912,932	$	5.55
$16.00		1,670	.75 Years	$	16.00		1,670	$	16.00
$21.38		500	.75 Years	$	21.38		500	$	21.38
$25.81 to $27.25		607,520	.75 Years	$	26.86		607,520	$	26.86
$2.22 to $27.25		6,787,624	1.28 Years	$	7.09		4,957,194	$	7.79

-95-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(17) Benefit Plans—(Continued)

     SFAS No. 123 applies only to options granted under the Company’s incentive plans and shares acquired under the Company’s Employee Stock Purchase Plan since the beginning of the Company’s 1996 fiscal year. Consequently, the pro forma amounts disclosed below do not reflect any compensation cost for the 7,791,034 stock options outstanding as of the beginning of fiscal year 1996 which have all since expired. If the Company had elected to recognize compensation cost for its stock option and employee stock purchase plans based on the fair value at the grant dates for awards under those plans, in accordance with SFAS No. 123, net earnings (loss) and earnings (loss) per share would have been as follows:

		Year Ended October 31,
		2003			2002		2001
					(Unaudited)
Net earnings (loss)	- as reported	$	(73,468	)	$	31,866	$	(408,660	)
	- pro forma		(76,400	)		27,339		(413,703	)
Basic earnings (loss) per common share	- as reported	$	(.68	)	$	.30	$	(3.81	)
	- pro forma		(.71	)		.25		(3.85	)
Diluted earnings (loss) per common share	- as reported	$	(.68	)	$	.29	$	(3.81	)
	- pro forma		(.71	)		.25		(3.85	)

     The fair value of the Company’s stock options used to compute pro forma net earnings (loss) and earnings (loss) per share disclosures is the estimated present value at grant date using the Black-Scholes option pricing model with the following weighted average assumptions for fiscal years 2003, 2002 and 2001, respectively: expected dividend yield of zero percent, .1 percent and .1 percent; expected volatility of 38.7 percent, 32.5 percent and 32.9 percent; risk-free interest rate of 4.8 percent, 4.5 percent and 4.7 percent; and an expected term of 3.8 years, 3.6 years and 3.8 years.

     Likewise, the fair value of shares acquired through the Employee Stock Purchase Plan is estimated on each semi-annual grant date using the Black-Scholes option pricing model with the following weighted average assumptions for fiscal years 2003, 2002 and 2001, respectively: expected dividend yield of zero percent for all years; expected volatility of 59.7 percent, 57.8 percent and 54.7 percent; risk-free interest rate of 1.3 percent, 2.3 percent and 5.5 percent; and an expected term of .5 years for all years.

(18) Commitments, Contingencies and Related Party Transactions

     The Company and certain of its subsidiaries are parties to a number of legal proceedings that have arisen in the ordinary course of business. While the outcome of these proceedings cannot be predicted with certainty, management does not expect these matters to have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

-96-

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(18) Commitments, Contingencies and Related Party Transactions—(Continued)

     The Company carries insurance with coverages and coverage limits that it believes to be appropriate for the business. Although there can be no assurance that such insurance is sufficient to protect the Company against all contingencies, management believes that its insurance protection is reasonable in view of the nature and scope of the Company’s operations.

     On July 15, 2003, the Company announced that Frank B. Stewart, Jr., Chairman of the Board, elected to retire and become Chairman Emeritus of the Company. As part of Mr. Stewart’s retirement benefits agreement, the Company agreed to pay Mr. Stewart $1,650, payable in three installments of $550 each. The first payment was made within five days after the announcement of his retirement. The remaining two payments will be made on June 20, 2004 and June 20, 2005. The Company recorded the $1,650 charge in the third quarter of fiscal year 2003 but will continue to make the payments in accordance with the terms of the agreement.

     On June 10, 2003, the Company announced that Brian J. Marlowe, Chief Operating Officer, stepped down to pursue other interests. According to the terms of his employment agreement, he is entitled to receive an amount equal to two years of salary, or $800, over the next two years. The Company recorded the $800 charge in the third quarter of fiscal year 2003 but will continue to make the payments in accordance with the terms of the agreement.

     During the fiscal year ended October 31, 1992, Mr. Frank B. Stewart, Jr., former Chairman of the Board, and two trusts established by Mr. Stewart and his wife for the benefit of their children, entered into an agreement with the Company whereby the Company, with the approval of all of the disinterested members of the Board of Directors, agreed to advance the premiums on a split dollar “second-to-die” life insurance policy purchased by the trusts and insuring the lives of Mr. and Mrs. Stewart. The outstanding amount advanced to the trusts by the Company, including accrued interest, was approximately $1,879 at October 31, 2002. On April 29, 2003, the outstanding amount advanced to the trusts, including accrued interest, was repaid in full by the trusts in the amount of $1,935.

     In January 1998, the Company discontinued an insurance policy on the life of Mr. Stewart unrelated to the policy described in the preceding paragraph. In order to purchase a replacement policy, The Stewart Family Special Trust borrowed $685 from the Company pursuant to a promissory note due 180 days after the death of Mr. Stewart. Interest on the note accrues annually at a rate equal to the Company’s cost of borrowing under its revolving credit facility and is payable when the principal becomes due. The amount of the loan was equal to the cash value received by the Company upon the discontinuance of the prior insurance policy. The loan proceeds were used by the trust to purchase a single premium policy on the life of Mr. Stewart. Certain of the beneficiaries of The Stewart Family Special Trust are members of Mr. Stewart’s family. The loan was approved by all of the disinterested members of the Board of Directors. The outstanding balance of the loan at October 31, 2003, including accrued interest, was approximately $974.

     The Company has noncancellable operating leases, primarily for land and buildings, that expire over the next 1 to 16 years, except for six leases that expire between 2032 and 2039. Rent expense under these leases was $5,799, $6,451 and $8,323 for the years ended October 31, 2003, 2002 and 2001, respectively. The Company leases office space from a non-affiliated company. Rental payments to the non-affiliated company were $322 per year for the years ended October 31, 2003, 2002 and 2001.

     The Company’s future minimum lease payments as of October 31, 2003 are $5,672, $4,697, $4,251, $3,709, $3,280 and $22,774 for the years ending October 31, 2004, 2005, 2006, 2007, 2008 and later years, respectively.

- 97 -

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(18) Commitments, Contingencies and Related Party Transactions—(Continued)

Additionally, the Company has entered into non-compete agreements with prior owners of acquired subsidiaries that expire through 2012. During fiscal year 2001, the Company decided to relieve some of the prior owners and key employees of their obligations not to compete; however, the payments will continue to be made in accordance with the contract terms. The Company’s future non-compete payments as of October 31, 2003 for the same periods are $4,316, $2,985, $1,965, $1,573, $1,237 and $868, respectively.

     The Company is required to maintain a bond ($41,061 as of October 31, 2003) to guarantee its obligations relating to funds the Company withdrew from its preneed funeral trusts in Florida. This amount would become senior debt if the Company was to borrow funds under the revolving credit facility to extinguish the bond obligation by returning to the trusts the amounts it previously withdrew that relate to the remaining preneed contracts.

(19) Segment Data

     In fiscal year 1999, the Company adopted SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” The accounting policies of the Company’s segments are the same as those described in Note 2. The Company evaluates the performance of its segments and allocates resources to them based on gross profit.

     The Company’s operations are product-based and, prior to the sale of its foreign operations, were geographically-based. As such, the Company’s primary reportable operating segments presented in the following table are based on products and services and include funeral and cemetery operations.

     The Company’s funeral homes offer a complete range of funeral services and products both at the time of need and on a preneed basis. The Company’s services and products include family consultation, removal and preparation of remains, the use of funeral home facilities for visitation, worship and funeral services, transportation services, flowers and caskets. In addition to traditional funeral services, all of the Company’s funeral homes offer cremation products and services.

     The Company’s cemetery operations involve the sale of cemetery property and related merchandise, including lots, lawn crypts, family and community mausoleums, monuments, memorials and burial vaults, along with the sale of burial site openings and closings and inscriptions. Cemetery property and merchandise sales are made both at the time of need and on a preneed basis.

     As of October 31, 2003, the Company conducted both funeral and cemetery operations in the United States and Puerto Rico. The Company sold its operations in Mexico, Australia, New Zealand, Belgium and the Netherlands during the fourth quarter of fiscal year 2001 and sold its operations in Spain, Portugal, France, Canada and Argentina during fiscal year 2002.

- 98 -

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(19) Segment Data—(Continued)

     The table below presents information about reported segments for fiscal years ended October 31, 2003, 2002 and 2001:

						Reconciling		Consolidated
		Funeral		Cemetery		Items (1)		Totals
Revenues from external customers
	October 31, 2003	$	298,569		223,489		—	$	522,058
	October 31, 2002	$	345,200		236,121		—	$	581,321
	October 31, 2001	$	410,253		256,680		—	$	666,933
Gross profit
	October 31, 2003	$	70,682		49,689		—	$	120,371
	October 31, 2002	$	88,151		56,633		—	$	144,784
	October 31, 2001	$	91,645		59,542		—	$	151,187
Depreciation and amortization
	October 31, 2003	$	25,240		24,258		4,213	$	53,711
	October 31, 2002	$	25,969		26,016		4,192	$	56,177
	October 31, 2001	$	43,115		31,687		4,390	$	79,192
Additions to long-lived assets (2)
	October 31, 2003	$	8,978		14,836		4,390	$	28,204
	October 31, 2002	$	9,108		14,220		4,670	$	27,998
	October 31, 2001	$	16,773		12,801		4,275	$	33,849
The table below presents information about reported segments as of October 31, 2003 and 2002:
Total assets
	October 31, 2003	$	1,637,644		1,141,356		119,989	$	2,898,989
	October 31, 2002	$	1,629,841		1,257,208		128,535	$	3,015,584
Goodwill
	October 31, 2003	$	320,957		85,117		—	$	406,074
	October 31, 2002	$	332,508		158,815		—	$	491,323
Assets held for sale (3)
	October 31, 2003	$	3,692		2,772		—	$	6,464
	October 31, 2002	$	5,595		3,371		—	$	8,966

(1)	Reconciling items consist of unallocated corporate assets, depreciation and amortization on unallocated corporate assets and additions to corporate long-lived assets
(2)	Long-lived assets include cemetery property and net property and equipment.
(3)	See Note 11.

- 99 -

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(19) Segment Data—(Continued)

     A reconciliation of total segment gross profit to total earnings (loss) before income taxes and cumulative effect of change in accounting principles for fiscal years ended October 31, 2003, 2002 and 2001, is as follows:

	Year Ended October 31,
	2003			2002			2001
Gross profit for reportable segments	$	120,371		$	144,784		$	151,187
Corporate general and administrative expenses		(20,183	)		(17,261	)		(18,020	)
Loss on assets held for sale and other charges		—			(18,500	)		(269,158	)
Impairment of goodwill and long-lived assets		(107,300	)		—			—
Interest expense		(53,478	)		(62,339	)		(63,572	)
Loss on early extinguishment of debt		(11,289	)		—			(9,120	)
Investment income		287			505			5,212
Other income, net		2,122			2,132			7,170
Earnings (loss) before income taxes and cumulative effect of change in accounting principles	$	(69,470	)	$	49,321		$	(196,301	)

		U.S. and
		Possessions (1)		Foreign (2)		Consolidated
Revenues from external customers
	October 31, 2003	$	522,058		—	$	522,058
	October 31, 2002	$	538,826		42,495	$	581,321
	October 31, 2001	$	551,530		115,403	$	666,933
Gross profit
	October 31, 2003	$	120,371		—	$	120,371
	October 31, 2002	$	139,536		5,248	$	144,784
	October 31, 2001	$	135,131		16,056	$	151,187
Long-lived assets (3)
	October 31, 2003	$	691,694		—	$	691,694
	October 31, 2002	$	722,381		—	$	722,381

(1)	Includes the Company’s operations in the United States and Puerto Rico.
(2)	Foreign revenue is based on the country in which the sales originate. The Company sold its operations in Mexico, Australia, New Zealand, Belgium and the Netherlands in fiscal year 2001 and sold its operations in Spain, Portugal, France, Canada and Argentina during fiscal year 2002.
(3)	Long-lived assets include cemetery property and net property and equipment.

- 100 -

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

(20) Quarterly Financial Data (Unaudited)

Year Ended October 31, 2003 (1)		First		Second		Third			Fourth
Revenues		$	131,217	$	133,364	$	128,779		$	128,698
Gross profit			31,383		32,896		27,910			28,182
Net earnings (loss)			9,473		9,491		(2,499	)		(89,933	)
Earnings (loss) per common share:
	Basic		.09		.09		(.02	)		(.83	)
	Diluted		.09		.09		(.02	)		(.83	)

Year Ended October 31, 2002 (2)		First		Second		Third			Fourth
Revenues		$	153,569	$	150,989	$	144,254		$	132,509
Gross profit			40,976		40,139		33,396			30,273
Net earnings (loss)			12,673		12,879		(2,486	)		8,800
Earnings (loss) per common share:
	Basic		.12		.12		(.02	)		.08
	Diluted		.12		.12		(.02	)		.08

(1)	Third quarter of fiscal year 2003 includes a charge of $11,289 ($7,338 after tax, or $.07 per share) in connection with the redemption of the ROARS. Fourth quarter of fiscal year 2003 includes a noncash charge of $107,300 ($97,100 after tax, or $.90 per share) in connection with goodwill impairment and long-lived asset impairment charges.
(2)	Third quarter of fiscal year 2002 includes a noncash charge of $18,500 ($11,200 after tax, or $.10 per share) in connection with the writedown of assets held for sale.

(21) Subsequent Events

     On December 4, 2003, the Company announced a restructuring and reduction of its workforce and plans to close or sell a number of small businesses, primarily funeral homes, most of which were previously acquired as part of a group in an acquisition and generally do not fit the Company’s operating profile. The Company will record a charge in the first quarter of fiscal year 2004 for severance and other costs associated with the workforce reductions in the range of $2,400 to $2,600 ($1,500 to $1,600 after tax, or $.01 per share).

     The Company received a $33,222 tax refund in December 2003 due to a change in the tax accounting methods for cemetery merchandise revenue. The Company used this tax refund and cash on hand to reduce its outstanding debt balance to $467,247 as of January 2, 2004.

- 101 -

Item 9. Changes in and Disagreements with Accountants in Accounting and Financial Disclosure

     None.

Item 9A. Controls and Procedures

     We have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. The evaluation was carried out under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report in timely alerting them to material information relating to the Company, including its consolidated subsidiaries, required to be included in reports we file with or submit to the Securities and Exchange Commission under the Securities Exchange Act of 1934. There have been no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART III

Item 10. Directors and Executive Officers of the Registrant

     The information regarding executive officers required by Item 10 may be found under Item 4(a) of this report.

     The information regarding directors and compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, required by Item 10 is incorporated by reference to the Registrant’s definitive proxy statement relating to its 2004 annual meeting of shareholders, which proxy statement will be filed pursuant to Regulation 14A within 120 days after the end of the last fiscal year.

     We have adopted the Stewart Enterprises, Inc. Code of Business Conduct and Ethics (the “code”), a code of ethics that applies to all employees, including our Chief Executive Officer, Chief Financial Officer and Corporate Controller. The code is being filed as Exhibit 14 in this annual report on Form 10-K. Any substantive amendments to the code, or any waivers granted for any directors or our Chief Executive Officer, Chief Financial Officer or Corporate Controller will be disclosed in a report on Form 8-K.

Item 11. Executive Compensation

     The information required by Item 11 is incorporated by reference to the Registrant’s definitive proxy statement relating to its 2004 annual meeting of shareholders, which proxy statement will be filed pursuant to Regulation 14A within 120 days after the end of the last fiscal year.

     Notwithstanding the foregoing, in accordance with Items 306 and 402(a)(8) of Regulation S-K and Item 7(d)(3) of Schedule 14A, the information contained in the Company’s proxy statement under the subheading “Compensation Committee Report on Executive Compensation” and “Total Return Comparison,” and under the subheading “Audit Committee” (except for information following the heading “Audit Fees” therein), shall not be deemed to be filed as part of or incorporated by reference into this Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The information required by Item 12 is incorporated by reference to the Registrant’s definitive proxy statement relating to its 2004 annual meeting of shareholders, which proxy statement will be filed pursuant to Regulation 14A within 120 days after the end of the last fiscal year.

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Equity Compensation Plan Information

     The following table provides information about our common stock that may be issued under equity compensation plans as of October 31, 2003:

					Number of Securities
					Remaining Available For
			Weighted-Average		Future Issuance Under
	Number of Securities to		Exercise Price of		Equity Compensation Plans
	be Issued Upon Exercise		Outstanding		(Excluding Securities
	of Outstanding Options,		Options, Warrants		Reflected in the First
Plan Category	Warrants and Rights		and Rights		Column)
Equity compensation plans approved by security holders (1)		6,787,624	$	7.09		6,118,895
Equity compensation plans not approved by security holders		—		—		—
Total		6,787,624	$	7.09		6,118,895

(1) Consists of the 1995 Incentive Compensation Plan, the 2000 Incentive Compensation Plan, the Directors’ Stock Option Plan, the 2000 Directors’ Stock Option Plan and the 2003 Employee Stock Purchase Plan.

Item 13. Certain Relationships and Related Transactions

     The information required by Item 13 is incorporated by reference to the Registrant’s definitive proxy statement relating to its 2004 annual meeting of shareholders, which proxy statement will be filed pursuant to Regulation 14A within 120 days after the end of the last fiscal year.

Item 14. Principal Accounting Fees and Services

     The information required by Item 14 is incorporated by reference to the Registrant’s definitive proxy statement relating to its 2004 annual meeting of shareholders, which proxy statement will be filed pursuant to Regulation 14A within 120 days after the end of the last fiscal year.

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PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

     (a)  Documents filed as part of this report:

          (1) Financial Statements

          The Company’s consolidated financial statements listed below have been filed as part of this report:

	Page
Report of Independent Auditors		49
Consolidated Statements of Earnings for the Years Ended October 31, 2003, 2002 and 2001		50
Consolidated Balance Sheets as of October 31, 2003 and 2002		51
Consolidated Statements of Shareholders’ Equity for the Years Ended October 31, 2003, 2002 and 2001		53
Consolidated Statements of Cash Flows for the Years Ended October 31, 2003, 2002 and 2001		55
Notes to Consolidated Financial Statements		57
(2) Financial Statement Schedule for the years ended October 31, 2003, 2002 and 2001
Report of Independent Auditors on Financial Statement Schedule		104
Schedule II—Valuation and Qualifying Accounts		105

     All other schedules are omitted because they are not applicable or not required, or the information appears in the financial statements or notes thereto.

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REPORT OF INDEPENDENT AUDITORS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
of Stewart Enterprises, Inc.:

Our audits of the consolidated financial statements of Stewart Enterprises, Inc. and Subsidiaries referred to in our report, which includes an explanatory paragraph related to the changes in the Company’s method of accounting for preneed activities related to merchandise and cemetery sales and services in 2001 and goodwill and other intangible assets in 2002, dated December 16, 2003 appearing in Item 8 of this Form 10-K, also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. This financial statement schedule is the responsibility of the Company’s management. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP

New Orleans, Louisiana
December 16, 2003

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STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)

COLUMN A			COLUMN B		COLUMN C		COLUMN D			COLUMN E			COLUMN F			COLUMN G
													Cumulative
			Balance at		Charged to		Charged to						effect of change
			beginning		costs and		other						in accounting			Balance at end
Description			of period		expenses		accounts			Write-offs			principles			of period
Current—Allowance for contract cancellations and doubtful accounts: (1)
	Year ended October 31,
		2003	$	3,369		2,809		—			(2,635	)		—		$	3,543
		2002	$	5,348		4,139		—			(6,118	)		—		$	3,369
		2001	$	9,924		6,076		(2,825	)		(6,138	)		(1,689	)	$	5,348
Due after one year—Allowance for contract cancellations and doubtful accounts: (1)
	Year ended October 31,
		2003	$	5,868		5,218		—			(4,507	)		—		$	6,579
		2002	$	8,875		7,360		—			(10,367	)		—		$	5,868
		2001	$	16,860		9,114		(203	)		(15,121	)		(1,775	)	$	8,875

⁽¹⁾ With the implementation of accounting changes effective November 1, 2000, the allowance for contract cancellations and doubtful accounts for installment contracts due within one year and due beyond one year in fiscal years 2002 and 2001 include receivables in the Company’s preneed property sales only. See Notes 4 and 8.

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Item 15(a)(3) Exhibits

3.1	Amended and Restated Articles of Incorporation of the Company, as amended and restated as of May 7, 2003 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2003)
3.2	By-laws of the Company, as amended and restated as of September 24, 2003
4.1	See Exhibits 3.1 and 3.2 for provisions of the Company’s Amended and Restated Articles of Incorporation, as amended, and By-laws, as amended, defining the rights of holders of Class A and Class B common stock
4.2	Specimen of Class A common stock certificate (incorporated by reference to Exhibit 4.2 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (Registration No. 33-42336) filed with the Commission on October 7, 1991)
4.3	Indenture dated as of December 1, 1996 by and between the Company and Citibank, N.A. as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated December 5, 1996) and Supplemental Indenture dated April 24, 1998 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 21, 1998) and Second Supplemental Indenture dated June 29, 2001 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated June 29, 2001)
4.4	Form of 6.70 percent Note due 2003 (incorporated by reference to Exhibit 4.6 to the Company’s Form S-4 dated August 14, 2001)
4.5	Rights Agreement, dated as of October 28, 1999, between Stewart Enterprises, Inc. and ChaseMellon Shareholder Services, L.L.C. as Rights Agent (incorporated by reference to Exhibit 1 to the Company’s Form 8-A dated November 3, 1999)
4.6	Credit Agreement dated June 29, 2001 by and among the Company, Empresas Stewart-Cementerios and Empresas Stewart-Funerarias, as Borrowers, Bank of America, N.A., as Administrative Agent, Collateral Agent and as a Lender, Deutsche Banc Alex. Brown Inc., as Syndication Agent, Bankers Trust Company, as a Lender and the other Lenders party thereto from time to time (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated June 29, 2001) and Amendment No. 1 to the Credit Agreement dated April 25, 2003 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 1, 2003)
4.7	Indenture dated June 29, 2001 by and among Stewart, the Guarantors named therein and Firstar Bank, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Form S-4 dated August 14, 2001)
4.8	Form of 10.75 percent Senior Subordinated Note due 2008 (incorporated by reference to Exhibit 4.2 to the Company’s Form S-4 dated August 14, 2001)
The Company hereby agrees to furnish to the Commission, upon request, a copy of the instruments which define the rights of holders of the Company’s long-term debt. None of such instruments (other than those included as exhibits herein) represent long-term debt in excess of 10 percent of the Company’s consolidated total assets.
10.1	Lease Agreement dated February 29, 2000, between Stewart Building Enterprise, L.L.C. and Stewart Enterprises, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2000)

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Management Contracts and Compensatory Plans or Arrangements

10.3	Form of Indemnity Agreement between the Company and its directors and executive officers (incorporated by reference to Exhibit 10.25 to the Company’s Registration Statement on Form S-1 (Registration No. 33-42336) filed with the commission on August 21, 1991 (the “1991 Registration Statement”)), and amendment dated September 18, 1996 (incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 1996, Commission File No. 0-19508 (the “1996 10-K”))
10.4	Retirement Benefits Agreement dated June 20, 2003, between the Company and Frank B. Stewart, Jr. (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended July 31, 2003)
10.5	Employment Agreement dated November 1, 2001, between the Company and William E. Rowe (incorporated by reference to Exhibit 10.4 to the 2001 10-K); Amendment No.1 dated April 1, 2002 to Employment Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended April 30, 2002)
10.6	Change of Control Agreement dated November 1, 2001, between the Company and William E. Rowe (incorporated by reference to Exhibit 10.6 to the 2001 10-K)
10.7	Stock Option Agreement dated September 7, 1995 (time-vest), between the Company and William E. Rowe (incorporated by reference to Exhibit 10.26 to the 1995 10-K)
10.8	Employment Agreement dated November 1, 2001, between the Company and Kenneth C. Budde (incorporated by reference to Exhibit 10.18 to the 2001 10-K); Amendment No. 1 dated April 1, 2002 to Employment Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended April 30, 2002)
10.9	Change of Control Agreement dated November 1, 2001, between the Company and Kenneth C. Budde (incorporated by reference to Exhibit 10.20 to the 2001 10-K)
10.10	Stock Option Agreement dated September 7, 1995 (time-vest), between the Company and Kenneth C. Budde (incorporated by reference to Exhibit 10.36 to the 1996 10-K)
10.11	Employment Agreement dated November 1, 2001, between the Company and Lawrence B. Hawkins (incorporated by reference to Exhibit 10.23 to the 2001 10-K); Amendment No. 1 dated April 1, 2002 to Employment Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended April 30, 2002)
10.12	Change of Control Agreement dated November 1, 2001, between the Company and Lawrence B. Hawkins (incorporated by reference to Exhibit 10.25 to the 2001 10-K)
10.13	Stock Option Agreement dated September 7, 1995 (time-vest), between the Company and Lawrence B. Hawkins (incorporated by reference to Exhibit 10.42 to the 1996 10-K)
10.14	Employment Agreement dated November 1, 2001, between the Company and Brent F. Heffron (incorporated by reference to Exhibit 10.28 to the 2001 10-K); Amendment No. 1 dated April 1, 2002 to Employment Agreement (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended April 30, 2002)
10.15	Change of Control Agreement dated November 1, 2001, between the Company and Brent F. Heffron (incorporated by reference to Exhibit 10.30 to the 2001 10-K)

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10.16	Stock Option Agreement dated September 7, 1995 (time-vest), between the Company and Brent F. Heffron (incorporated by reference to Exhibit 10.47 to the 1996 10-K)
10.17	Stock Option Agreement dated January 1, 1997 (time-vest), between the Company and Brent F. Heffron (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended January 31, 1997)
10.18	Stock Option Agreement dated December 23, 1997 (time-vest), between the Company and Brent F. Heffron (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended January 31, 1998)
10.19	Employment Agreement dated November 1, 2001, between the Company and Randall L. Stricklin (incorporated by reference to Exhibit 10.35 to the 2001 10-K); Amendment No. 1 dated April 1, 2002 to Employment Agreement (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended April 30, 2002); First Supplement to Appendix A dated April 30, 2002 to Employment Agreement (incorporated by reference to Exhibit 10.21 to the 2002 10-K); Second Supplement to Appendix A to Employment Agreement dated June 25, 2003 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended July 31, 2003)
10.20	Change of Control Agreement dated November 1, 2001, between the Company and Randall L. Stricklin (incorporated by reference to Exhibit 10.37 to the 2001 10-K)
10.21	Indemnity Agreement dated April 20, 2000, between the Company and Randall L. Stricklin (incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended July 31, 2000)
10.22	Employment Agreement dated November 1, 2001, between the Company and G. Kenneth Stephens, Jr. (incorporated by reference to Exhibit 10.40 to the 2001 10-K); First Supplement to Appendix A dated April 12, 2002 to Employment Agreement (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended April 30, 2002); Second Supplement to Appendix A to Employment Agreement dated June 25, 2003 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended July 31, 2003)
10.23	Change of Control Agreement dated November 1, 2001, between the Company and G. Kenneth Stephens, Jr. (incorporated by reference to Exhibit 10.42 to the 2001 10-K)
10.24	Indemnity Agreement dated January 31, 2000, between the Company and G. Kenneth Stephens, Jr. (incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended July 31, 2000)
10.25	Employment Agreement dated November 1, 2001, between the Company and Michael K. Crane (incorporated by reference to Exhibit 10.45 to the 2001 10-K); Amendment No. 1 dated April 1, 2002 to Employment Agreement (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended April 30, 2002); First Supplement to Appendix A dated April 12, 2002 to the Employment Agreement (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended April 30, 2002); Second Supplement to Appendix A to Employment Agreement dated June 25, 2003 (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended July 31, 2003)
10.26	Change of Control Agreement dated November 1, 2001, between the Company and Michael K. Crane (incorporated by reference to Exhibit 10.46 to the 2001 10-K)

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10.27	Employment Agreement dated November 1, 2001, between the Company and Everett N. Kendrick (incorporated by reference to Exhibit 10.47 to the 2001 10-K); Amendment No. 1 dated April 1, 2002 to Employment Agreement (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended April 30, 2002); Second Supplement to Appendix A to Employment Agreement dated June 25, 2003 (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended July 31, 2003)
10.28	Change of Control Agreement dated November 1, 2001, between the Company and Everett N. Kendrick (incorporated by reference to Exhibit 10.49 to the 2001 10-K)
10.29	Indemnity Agreement dated January 31, 2000, between the Company and Everett N. Kendrick (incorporated by reference to Exhibit 10.19 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended July 31, 2000)
10.30	Form of Stock Option Agreement (time-vest), between the Company and its Executive Officers (incorporated by reference to Exhibit 10.45 to the 1998 10-K)
10.31	Form of Stock Option Agreement (performance-based), between the Company and its Executive Officers (incorporated by reference to Exhibit 10.46 to the 1998 10-K)
10.32	The Stewart Enterprises Employees’ Retirement Trust (incorporated by reference to Exhibit 10.20 to the 1991 Registration Statement); Amendment thereto dated January 1, 1994 (incorporated by reference to Exhibit 10.28 to the Company Annual Report on Form 10-K for the fiscal year ended October 31, 1994 (the “1994 10-K”)); and Amendment thereto dated January 1, 2002 (incorporated by reference to Exhibit 10.54 to the 2001 10-K); Amendment thereto dated January 1, 2003 (incorporated by reference to Exhibit 10.34 to the 2002 10-K); Commission File No. 0-19508
10.33	The Stewart Enterprises Supplemental Retirement and Deferred Compensation Plan (incorporated by reference to Exhibit 10.29 to the 1994 10-K); Commission File No. 0-19508
10.34	Amended and Restated Stewart Enterprises, Inc. 1995 Incentive Compensation Plan (incorporated by reference to Exhibit 10.57 to the 1996 10-K); Commission File No. 0-19508
10.35	Amended and Restated Directors’ Stock Option Plan (incorporated by reference to Exhibit 10.58 to the 1996 10-K); Commission File No. 0-19508
10.36	2003 Employee Stock Purchase Plan (incorporated by reference to Exhibit B to the Company’s 2003 definitive proxy statement for the fiscal year ended October 31, 2002)
10.37	2000 Incentive Compensation Plan (incorporated by reference to Exhibit 10.45 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2000)
10.38	2000 Directors’ Stock Option Plan (incorporated by reference to Exhibit 10.46 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2000); Amended and Restated Stewart Enterprises, Inc. 2000 Directors’ Stock Option Plan (incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended April 30, 2002)

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10.39	Form of Stock Option Agreement (time-vest), between the Company and its Executive Officers, granted in January 2000 under the Amended and Restated 1995 Incentive Compensation Plan (incorporated by reference to Exhibit 10.61 to the 2001 10-K)
10.40	Form of Stock Option Agreement (time-vest) between the Company and its Executive Officers, granted under the 2000 Incentive Compensation Plan (incorporated by reference to Exhibit 10.62 to the 2001 10-K)
10.41	The Stewart Enterprises, Inc. Supplemental Retirement and Deferred Compensation Plan for certain highly compensated executives (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended July 31, 2001)
10.42	Stewart Enterprises, Inc. Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended April 30, 2002)
12	Calculation of Ratio of Earnings to Fixed Charges
14	Code of Business Conduct and Ethics
21	Subsidiaries of the Company
23	Consent of PricewaterhouseCoopers LLP
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of William E. Rowe, Chairman of the Board, Chief Executive Officer and President
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Kenneth C. Budde, Executive Vice President and Chief Financial Officer
32	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of William E. Rowe, Chairman of the Board, Chief Executive Officer and President, and Kenneth C. Budde, Executive Vice President and Chief Financial Officer

(b) Reports on Form 8-K

     The Company filed a Form 8-K on September 9, 2003, reporting under “Item 7. Financial Statements and Exhibits” and “Item 12. Results of Operations and Financial Condition,” the earnings release for the quarter ended July 31, 2003.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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 on January 14, 2004.

STEWART ENTERPRISES, INC.
By:	/s/ WILLIAM E. ROWE
	William E. Rowe
	Chairman of the Board,
	Chief Executive Officer
	and President

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ WILLIAM E. ROWE
William E. Rowe	Chairman of the Board,	January 14, 2004
(Principal Executive Officer)	Chief Executive Officer
	and President
/s/ KENNETH C. BUDDE
Kenneth C. Budde	Executive Vice President,	January 14, 2004
(Principal Financial Officer)	Chief Financial Officer
	and a Director
/s/ MICHAEL G. HYMEL
Michael G. Hymel	Vice President,	January 14, 2004
(Principal Accounting Officer)	Corporate Controller and
	Chief Accounting Officer
/s/ LESLIE R. JACOBS
Leslie R. Jacobs	Director	January 14, 2004
/s/ JOHN P. LABORDE
John P. Laborde	Director	January 14, 2004
/s/ ALDEN J. McDONALD, JR.
Alden J. McDonald, Jr.	Director	January 14, 2004
/s/ JAMES W. McFARLAND
James W. McFarland	Director	January 14, 2004
/s/ MICHAEL O. READ
Michael O. Read	Director	January 14, 2004
/s/ FRANK B. STEWART, JR.
Frank B. Stewart, Jr.	Director	January 14, 2004

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Exhibit Index

3.2	By-laws of the Company, as amended and restated as of September 24, 2003
12	Calculation of Ratio of Earnings to Fixed Charges
14	Code of Business Conduct and Ethics
21	Subsidiaries of the Company
23	Consent of PricewaterhouseCoopers LLP
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of William E. Rowe, Chairman of the Board, Chief Executive Officer and President
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of Kenneth C. Budde, Executive Vice President and Chief Financial Officer
32	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of William E. Rowe, Chairman of the Board, Chief Executive Officer and President, and Kenneth C. Budde, Executive Vice President and Chief Financial Officer

-113- EX-3.2 3 d11054exv3w2.txt BY-LAWS OF THE COMPANY BY-LAWS OF STEWART ENTERPRISES, INC. (as amended and restated as of September 24, 2003) SECTION 1 OFFICES 1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall be located at 110 Veterans Memorial Boulevard, Metairie, Louisiana 70005. 1.2 ADDITIONAL OFFICES. The Corporation may have such offices at such other places as the Board of Directors may from time to time determine or the business of the Corporation may require. SECTION 2 SHAREHOLDERS MEETINGS 2.1 PLACE OF MEETINGS. Unless otherwise required by law or these By-laws, all meetings of the shareholders shall be held at the principal office of the Corporation or at such other place, within or without the State of Louisiana, as may be designated by the Board of Directors. 2.2 ANNUAL MEETINGS; NOTICE THEREOF. An annual meeting of the shareholders shall be held each year on the date and at the time as the Board of Directors shall designate, for the purpose of electing directors and for the transaction of such other business as may be properly brought before the meeting. If no annual shareholders' meeting is held for a period of eighteen months, any shareholder may call such meeting to be held at the registered office of the Corporation as shown on the records of the Secretary of State of the State of Louisiana. 2.3 SPECIAL MEETINGS. Special meetings of the shareholders, for any purpose or purposes, may be called by the Board of Directors, the Chairman of the Board, or the President. At any time, upon the written request of any shareholder or group of shareholders holding in the aggregate at least 25% of the Total Voting Power (as defined in Article III(D) of the Articles of Incorporation), the Secretary shall call a special meeting of shareholders to be held at the registered office of the Corporation at such time as the Secretary may fix, not less than 15 nor more than 60 days after the receipt of such request, and if the Secretary shall neglect or refuse to fix such time or to give notice of the meeting, the shareholder or shareholders making the request may do so. Such request must state the specific purpose or purposes of the proposed special meeting and the business to be conducted thereat shall be limited to such purpose or purposes. 2.4 NOTICE OF MEETINGS. Except as otherwise provided by law, the authorized person or persons calling a shareholders' meeting shall cause written notice of the time, place and purpose of the meeting to be given to all shareholders entitled to vote at such meeting, at least 10 days and not more than 60 days prior to the day fixed for the meeting. Notice of the annual meeting need not state the purpose or purposes thereof, unless action is to be taken at the meeting as to which notice is required by law or the By-laws. Notice of a special meeting shall state the purpose or purposes thereof, and the business conducted at any special meeting shall be limited to the purpose or purposes stated in the notice. 2.5 LIST OF SHAREHOLDERS. At every meeting of shareholders, a list of shareholders entitled to vote, arranged alphabetically and certified by the Secretary or by the agent of the Corporation having charge of transfers of shares, showing the number and class of shares held by each such shareholder on the record date for the meeting and confirming the number of votes per share as to which each such shareholder is entitled, shall be produced on the request of any shareholder. 2.6 QUORUM. At all meetings of shareholders, the holders of a majority of the Total Voting Power (as defined in Article III(D) of the Articles of Incorporation) shall constitute a quorum, provided, however, that this subsection shall not have the effect of reducing the vote required to approve any matter that may be established by law, the Articles of Incorporation or these By-laws. 2.7 VOTING. When a quorum is present at any shareholders' meeting, the vote of the holders of a majority of that portion of the Total Voting Power (as defined in Article III(D) of the Articles of Incorporation) that is present in person or represented by proxy, voting together as a single class, shall decide each question brought before such meeting, unless the resolution of the question requires, by express provision of law, the Articles of Incorporation or these By-laws, a different vote or one or more separate votes by the holders of a class or series of capital stock, in which case such express provision shall apply and control the decision of such question. Directors shall be elected by plurality vote. 2.8 PROXIES. (a) At any meeting of the shareholders, every shareholder having the right to vote shall be entitled to vote in person or by proxy authorized by such shareholder and bearing a date not more than eleven months prior to the meeting, unless the instrument provides for a longer period, but in no case will an outstanding proxy be valid for longer than three years from the date of its execution; provided, however, that in no event may a proxy be voted at a meeting called pursuant to La. R.S. 12:138 unless it is executed and dated by the shareholder within 30 days of the date of such meeting. The person appointed as proxy need not be a shareholder of the Corporation. -2- (b) The following are valid means by which a shareholder may authorize another person or persons to act for him as proxy: (i) A shareholder may execute a writing authorizing another person or persons to act for him as proxy. Execution may be accomplished by the shareholder or his authorized officer, director, employee or agent signing such writing or causing his signature to be affixed to such writing by any reasonable means, including but not limited to facsimile signature. (ii) A shareholder may authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission (including but not limited to transmission by telephone, the Internet or e-mail) to the person who will be the holder of the proxy, or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission; however, any such telegram, cablegram or other means of electronic transmission shall be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the shareholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or other such persons making that determination shall specify the information upon which they relied. 2.9 ADJOURNMENTS. Adjournments of any annual or special meeting of shareholders may be taken without new notice being given unless a new record date is fixed for the adjourned meeting, but any meeting at which directors are to be elected shall be adjourned only from day to day until such directors shall have been elected. 2.10 WITHDRAWAL. If a quorum is present or represented at a duly organized shareholders' meeting, such meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum as fixed in Section 2.6 of these By-laws, or the refusal of any shareholders to vote. 2.11 LACK OF QUORUM. If a meeting cannot be organized because a quorum has not attended, those present may adjourn the meeting to such time and place as they may determine, subject, however, to the provisions of Section 2.9 hereof. In the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum as fixed in Section 2.6 hereof, shall nevertheless be deemed to constitute a quorum for the purpose of electing directors. 2.12 PRESIDING OFFICER. The Chairman of the Board or the Chief Executive Officer, or in their absence a chairman designated by the Board of Directors, shall preside at all shareholders' meetings. -3- 2.13 DEFINITION OF SHAREHOLDER. As used in these By-laws, and unless the context otherwise requires, the term shareholder shall mean a person who is the record holder of shares of the Corporation's capital stock or a registered holder of any bonds, debentures or similar obligations granted voting rights by the Corporation pursuant to La. R.S. 12:75H. 2.14 BUSINESS TO BE CONDUCTED AT ANNUAL AND SPECIAL MEETINGS OF SHAREHOLDERS. (a) At any annual meeting of shareholders, only such business shall be conducted as shall have been brought before the meeting (i) by or at the direction of the Board of Directors, or (ii) by any shareholder of record entitled to vote at such meeting who complies with the procedures set forth in this Section 2.14. (b) At any special meeting of shareholders called at the request of a shareholder, or group of shareholders, of record in accordance with the Corporation's Articles of Incorporation and these By-laws, only such business shall be conducted as shall have been (i) submitted by the shareholder, or group of shareholders of record requesting the meeting, (ii) described in the request for the meeting, and (iii) described in the notice of the meeting. (c) At any special meeting of shareholders called at the request of the Board of Directors, the Chairman of the Board or the President of the Corporation, only such business shall be conducted as shall have been brought before the meeting (i) by or at the direction of the Board of Directors, the Chairman of the Board or the President or (ii) by any shareholder of record entitled to vote at such meeting who complies with the procedures set forth in this Section 2.14. (d) No proposal by a shareholder, or group of shareholders, of record of the Corporation shall be considered at an annual shareholders' meeting unless Sufficient Notice (as described in subparagraph (f) hereof) of the proposal is received by the Secretary of the Corporation not less than 120 calendar days in advance of the date in the current year that corresponds to the date on which proxy materials were first mailed by the Corporation in connection with the previous year's annual meeting. If the date of the annual meeting is changed to a date that is 30 calendar days earlier or later than the date in the current year that corresponds to the date on which the annual meeting was held in the previous year, or if no annual meeting was held in the previous year, Sufficient Notice of the proposal must be received by the Secretary of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event less than 70 days notice or prior public disclosure of the date of the meeting is given or made to shareholders, Sufficient Notice of the proposal must be received by the Secretary of the Corporation no later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. -4- (e) No proposal by a shareholder, or group of shareholders, of record of the Corporation shall be considered at a special meeting of shareholders called by the Board of Directors, the Chairman of the Board or the President unless Sufficient Notice (as described in subparagraph (f) hereof) of the proposal is received by the Secretary of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event less than 70 days notice or prior public disclosure of the date of the meeting is given or made to shareholders, Sufficient Notice of the proposal must be received by the Secretary of the Corporation no later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. (f) Notice of a proposal shall constitute Sufficient Notice only if it contains (i) a complete and accurate description of the proposal; (ii) a statement that the shareholder (or the shareholder's legal representative) intends to attend the meeting and present the proposal and that the shareholder intends to hold of record securities of the Corporation entitled to vote at the meeting through the meeting date; (iii) the shareholder's name and address and the number of shares of the Corporation's voting securities that the shareholder holds of record and beneficially as of the notice date; and (iv) a complete and accurate description of any material interest of such shareholder in such proposal. (g) Notwithstanding compliance with this Section 2.14, no shareholder proposal shall be deemed to be properly brought before a shareholders' meeting if it is not a proper subject for action by shareholders under Louisiana law or the Articles of Incorporation. (h) Any shareholder proposal failing to comply with this Section 2.14 shall not be considered at the meeting and, if introduced at the meeting, shall be ruled out of order. (i) Nothing in this Section 2.14 is intended to confer any rights to have any proposal included in the notice of any meeting or in proxy materials related to such meeting. (j) Notwithstanding the requirement in this Section 2.14 that a shareholder be a shareholder of record in order to present a shareholder proposal at a shareholders' meeting, a beneficial owner of shares entitled to vote at the meeting shall be entitled to present a proposal at a meeting if such beneficial owner complies with Rule 14a-8 promulgated under the Securities Exchange Act of 1934 and the proposal has been included in the Corporation's proxy statement for the meeting pursuant to Rule 14a-8. -5- SECTION 3 DIRECTORS 3.1 NUMBER. All of the corporate powers shall be vested in, and the business and affairs of the Corporation shall be managed by, a Board of Directors. Except as otherwise fixed by or pursuant to Article III of the Articles of Incorporation (as it may be duly amended from time to time) relating to the rights of the holders of any class or series of stock having a preference over the Class A and Class B Common Stock as to dividends or upon liquidation to elect additional directors by class vote, the Board of Directors shall consist of up to 12 natural persons, the exact number of which shall be fixed each year by resolution of the Board of Directors, provided that, if after proxy materials for any meeting of shareholders at which directors are to be elected are mailed to shareholders any person or persons named therein to be nominated at the direction of the Board of Directors become unable or unwilling to serve, the number of directors fixed by the Board or Directors for such year shall be automatically reduced by a number equal to the number of such persons unless the Board of Directors selects an additional nominee or nominees to replace such persons. No director need be a shareholder. The Secretary shall have the power to certify at any time as to the number of directors authorized and as to the class to which each director has been elected or assigned. No person shall be eligible for nomination, election or appointment to the Board of Directors unless such person will not have achieved his or her 70th birthday on or prior to the date on which his or her election or appointment would otherwise become effective; provided, however, that (i) the foregoing shall not be applied in a manner that would shorten the current term of office of any incumbent director on the date of the adoption of this by-law, (ii) the Board may, by a vote of two-thirds of its members who are not affected by the decision, exempt any Director from the foregoing limitation in order that such Director may serve one additional term of office; and (iii) such limitation shall not apply to Frank B. Stewart, Jr. so long as he is the record and/or beneficial owner of not less than 3.5 million shares of the Company's Class B Common Stock (as such number may be adjusted from time to time to reflect stock dividends, stock splits, a recapitalization or other similar transactions). 3.2 POWERS. The Board may exercise all such powers of the Corporation and do all such lawful acts and things which are not by law, the Articles of Incorporation or these By-laws directed or required to be done by the shareholders. 3.3 CLASSES. The Board of Directors, other than those directors who may be elected by the holders of any class or series of stock having preference over the Class A and Class B Common Stock as to dividends or upon liquidation, shall be divided, with respect to the time during which they shall hold office, into three classes as nearly equal in number as possible, with the initial term of office of Class I directors expiring at the annual meeting of shareholders to be held in 1993, of Class II directors expiring at the next succeeding annual meeting of shareholders and of Class III directors expiring at the second succeeding annual meeting of shareholders, with all such directors to hold office until their successors are elected and qualified. Any increase or decrease in the number -6- of directors shall be apportioned by the Board of Directors so that all classes of directors shall be as nearly equal in number as possible. At each annual meeting of shareholders, directors chosen to succeed those whose terms then expire shall be elected to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election and until their successors are duly elected and qualified. 3.4 GENERAL ELECTION. At each annual meeting of shareholders, directors shall be elected to succeed those directors whose terms then expire. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 3.5 VACANCIES. Except as otherwise provided in the Articles of Incorporation or these By-laws, the office of a director shall become vacant if he dies, resigns or is duly removed from office and the Board of Directors may declare vacant the office of a director if he is interdicted or adjudicated an incompetent, is adjudicated a bankrupt, in the sole opinion of the Board of Directors becomes incapacitated by illness or other infirmity so that he is unable to perform his duties for a period of six months or longer, or ceases at any time to have the qualifications required by law, the Articles of Incorporation or these By-laws. 3.6 FILLING VACANCIES. Except as otherwise provided in Section 3.8 of these By-laws, any vacancy on the Board (including any vacancy resulting from an increase in the authorized number of directors or from failure of the shareholders to elect the full number of authorized directors) may, notwithstanding any resulting absence of a quorum of directors, be filled by a two-thirds vote of the Board of Directors remaining in office, provided that the shareholders shall have the right, at any special meeting called for such purpose prior to any such action by the Board, to fill the vacancy. A director elected pursuant to this section shall serve until the next shareholders' meeting held for the election of directors of the class to which he shall have been appointed and until his successor is elected and qualified. 3.7 NOTICE OF SHAREHOLDER NOMINEES. Except as otherwise provided in Section 3.8 of these By-laws, only persons who are nominated in accordance with the procedures set forth in this section shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders by or at the direction of the Board of Directors or by any shareholder of record of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this section. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered or mailed and received at the principal office of the Corporation not less than 45 days nor more than 90 days prior to the meeting, provided, however, that in the event that less than 55 days notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be received no later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such -7- public disclosure was made. Such shareholder's notice shall set forth or include the following: a. as to each person whom the shareholder proposes to nominate for election or reelection as a director the name, age, business address and residential address of such person, the principal occupation or employment of such person, the class and number of shares of capital stock of the Corporation of which such person is the beneficial owner (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934), such person's written consent to being named in the proxy statement as a nominee and to serve as a director if elected and any other information relating to such person that would be required to be disclosed in solicitations of proxies for election of directors, or would be otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934; and b. as to the shareholder of record giving the notice, (i) the name and address of such shareholder and (b) the class and number of shares of capital stock of the Corporation of which such shareholder is the beneficial owner (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934). If requested in writing by the Secretary the Corporation at least 15 days in advance of the meeting, such shareholder shall disclose to the Secretary, within ten days of such request, whether such person is the sole beneficial owner of the shares held of record by him, and, if not, the name and address of each other person known by the shareholder of record to claim or have a beneficial interest in such shares. At the request of the Board of Directors, any person nominated by or at the direction of the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. If a shareholder seeks to nominate one or more persons as directors, the Secretary shall appoint two inspectors, who shall not be affiliated with the Corporation, to determine whether the shareholder has complied with this section. If the inspectors shall determine that the shareholder has not complied with this section, the defective nomination shall be disregarded and the inspectors shall direct the Chairman of the meeting to declare at the meeting that such nomination was not made in accordance with the procedures prescribed by the Articles of Incorporation and these By-laws. 3.8 DIRECTORS ELECTED BY PREFERRED SHAREHOLDERS. Notwithstanding anything in these By-laws to the contrary, whenever the holders of any one or more classes or series of stock having a preference over the Class A and Class B Common Stock as to dividends or upon liquidation shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the provisions of the Articles of Incorporation (as they may be duly amended from time to time) fixing the rights and preferences of such preferred stock shall govern with respect to the nomination, election, term, removal, vacancies or other related matters with respect to such directors. -8- 3.9 COMPENSATION OF DIRECTORS. Directors shall receive such compensation for their services, in their capacity as directors, as may be fixed by resolution of the Board of Directors, provided, however, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. 3.10 VICE CHAIRMAN OF THE BOARD. The Board of Directors may appoint a Vice Chairman of the Board, who shall perform such duties as the Chairman of the Board or the Board of Directors shall prescribe. SECTION 4 MEETINGS OF THE BOARD 4.1 PLACE OF MEETINGS. The meetings of the Board of Directors may be held at such place within or without the State of Louisiana as a majority of the directors may from time to time appoint. 4.2 REGULAR MEETINGS; NOTICE. Regular meetings of the Board may be held at such times as the Board may from time to time determine. Notice of regular meetings of the Board of Directors shall be required, but no special form of notice or time of notice shall be necessary. 4.3 SPECIAL MEETINGS; NOTICE. Special meetings of the Board may be called by the Chairman of the Board or the President on reasonable notice given to each director, either personally or by telephone, mail, telex, telecopy or any other comparable form of facsimile communication. Special meetings shall be called by the Secretary in like manner and on like notice on the written request of a majority of the directors and if such officer fails or refuses, or is unable within 24 hours to call a meeting when requested, then the directors making the request may call the meeting on two days' written notice given to each director. The notice of a special meeting of directors need not state its purpose or purposes, but if the notice states a purpose or purposes and does not state a further purpose to consider such other business as may properly come before the meeting, the business to be conducted at the special meeting shall be limited to the purpose or purposes stated in the notice. 4.4 WAIVER OF NOTICE. Directors present at any regular or special meeting shall be deemed to have received due, or to have waived, notice thereof, provided that a director who participates in a meeting by telephone (as permitted by Section 4.8 hereof) shall not be deemed to have received or waived due notice if, at the beginning of the meeting, he objects to the transaction of any business because the meeting is not lawfully called. 4.5 QUORUM. A majority of the Board shall be necessary to constitute a quorum for the transaction of business, and except as otherwise provided by law, the -9- Articles of Incorporation or these By-laws, the acts of a majority of the directors present at a duly-called meeting at which a quorum is present shall be the acts of the Board. If a quorum is not present at any meeting of the Board of Directors, the directors present may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum is present. 4.6 WITHDRAWAL. If a quorum is present when the meeting convened, the directors present may continue to do business, taking action by vote of a majority of a quorum as fixed in Section 4.5 hereof, until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum as fixed in Section 4.5 hereof or the refusal of any director present to vote. 4.7 ACTION BY CONSENT. Any action that may be taken at a meeting of the Board, or any committee thereof, may be taken by a consent in writing signed by all of the directors or by all members of the committee, as the case may be, and filed with the records of proceedings of the Board or committee. 4.8 MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATION. Members of the Board may participate at and be present at any meeting of the Board or any committee thereof by means of conference telephone or similar communications equipment if all persons participating in such meeting can hear and communicate with each other. SECTION 5 COMMITTEES OF THE BOARD 5.1 GENERAL. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation (and one or more directors may be named as alternate members to replace any absent or disqualified regular members), which, to the extent provided by resolution of the Board or these By-laws, shall have and may exercise the powers of the Board in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to documents, but no such committee shall have power or authority to amend the Articles of Incorporation, adopt an agreement of merger, consolidation or share exchange, recommend to the shareholders the sale, lease or exchange of all or substantially all of the Corporation's assets, recommend to the shareholders a dissolution of the Corporation or a revocation of dissolution, remove or indemnify directors, or amend these By-laws; and unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or authorize the issuance of stock. Such committee or committees shall have such name or names as may be stated in these By-laws, or as may be determined, from time to time, by the Board. Any vacancy occurring in any such committee shall be filled by the Board, but the President may designate another director to serve on the committee pending action by the Board. Each such member of a committee shall hold office during the term designated by the Board. -10- 5.2 STANDING COMMITTEES. The standing committees of the Board of Directors shall be the Audit Committee, the Compensation Committee and the Corporate Governance and Nominating Committee, which committees shall have such authority and be comprised of such members as designated by the Board. SECTION 6 REMOVAL OF BOARD MEMBERS Except as may be otherwise provided in Section 3.8 of these By-laws, any director may be removed, with or without cause, by a two-thirds vote of the Board of Directors and any director or the entire Board of Directors may be removed at any time, with or without cause, by the affirmative vote of the holders of not less than two-thirds of that portion of the Total Voting Power (as defined in Article III(D) of the Articles of Incorporation) that is present or represented at a special shareholders' meeting called for that purpose, voting together as a single class. At the same meeting in which the Board of Directors or the shareholders remove one or more directors, a successor or successors may be elected for the unexpired term of the director or directors removed. Except as provided in the Articles of Incorporation and in this Section 6, directors shall not be subject to removal. SECTION 7 NOTICES 7.1 FORM OF DELIVERY. Whenever under the provisions of law, the Articles of Incorporation or these By-laws notice is required to be given to any shareholder or director, it shall not be construed to mean personal notice unless otherwise specifically provided in the Articles of Incorporation or these By-laws, but such notice may be given by mail, addressed to such shareholder or director at his address as it appears on the records of the Corporation, with postage thereon prepaid, or in such other manner as may be specified in these By-laws. Notices given by mail shall be deemed to have been given at the time they are deposited in the United States mail, and all other notices shall be deemed to have been given upon receipt. 7.2 WAIVER. Whenever any notice is required to be given by law, the Articles of Incorporation or these By-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent thereto. In addition, notice shall be deemed to have been given to, or waived by, any shareholder or director who attends a meeting of shareholders or directors in person, or is represented at such meeting by proxy, without protesting at the commencement of the meeting the transaction of any business because the meeting is not lawfully called or convened. -11- SECTION 8 OFFICERS 8.1 DESIGNATIONS. The Board of Directors shall elect a Chairman of the Board, Chief Executive Officer, President, Secretary and Treasurer. The Chief Executive Officer may appoint such other officers as he or she shall deem necessary or appropriate, and shall present to the Board a list of such officers at least annually. More than one office may be held by one person, provided that no person holding more than one office may sign, in more than one capacity, any certificate or other instrument required by law to be signed by two officers. 8.2 DUTIES AND TERMS OF OFFICE. Officers shall exercise such powers and perform such duties as the Chief Executive Officer may from time to time direct, provided that their powers and duties are not inconsistent with these By-laws or any Board resolution. Except as otherwise provided in the resolution of the Board of Directors electing any officer, each officer elected by the Board shall hold office until the first meeting of the Board of Directors after the annual meeting of shareholders next succeeding his or her election, and until his or her successor is elected or until his or her earlier resignation or removal. Officers appointed by the Chief Executive Officer shall hold such office for the term designated by the Chief Executive Officer or, if none, until his or her successor is elected or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board, Chief Executive Officer or Secretary of the Corporation. Such resignation shall take effect at the time specified therein and acceptance of such resignation shall not be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any officer appointed by the Chief Executive Officer may be removed by the Chief Executive Officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officers, if any, with the Corporation, but the election of an officer shall not in and of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board at any regular or special meeting, or, if the appointment of the officer did not require Board approval, by the Chief Executive Officer. 8.3 THE CHAIRMAN OF THE BOARD. The Chairman of the Board or a director designated by him shall preside at meetings of the Board of Directors and the shareholders and perform such other duties as may be designated by the Board of Directors or these By-laws. 8.4 THE CHIEF EXECUTIVE OFFICER AND PRESIDENT. The office of Chief Executive Officer and President shall be held by one person unless the Board otherwise determines. Subject to such determination, the Chief Executive Officer and President shall, subject to the powers of the Chairman of the Board, have general and active responsibility for the management of the business of the Corporation, shall be the chief executive officer of the Corporation, shall supervise the daily operations of the business -12- of the Corporation and shall ensure that all orders, policies and resolutions of the Board are carried out. 8.5 THE SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose. He or she shall give, or cause to be given, notice of all meetings of the shareholders and regular and special meetings of the Board, and shall perform such other duties as may be prescribed by the Board or the Chief Executive Officer. He or she shall keep in safe custody the seal of the Corporation, if any, and affix such seal to any instrument requiring it. 8.6 THE TREASURER. The Treasurer shall have the custody of the corporate funds and shall keep or cause to be kept full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation. He or she shall keep a proper accounting of all receipts and disbursements and shall disburse the funds of the Corporation only for proper corporate purposes or as may be ordered by the Board and shall render to the Chief Executive Officer and the Board at the regular meetings of the Board, or whenever they may require it, an account of all his or her transactions as Treasurer. SECTION 9 STOCK 9.1 CERTIFICATES. Every holder of stock in the Corporation shall be entitled to have a certificate signed by the President or a Vice President and the Secretary or an Assistant Secretary evidencing the number and class (and series, if any) of shares owned by him, containing such information as required by law and bearing the seal of the Corporation. If any stock certificate is manually signed by a transfer agent or registrar other than the Corporation itself or an employee of the Corporation, the signature of any such officer may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be an officer, transfer agent or registrar of the Corporation before such certificate is issued, it may be issued by the Corporation with the same effect as if such person or entity were an officer, transfer agent or registrar of the Corporation on the date of issue. 9.2 MISSING CERTIFICATES. The President or any Vice President may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the Corporation's receipt of an affidavit of that fact from the person claiming the certificate of stock to be lost, stolen or destroyed. As a condition precedent to the issuance of a new certificate or certificates, the officers of the Corporation shall, unless dispensed with by the President, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to give the Corporation a bond or enter into a written indemnity agreement, in each case in an amount appropriate to -13- indemnify the Corporation against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. 9.3 TRANSFERS. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 10 DETERMINATION OF SHAREHOLDERS 10.1 RECORD DATE. For the purpose of determining shareholders entitled to notice of and to vote at a meeting, or to receive a dividend, or to receive or exercise subscription or other rights, or to participate in a reclassification of stock, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a record date for determination of shareholders for such purpose, such date to be not more than 60 days and, if fixed for the purpose of determining shareholders entitled to notice of and to vote at a meeting, not less than 10 days, prior to the date on which the action requiring the determination of shareholder is to be taken. 10.2 REGISTERED SHAREHOLDERS. Except as otherwise provided by law, the Corporation and its directors, officers and agents may recognize and treat a person registered on its records as the owner of shares as the owner in fact thereof for all purposes, and as the person exclusively entitled to have and to exercise all rights and privileges incident to the ownership of such shares, and the Corporation's rights under this section shall not be affected by any actual or constructive notice that the Corporation, or any of its directors, officers or agents, may have to the contrary. SECTION 11 INDEMNIFICATION 11.1 DEFINITIONS. As used in this section the following terms shall have the meanings set forth below: (a) "Board" - the Board of Directors of the Corporation. (b) "Claim" - any threatened, pending or completed claim, action, suit, or proceeding, whether civil, criminal, administrative or investigative and whether made judicially or extrajudicially, or any separate issue or matter therein, as the context requires. -14- (c) "Determining Body" - those members of the Board who are not named as parties to the Claim for which indemnification is being sought ("Impartial Directors"), if there are at least three Impartial Directors, a committee of at least three Impartial Directors appointed by the Board (regardless whether the members of the Board of Directors voting on such appointment are Impartial Directors) or if there are fewer than three Impartial Directors or if the Board of Directors or the committee appointed pursuant to clause (ii) of this paragraph so directs (regardless whether the members thereof are Impartial Directors), independent legal counsel, which may be the regular outside counsel of the Corporation. (d) "Disbursing Officer" - the President of the Corporation or, if the President is a party to the Claim for which indemnification is being sought, any officer not a party to such Claim who is designated by the President to be the Disbursing Officer with respect to indemnification requests related to the Claim, which designation shall be made promptly after receipt of the initial request for indemnification with respect to such Claim. (e) "Expenses" - any expenses or costs (including, without limitation, attorney's fees, judgments, punitive or exemplary damages, fines and amounts paid in settlement). (f) "Indemnitee" - each person who is or was a director or officer of the Corporation. 11.2 INDEMNITY. (a) To the extent such Expenses exceed the amounts reimbursed or paid pursuant to policies of liability insurance maintained by the Corporation, the Corporation shall indemnify each Indemnitee against any Expenses actually and reasonably incurred by (as they are incurred) in connection with any Claim either against him or as to which he is involved solely as a witness or person required to give evidence, by reason of his position as a director or officer of the Corporation, as a director or officer of any subsidiary of the Corporation or as a fiduciary with respect to any employee benefit plan of the Corporation, or as a director, officer, partner, employee or agent of another Corporation, partnership, joint venture, trust or other for-profit or not-for-profit entity or enterprise, if such position is or was held at the request of the Corporation, whether relating to service in such position before or after the effective date of this Section, if he (i) is successful in his defense of the Claim on the merits or otherwise or (ii) has been found by the Determining Body (acting in good faith) to have met the Standard of Conduct (defined below); provided that (A) the amount otherwise payable by the Corporation may be reduced by the Determining Body to such amount as it deems proper if it determines that the Claim involved the receipt of a personal benefit by Indemnitee, and (B) no indemnification shall be made in respect of any Claim as to which Indemnitee shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for willful or intentional misconduct in the performance of his duty to the Corporation or to have obtained an improper personal benefit, unless, and -15- only to the extent that, a court shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as the court deems proper. (b) The Standard of Conduct is met when the conduct by an Indemnitee with respect to which a Claim is asserted was conduct that was in good faith and that he reasonably believed to be in, or not opposed to, the best interest of the Corporation, and, in the case of a criminal action or proceeding, that he had no reasonable cause to believe was unlawful. The termination of any Claim by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not meet the Standard of Conduct. (c) Promptly upon becoming aware of the existence of any Claim as to which he may be indemnified hereunder, Indemnitee shall notify the President of the Corporation of the Claim and whether he intends to seek indemnification hereunder. If such notice indicates that Indemnitee does so intend, the President shall promptly advise the Board thereof and notify the Board that the establishment of the Determining Body with respect to the Claim will be a matter presented at the next regularly scheduled meeting of the Board. After the Determining Body has been established the President shall inform the Indemnitee thereof and Indemnitee shall immediately provide the Determining Body with all facts relevant to the Claim known to him. Within 60 days of the receipt of such information, together with such additional information as the Determining Body may request of Indemnitee, the Determining Body shall determine, and shall advise Indemnitee of its determination, whether Indemnitee has met the Standard of Conduct. (d) During such 60-day period, Indemnitee shall promptly inform the Determining Body upon his becoming aware of any relevant facts not therefore provided by him to the Determining Body, unless the Determining Body has obtained such facts by other means. (e) In the case of any Claim not involving a proposed, threatened or pending criminal proceeding, (i) if Indemnitee has, in the good faith judgment of the Determining Body, met the Standard of Conduct, the Corporation may, in its sole discretion after notice to Indemnitee, assume all responsibility for the defense of the Claim, and, in any event, the Corporation and the Indemnitee each shall keep the other informed as to the progress of the defense, including prompt disclosure of any proposals for settlement; provided that if the Corporation is a party to the Claim and Indemnitee reasonably determines that there is a conflict between the positions of the Corporation and Indemnitee with respect to the Claim, then Indemnitee shall be entitled to conduct his defense, with counsel of his choice; and provided further that Indemnitee shall in any event be entitled at his expense to employ counsel chosen by him to participate in the defense of the Claim; and -16- (ii) the Corporation shall fairly consider any proposals by Indemnitee for settlement of the Claim. If the Corporation (A) proposes a settlement acceptable to the person asserting the Claim, or (B) believes a settlement proposed by the person asserting the Claim should be accepted, it shall inform Indemnitee of the terms thereof and shall fix a reasonable date by which Indemnitee shall respond. If Indemnitee agrees to such terms, he shall execute such documents as shall be necessary to effect the settlement. If he does not agree he may proceed with the defense of the Claim in any manner he chooses, but if he is not successful on the merits or otherwise, the Corporation's obligation to indemnify him for any Expenses incurred following his disagreement shall be limited to the lesser of (A) the total Expenses incurred by him following his decision not to agree to such proposed settlement or (B) the amount the Corporation would have paid pursuant to the terms of the proposed settlement. If, however, the proposed settlement would impose upon Indemnitee any requirement to act or refrain from acting that would materially interfere with the conduct of his affairs, Indemnitee may refuse such settlement and proceed with the defense of the Claim, if he so desires, at the Corporation's expense without regard to the limitations imposed by the preceding sentence. In no event, however, shall the Corporation be obligated to indemnify Indemnitee for any amount paid in a settlement that the Corporation has not approved. (f) In the case of a Claim involving a proposed, threatened or pending criminal proceeding, Indemnitee shall be entitled to conduct the defense of the Claim, and to make all decisions with respect thereto, with counsel of his choice, provided, however, that the Corporation shall not be obligated to indemnify Indemnitee for an amount paid in settlement that the Corporation has not approved. (g) After notifying the Corporation of the existence of a Claim, Indemnitee may from time to time request the Corporation to pay the Expenses (other than judgments, fines, penalties or amounts paid in settlement) that he incurs in pursuing a defense of the Claim prior to the time that the Determining Body determines whether the Standard of Conduct has been met. If the Disbursing Officer believes the amount requested to be reasonable, he shall pay to Indemnitee the amount requested (regardless of Indemnitee's apparent ability to repay such amount) upon receipt of an undertaking by or on behalf of Indemnitee to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation under the circumstances. If the Disbursing Officer does not believe such amount to be reasonable, the Corporation shall pay the amount deemed by him to be reasonable and Indemnitee may apply directly to the Determining Body for the remainder of the amount requested. (h) After the Determining Body has determined that the Standard of Conduct was met, for so long as and to the extent that the Corporation is required to indemnify Indemnitee under this Agreement, the provisions of Paragraph (g) shall continue to apply with respect to Expenses incurred after such time except that (i) no undertaking shall be required of Indemnitee and (ii) the Disbursing Officer shall pay to Indemnitee such amount of any fines, penalties or judgments against him which have become final as the Corporation is obligated to indemnify him. -17- (i) Any determination by the Corporation with respect to settlements of a Claim shall be made by the Determining Body. (j) The Corporation and Indemnitee shall keep confidential, to the extent permitted by law and their fiduciary obligations, all facts and determinations provided or made pursuant to or arising out of the operation of this Section, and the Corporation and Indemnitee shall instruct its or his agents and employees to do likewise. 11.3 ENFORCEMENT. (a) The rights provided by this Section shall be enforceable by Indemnitee in any court of competent jurisdiction. (b) If Indemnitee seeks a judicial adjudication of his rights under this Section Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all Expenses actually and reasonably incurred by him in connection with such proceeding but only if he prevails therein. If it shall be determined that Indemnitee is entitled to receive part but not all of the relief sought, then the Indemnitee shall be entitled to be reimbursed for all Expenses incurred by him in connection with such judicial adjudication if the amount to which he is determined to be entitled exceeds 50% of the amount of his claim. Otherwise, the Expenses incurred by Indemnitee in connection with such judicial adjudication shall be appropriately prorated. (c) In any judicial proceeding described in this subsection, the Corporation shall bear the burden of proving that Indemnitee is not entitled to any Expenses sought with respect to any Claim. 11.4 SAVING CLAUSE. If any provision of this Section is determined by a court having jurisdiction over the matter to require the Corporation to do or refrain from doing any act that is in violation of applicable law, the court shall be empowered to modify or reform such provision so that, as modified or reformed, such provision provides the maximum indemnification permitted by law, and such provision, as so modified or reformed, and the balance of this Section, shall be applied in accordance with their terms. Without limiting the generality of the foregoing, if any portion of this Section shall be invalidated on any ground, the Corporation shall nevertheless indemnify an Indemnitee to the full extent permitted by any applicable portion of this Section that shall not have been invalidated and to the full extent permitted by law with respect to that portion that has been invalidated. 11.5 NON-EXCLUSIVITY. (a) The indemnification and advancement of Expenses provided by or granted pursuant to this Section shall not be deemed exclusive of any other rights to which Indemnitee is or may become entitled under any statute, article of incorporation, by-law, authorization of shareholders or directors, agreement, or otherwise. -18- (b) It is the intent of the Corporation by this Section to indemnify and hold harmless Indemnitee to the fullest extent permitted by law, so that if applicable law would permit the Corporation to provide broader indemnification rights than are currently permitted, the Corporation shall indemnify and hold harmless Indemnitee to the fullest extent permitted by applicable law notwithstanding that the other terms of this Section would provide for lesser indemnification. 11.6 SUCCESSORS AND ASSIGNS. This Section shall be binding upon the Corporation, its successors and assigns, and shall inure to the benefit of the Indemnitee's heirs, personal representatives, and assigns and to the benefit of the Corporation, its successors and assigns. 11.7 INDEMNIFICATION OF OTHER PERSONS. The Corporation may indemnify any person not covered by Sections 11.1 through 11.6 to the extent provided in a resolution of the Board or a separate section of these By-laws. SECTION 12 AMENDMENTS 12.1 ADOPTION OF BY-LAWS; AMENDMENTS THEREOF. By-laws of the Corporation may be adopted only by a majority vote of the Board of Directors. By-laws may be amended or repealed only by (i) a majority vote of the Board of Directors, except that any amendment to or repeal of Section 6 of these By-laws shall require an affirmative vote of at least three-quarters of the Board, or (ii) the affirmative vote of the holders of at least two-thirds of that portion of the Total Voting Power (as defined in Article III(D) of the Articles of Incorporation), voting together as a single class, that is present in person or by proxy at any regular or special meeting of shareholders, the notice of which expressly states that the proposed amendment or repeal is to be considered at the meeting. 12.2 NEW BY-LAWS; AMENDMENTS. Any purported amendment to these By-laws which would add hereto a matter not covered herein prior to such purported amendment shall be deemed to constitute the adoption of a By-law provision and not an amendment to the By-laws. SECTION 13 MISCELLANEOUS 13.1 DIVIDENDS. Except as otherwise provided by law or the Articles of Incorporation, dividends upon the stock of the Corporation may be declared by the Board of Directors at any regular or special meeting. Dividends may be paid in cash, property, or shares of stock, subject to the limitations specified in the Articles of Incorporation. -19- 13.2 VOTING OF SHARES OWNED BY CORPORATION. Unless otherwise directed by the Board, any shares of capital stock issued by a wholly-owned subsidiary of the Corporation may be voted by the President of the Corporation at any shareholders' meeting of the subsidiary (or in connection with any written consent in lieu thereof). 13.3 CHECKS. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Signatures of the authorized signatories may be by facsimile. 13.4 FISCAL YEAR. The Board of Directors may adopt for and on behalf of the Corporation a fiscal or a calendar year. 13.5 SEAL. The Board of Directors may adopt a corporate seal, which shall have inscribed thereon the name of the Corporation. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Failure to affix the seal shall not, however, affect the validity of any instrument. 13.6 GENDER. All pronouns and variations thereof used in these By-laws shall be deemed to refer to the masculine, feminine or neuter gender, singular or plural, as the identity of the person, persons, entity or entities referred to may require. 13.7 LOUISIANA'S FAIR PRICE STATUTE. The Company expressly opts into, and accepts the benefits of, La. R.S. 12:132-134, as they may be amended from time to time. 13.8 CONTROL SHARE ACQUISITION STATUTE. The Company expressly waives the benefits of La. R.S. 12:135-140.2, as they may be amended from time to time. -20- EX-12 4 d11054exv12.txt CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12 STEWART ENTERPRISES, INC. AND SUBSIDIARIES CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN THOUSANDS) (UNAUDITED)

YEARS ENDED OCTOBER 31, --------------------------------------------------------------------- 2003 2002 2001 2000 1999 ------------- ---------- ---------------- -------- ---------- Earnings (loss) from operations before income taxes................................ $(69,470)(2) $ 49,321(3) $(196,301)(4)(5) $105,187 $ 142,551(6) Fixed charges: Interest charges (1)............................... 53,797 62,655 64,235 62,748 55,543 Interest portion of lease expense.................. 1,933 2,258 2,882 3,379 2,859 -------- ---------- --------- -------- ---------- Total fixed charges.................................. 55,730 64,913 67,117 66,127 58,402 Earnings (loss) from operations before income taxes and fixed charges, less capitalized interest........................................... $(14,059)(2) $113,918(3) $(129,847)(4)(5) $169,960 $ 200,118(6) ======== ======== ========= ======== ========== Ratio of earnings to fixed charges................... - (2) 1.75(3) - (4)(5) 2.57 3.43(6) ======== ======== ========= ======== ==========

- ---------- (1) Includes capitalized interest expense of $319, $316, $663, $1,354, and $835 for 2003, 2002, 2001, 2000 and 1999, respectively. (2) Includes a charge of $11,289 for the loss on early extinguishment of debt recorded in connection with the redemption of the Remarketable Or Redeemable Securities and a noncash charge of $107,300 recorded in connection with goodwill impairment and long-lived asset impairment charges. As a result of these charges, the Company's earnings for fiscal year 2003 were insufficient to cover its fixed charges, and an additional $69,789 in pretax earnings would have been required to eliminate the coverage deficiency. (3) Includes a noncash charge of $18,500 recorded in connection with the writedown of assets held for sale. (4) Excludes cumulative effect of change in accounting principles of $250,004 (net of a $166,669 income tax benefit). (5) Includes a noncash charge of $269,158 recorded in connection with the writedowns of assets held for sale and other charges and a charge of $9,120 for the loss on early extinguishment of debt. As a result of these charges, the Company's earnings for fiscal year 2001 were insufficient to cover its fixed charges, and an additional $196,964 in pretax earnings would have been required to eliminate the coverage deficiency. (6) Excludes cumulative effect of change in accounting principle of $50,101 (net of $28,798 income tax benefit). - -------------------------- 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. -114- EX-14 5 d11054exv14.txt CODE OF BUSINESS CONDUCT AND ETHICS CODE OF BUSINESS CONDUCT AND ETHICS OUR COMMITMENT TO ETHICAL CONDUCT Stewart Enterprises, Inc. is committed to maintaining high ethical standards that are essential to our continued success. Our policy, as expressed in this Code of Business Conduct and Ethics, is to operate our businesses with integrity and to comply with all laws applicable to our business. Our Company is owned by its stockholders. They expect and require all directors, officers and employees, by virtue of their association or employment with the Company, to adhere to the highest standards of integrity and to comply with all laws. We expect compliance with this Code by each director, officer and employee of the Company. This Code explains the basic principles of business conduct and ethics for our Company. No code or policy can anticipate every situation a director, officer or employee might confront. Accordingly, this Code is intended to serve as a source of guiding principles for directors, officers and employees, who are expected to apply them to their day-to-day activities and seek advice whenever they are unsure about a particular situation. The purpose of this Code is to enhance the awareness of all personnel of our commitment to integrity, to deter any wrongdoing and to promote the following objectives, which are key to the success of our Company: o Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. o Avoidance of conflicts of interest, including disclosure to an appropriate person or persons identified in the Code, of any material transaction or relationship that reasonably could be expected to give rise to such a conflict. o Full, fair, accurate, timely and understandable disclosure in reports and documents that we file with or submit to the SEC and other public communications made by the Company. o Compliance with applicable governmental laws, rules and regulations. o The prompt internal reporting to an appropriate person or persons identified in the Code of violations of the Code. o Accountability for adherence to the Code. EMPLOYEE RESPONSIBILITIES: INTERPRETATION, COMPLIANCE AND REPORTING Employees should address questions concerning the application of laws, this Code or any other Company policy, and should report violations of any law, this Code or any other Company policy, as set forth below: o First, an employee should direct questions or report violations to his or her supervisor or manager. o If an employee believes his or her questions or concerns have not been addressed satisfactorily by the supervisor or manager, or if an employee is uncomfortable discussing questions or concerns with or reporting violations to the supervisor or manager, the matter should be addressed with the next level of management, a senior manager, the Division President, a Human Resources representative or by calling the Employee Hotline at 1-800-401-2119. You do not have to identify yourself when calling the Employee Hotline, but you should provide enough information so that a reasonable inquiry can be conducted. All calls to the Employee Hotline will be handled on a confidential basis. o Calls to the Employee Hotline regarding accounting, internal accounting controls or auditing matters will be handled by senior members of the Company's Internal Audit Department. If you are uncomfortable with this arrangement and would rather register a complaint directly with the Audit Committee of the Board of Directors regarding accounting, internal accounting controls or auditing matters, or if you wish to deliver an anonymous submission of concerns regarding questionable accounting or auditing matters, you can call counsel to the Audit Committee, Mr. L. R. McMillan, II (504-582-8188), who has been instructed by the Audit Committee to maintain the confidentiality of anyone who calls him. Each employee must be alert and sensitive to situations that could result in illegal, unethical or otherwise improper actions, either by him or herself or other employees. Also, employees should be aware that failure to comply with the provisions outlined in this Code may result in disciplinary action, up to and including termination of employment, and in the case of an illegal act, referral for criminal prosecution. No violation of this Code, any other Company policy, or any law will be justified by a claim that it was ordered by someone in higher authority. No one, regardless of his or her position, is authorized to direct an employee to commit an illegal act. If any employee observes or becomes aware of a possible violation of this Code, any other Company policy, or any law, the employee is obligated to report the matter as directed above. Reporting a known or suspected violation should not be considered an act of disloyalty, but an action that shows a sense of responsibility that will help safeguard the reputation of the Company and its employees. Failure to report a known 2 violation may result in disciplinary action, up to and including termination of employment. Should it be discovered that an employee has been arrested for suspected criminal conduct, either on or off the job, the Company may conduct an independent review of the available facts and determine whether disciplinary or employment action is warranted. DIRECTOR AND OFFICER RESPONSIBILITIES: INTERPRETATION, COMPLIANCE AND REPORTING The Company's directors and officers are expected to comply with this Code, other applicable Company policies, and all laws. They are also expected to promote ethical behavior by (1) encouraging employees to talk to supervisors, managers and other appropriate personnel when in doubt about the best course of action in a particular situation; (2) encouraging employees to report violations of laws, this Code, or any other Company policy to appropriate personnel; and (3) reminding employees that the Company will not permit retaliation for reports made in good faith. Company directors and officers who become aware of violations of law, this Code or any other Company policy are expected to stop the violations and, if necessary, conduct an investigation with assistance of Company counsel if appropriate. A failure of any director or officer to comply with any law, this Code, or any other applicable Company policy may result in disciplinary action, removal or dismissal, and, if warranted, legal proceedings. PROTECTION FOR PERSONS REPORTING QUESTIONABLE BEHAVIOR All directors, officers and employees are required to cooperate fully in any internal investigation. If an employee discovers the need to report a suspected violation of law, this Code, or any Company policy, that employee will not be disciplined for (1) making a report of a violation or suspected violation in good faith and on the basis of a reasonable belief that a violation has occurred or will occur or (2) assisting with any ensuing investigation. To the extent permissible, the Company will endeavor to keep confidential the identity of anyone reporting possible violations. CONFLICTS OF INTEREST Actual and Apparent Conflicts of Interest This Code requires directors, officers and employees to avoid any situation that would create a conflict between their own interests and the interests of the Company. Personal interest that causes a conflict may extend to a family member, friend, or other associate of a director, officer or employee, rather than directly to those persons. All persons subject to this Code should avoid situations that would reasonably appear to adversely affect the independence and objectivity of their judgment, or interfere with the timely and effective performance of their duties and responsibilities. Director, officer and employee 3 actions should be based primarily upon what is in the best interests of the Company, rather than upon personal considerations or relationships. It is not possible to describe every conflict of interest. Some of the more common conflict circumstances are set forth below. Questions about possible conflicts of interest should be discussed as set forth in this Code. o Gifts, entertainment and payments - The undisclosed acceptance of gifts, entertainment, money or anything else of value from outsiders, which may influence the performance of duties, should be avoided at all times. Notwithstanding the foregoing, employees may accept without disclosure nominal gifts (valued at less than $250), which are gifts of token value or gifts used for advertising or promotion, as long as they are customarily given in the regular course of business. In addition, employees may accept ordinary business entertainment without disclosure if it is reasonable in the context of the business and it is either associated with a necessary business meeting or it advances the Company's business interests. In all cases, the acceptance of gifts valued at $250 or greater or the acceptance of extraordinary business entertainment must be disclosed to and approved by:

Recipient Required Approval -------------------------------------- ------------------------------------- Company Employee ..................... Regional COO, Division CFO, Corporate Vice President, or Division President Regional COO or Division CFO ......... Division President Senior Sales Executive ............... Division President Corporate Vice President ............. Company Chief Financial Officer Division President ................... Company Chief Operating Officer Chief Financial Officer or Company Chief Operating Officer .............. Chief Executive Officer Chief Executive Officer .............. Chairman of the Audit Committee

Under no circumstances (except for tipping, as described below) is the acceptance of money from third parties permitted. This includes cash equivalents such as checks, money orders, securities or other items that may be readily converted to cash. An employee who is offered money should report the offer immediately to his or her supervisor. 4 In regard to tipping, no employee may solicit or accept any gratuity, tip or money of any amount. Generally, when offered an unsolicited tip, employees should politely decline by saying, "I'm here to serve your family, and appreciate your offer, but nothing additional is required." If and only if the prevailing cultural norms provide for tipping of employees and it would be insulting to refuse such tips, then these tips may be accepted on behalf of the entire firm, with the knowledge of local management. Such tips should be combined and used for the benefit of all the location's staff, not individual employees. o Preferential treatment in providing services - It is a conflict of interest to favor the interests of certain customers, suppliers or fellow employees over those of similarly situated individuals or companies. Of course, extra effort to provide superior service for all customers is encouraged, as long as those efforts fall within standard Company procedures. Examples of conflicts involving preferential treatment include handling business transactions of family members, being personally involved in a business deal or providing special treatment because of a personal relationship. We expect all transactions with Company stakeholders to be at "arms length" and to have no appearance of undue favoritism or impropriety. o Purchase and sale of Company assets - Employees may purchase equipment or vehicles from the Company only with the prior written consent of the Company's Chief Operating Officer or Chief Financial Officer. Avoidance of Conflicts of Interest: Disclosure of Material Transactions or Relationships that Could be Expected to Give Rise to Conflicts of Interest Each director, officer and employee is responsible for recognizing situations in which a conflict of interest is present or might arise and for taking appropriate action to eliminate or prevent such conflict, including disclosing any material transaction or relationship that reasonably could be expected to give rise to such conflict, to their immediate supervisor, a senior manager, a Division President, a Human Resources representative or, in the case of directors and officers, to the Audit Committee of the Board of Directors. In some instances conflict of interest situations may be permitted if disclosed to and approved in writing by, (1) in the case of an employee, a Regional Chief Operating Officer, a Senior Sales Executive or a Corporate Vice President or (2) in the case of a director or officer, the Audit Committee of the Board of Directors. CUSTOMER RELATIONS An employee should never knowingly misrepresent any product or service of the Company. Employees should always exhibit the highest possible ethical and professional standards when dealing with our customers. 5 PROPERTY RIGHTS OF OTHERS Copyright infringement - Copyright laws prohibit the unauthorized duplication of computer software and other published works. Copyrighted materials should not be reproduced for personal or Company use without verifying that duplication is permissible. Unauthorized copying of computer software, video, written, photographic or audio material subject to copyright protection could result in claims of copyright infringement. Utmost care should be taken to avoid the unauthorized reproduction of any copyrighted materials. Intellectual property - In the conduct of business, the Company has occasion to receive and use proprietary information of others. This information can be used only in accordance with the agreements under which it has been received. Employees should not engage in unauthorized copying, revealing or using the intellectual property of a former employer or a competitor in connection with employment, including competitor information such as customer lists or operational data. INVOLVEMENT IN POLITICS, OUTSIDE ACTIVITIES AND THE COMMUNITY Political activities - The Company may choose to make contributions to political candidates or political parties if permitted by applicable laws. Employees may not make any contribution on behalf of the Company or use the Company's name, funds, property or services for support of political parties or candidates unless the contribution is permitted by law and specifically authorized in writing by the Company. Employees are encouraged to participate in the political process by voting and otherwise being involved in political activity. However, employees engaging in political activity will do so as private citizens and not as representatives of the Company. An employee's personal political affiliations, involvement or contributions will not influence the employee's compensation, job security or opportunities for advancement. Under no circumstances will any employee be reimbursed by the Company for personal political contributions. Outside activities - Employees are expected to give their work the attention necessary for quality performance. Any outside business interest, including other employment, is not permitted if it is in direct competition with Company business, interferes with the timely and effective performance of job duties, creates a conflict of interest or prevents devotion of full time (or, in the case of part-time employees, their full part-time commitment) and energy to the job when at work. Employees may not solicit other employees or distribute literature of any sort during work time or in work areas. Community activities - Employees are encouraged to be involved in volunteer activities and organizations that improve or help their communities according to the following criteria: o The involvement must be undertaken in accordance with applicable laws; o The involvement must not interfere with an employee's ability to do his or her job with the Company; 6 o The involvement must be such that the employee does not appear to represent or make decisions on behalf of the Company; and o The involvement must not create a conflict of interest or other problem related to employment. USE AND PROTECTION OF COMPANY ASSETS Protection of Company property is vital to our business. It is the responsibility of every employee to protect these assets from loss, damage, misuse or theft. Company property includes tangible assets such as buildings, equipment, vehicles, customer contracts and payments, and office supplies, as well as intangible assets such as software and other intellectual property rights, business concepts and strategies, employee time, financial data and other information about the Company. Directors, officers and employees are prohibited from taking for themselves business or corporate opportunities that are discovered through the use of Company property or information or through the individual's position, provided, however, if the Company's disinterested directors or an appropriate committee of the Board of Directors determines in writing that the Company will not pursue an opportunity that relates to the Company's business, a director, officer or employee may do so. The Company considers all data and communications transmitted or received by or contained in the Company's electronic or telephonic equipment and systems or maintained in written form to be Company property. Employees and other users of the equipment or systems should have no expectation of privacy with respect to those data and communications. Company property should be used for the benefit of the Company and not for personal gain. COMPANY RECORDS AND FINANCIAL STATEMENTS - ACCURACY, ACCOUNTING, ACCOUNTING PRACTICES The integrity of the Company's financial reporting is of the utmost importance. All transactions must be accurately reflected in the Company's books and records in accordance with generally accepted accounting principles and in compliance with all laws and Company policies regarding the maintenance of accounts and records. All financial data should be prepared promptly, carefully, and honestly and treated with discretion. Management will establish and maintain internal standards and a system of internal accounting controls designed to provide that transactions are recorded accurately and honestly. 7 Falsifying or altering records or reports or knowingly approving false or altered records or reports is prohibited. Records should always be retained or destroyed according to the Company's records retention procedures. FULL, FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE DISCLOSURE IN (1) REPORTS AND DOCUMENTS THAT THE COMPANY FILES WITH, OR SUBMITS TO, THE SECURITIES AND EXCHANGE COMMISSION AND (2) OTHER PUBLIC COMMUNICATIONS MADE BY THE COMPANY Filings Submitted to the Securities and Exchange Commission The Company's Disclosure Committee has adopted a set of written Disclosure Controls and Procedures designed to enhance the accuracy and completeness of the Company's SEC filings. All officers and employees involved with the preparation of the Company's SEC filings are expected to comply fully with the Company's Disclosure Controls and Procedures. Other Public Communications No director, officer or employee shall make statements or provide any information to the press, financial analysts, or any public forum about the Company and its business prospects unless they have specific authorization to do so. The potential legal risks from inaccurate statements include claims of false advertising, misrepresentation, breach of contract, securities fraud or antitrust violations. In order to ensure that communications to the public about the Company are accurate and widely disseminated to all investors, directors, unauthorized officers and employees may not communicate any material nonpublic information about the Company outside of the Company. Only the Company's President and Chief Executive Officer, Chief Financial Officer and Vice President of Investor Relations, or employees specifically authorized by them, are authorized to speak with financial analysts or securities professionals. If an employee or director receives an inquiry from a journalist or financial analyst, he or she should refer it to the Investor Relations Department or the Corporate Communications Department, as appropriate. CONFIDENTIALITY It is a conflict of interest for a director, officer or employee, during or subsequent to association or employment with the Company and without proper authority, to give or make available to anyone, or use for his or her own benefit, information of a confidential nature derived from association or employment with the Company. Directors, officers and employees may not use their positions with the Company for outside gain or benefit, nor may they use confidential information in any outside activity or employment. 8 Directors, officers and employees of the Company are expected not to divulge confidential information about the Company's business or customers and are expected to use confidential information only in the performance of their duties. Examples of confidential information include, but are not limited to, financial earnings results before they are released to the public, pending negotiations regarding financing or the acquisition or sale of businesses, and attorney-client communications. For more information, refer to the Company policy on Trading of Company Securities and Handling of Non-Public Information. INSIDER INFORMATION Many directors, officers and employees may learn of or have access to proprietary information about the Company that is not generally known to the public and if disclosed could affect the market value of Company stock or that of other companies. This information could include trade secrets, business plans, marketing and sales programs, audits, dividend policy, earnings or other confidential or proprietary information that could financially affect the Company. This is known as "insider information" and must be held in the strictest confidence. Disclosing "insider information" is a violation of federal law. Any director, officer or employee participating in such activities may be subject to civil or criminal penalties. For more information, refer to the Company policy on Trading of Company Securities and Handling of Non-Public Information. NONDISCRIMINATION The Company strives to maintain an environment free of discrimination on the basis of race, color, religion, sex (including sexual harassment), national origin, age, disability, veteran status or any other unlawful discrimination. If an employee believes he or she has been discriminated against or sexually harassed, the procedures outlined in the Company's Workplace Harassment Policy should be followed to report discrimination or harassment. SAFETY, HEALTH AND THE ENVIRONMENT The Company is committed to providing a safe and healthy workplace for its employees and for visitors to all facilities. All employees are expected to actively participate in this effort and immediately report any suspected unsafe or unhealthy conditions in the workplace to a manager, safety director or a Human Resources representative. The Company's policy on Safety and Health is available in the HR Policy Guide. 9 ANTITRUST LAWS Antitrust laws have been developed to encourage healthy competition among businesses by defining what conduct or activities are unacceptable and unlawful. The Company must compete solely on the merits of its products and services and must not engage in any form of unfair competition. Agreements between competitors that unfairly limit competition are a violation of antitrust laws. Oral discussions and informal arrangements may be considered "agreements," so employees should be extremely careful when meeting with competitors, including contacts at trade associations and professional gatherings. When engaged in conversation with competitors, employees must not discuss or listen to a discussion of present or future prices, profit margins or costs, bids or intended bids, terms or conditions of sale, market share, sales territories, distribution practices or other competitive information. INTERNATIONAL BUSINESS Employees are expected to obey the laws and respect the customs of countries in which the Company operates and transacts business. If the laws do not address a particular situation or are unclear or conflicting, consult a Regional Chief Operating Officer or Division President for guidance. GENERAL CONDUCT Employee conduct should always reflect favorably on the Company. This includes respecting the personal and property rights of others, acting in a courteous and considerate manner with others, representing the Company in the community in a positive and law-abiding manner and complying with the Company's policies and procedures such as: o Taking responsibility for work attendance and performance; o Exhibiting courtesy, honesty, integrity and trustworthiness in conduct with other employees and visitors; o Treating others with dignity and respect; o Helping to keep our workplace safe and desirable; o Not engaging in or tolerating any form of harassment or discrimination; and o Following the Company's Standards of Conduct and Work Rules. COMPLIANCE Each director, officer and employee is required to comply with the Code of Business Conduct and Ethics. Directors, officers and employees have the following responsibilities with regard to the Code's administration: o Every supervisor or manager is required to administer and enforce the Code within his or her area of responsibility by: 10 o Ensuring that each employee reads and reviews a copy of the Code; o Ensuring that employees are aware that they may make a good faith report of a violation or suspected violation of the law or the Code without fear of reprisals; o Ensuring that any standards and procedures developed for their areas of responsibility comply with the Code; and o Reporting any possible violations of the Code, or situations that could result in Code violations or be perceived as Code violations. o All directors and key officers are required to certify compliance with the Code on an annual basis. Those officers required to certify compliance annually include Regional Chief Operating Officers, Division Chief Financial Officers, Division Presidents, Corporate Vice Presidents, the Chief Financial Officer, the Chief Operating Officer, and the Chief Executive Officer. o All directors, officers and employees (including supervisors and managers) are responsible for: o Reviewing and familiarizing themselves with the Code; o Keeping a copy of the Code or having access to it for personal reference; o Complying with the policies set forth in the Code; o Seeking advice and information when uncertain whether particular activities are in compliance with the Code; and o Reporting violations of the Code using appropriate channels described in the Code. REVIEW AND CHANGE OF POLICY The Human Resources Department has administrative responsibility for monitoring compliance with the Code on the employee level. The Audit Committee of the Company's Board of Directors is responsible for monitoring compliance with the code on the director and officer level. The Internal Audit Department is responsible for conducting a periodic review of the Code and for recommending necessary changes. The Audit Committee of the Company's Board of Directors must approve any changes to the Code. Any waiver of any requirement of this Code for senior officers or directors may be made only by the Audit Committee of the Company's Board of Directors and all such waivers of or changes in Code provisions must be promptly disclosed to shareholders in accordance with the rules of the Securities and Exchange Commission and the trading markets on which the Company's securities are traded. 11 EX-21 6 d11054exv21.txt SUBSIDIARIES OF THE COMPANY Exhibit 21 SUBSIDIARIES The following is a list of all direct and indirect subsidiaries of the Company and their jurisdictions of incorporation as of October 31, 2003. The name of each indirect subsidiary is indented under the name of its parent company.

JURISDICTION OF STEWART ENTERPRISES, INC. INCORPORATION ------------------------- ---------------- Acme Mausoleum Corporation LA Carolina Financial Corporation of Pickens SC Hill-Crest Memorial Park SC Oconee Memorial Gardens, Inc. SC Cemetery Management, Inc. FL Arlington Memorial Park Cemetery and Funeral Home, Inc. FL Baldwin-Fairchild Funeral Homes, Inc. FL All Faiths Memorial Park, Inc. FL The Simplicity Plan, Inc. FL Bay Area Crematory, Inc. FL Beth David Funeral Chapel Tampa, Inc. FL Beth David Memorial Chapel, Inc. FL Bruce Ocala Funeral Home, Inc. FL Chapel Hill Cemetery, Inc. FL Glen Haven Memorial Park, Inc. FL Highland Memory Gardens, Inc. FL Semoran Funeral Home, Inc. FL Cheatham Hill Memorial Park, Inc. GA David C. Gross Funeral Home, Inc. FL Empresas Stewart - Cementerios, Inc. LA Empresas Stewart - Funerarias, Inc. LA Florida Hills Memorial Gardens, Inc. FL Garden of Memories, Inc. FL A.P. Boza Funeral Home, Inc. FL Curry and Son Funeral Home, Inc. FL Woodlawn Memory Gardens, Inc. FL Good Shepherd Memorial Gardens, Inc. FL Hubbell Funeral Home and Crematory, Inc. FL Kent R. Palmer, Inc. FL Kicliter Funeral Home, Inc. FL Madcem of Florida, Inc. FL Memorial Park Cemetery, Inc. FL Oaklawn Park Cemetery and Funeral Home, Inc. FL Roberts Funeral Home, Inc. FL Royal Palm Memorial Gardens, Inc. FL Sylvan Abbey Memorial Park, Inc. FL Trinity Memorial Gardens of Lakeland, Inc. FL Turner Crematory, Inc. FL Turner Funeral Homes, Inc. FL Walsh & Wood Funeral Home, Inc. FL Woodlawn Park Cemetery Company FL

-115- Memorial Sunset Park, Inc. FL South Dade-Palms Memorial Park, Inc. FL Cole & Garrett Funeral Homes, Inc. TN Cunningham Memorial Park, Inc. WV Victor V. Desrosier, Inc. CA Dilday Brothers Huntington Valley Mortuary CA Dillard Memorial, Inc. SC Eastlawn Corporation GA Griffin Leggett, Inc. AR Forest Hills Cemetery, Inc. AR Griffin Leggett Healey & Roth, Inc. AR Griffin Leggett Insurance Agency, Inc. AR Gross Funeral Home, Inc. AR Rest Hills Memorial Park, Inc. AR Griffin Leggett-Conway, Inc. AR Highland Memorial Cemetery, Inc. TN Holly Hill Memorial Park, Inc. GA Holly Hills, Inc. TN Hopson Mortuary, Inc. CA Investors Trust, Inc. TX Kingsport Cemetery Corporation TN Lake Lawn Metairie Funeral Home, Inc. LA Lake Lawn Metairie Funeral Home (Joint Venture) LA Lake Lawn Park, Inc. LA Lakewood Memorial Park, Inc. MS Lassila Funeral Chapels, Inc. CA Legacy One, Inc. WV Blue Ridge Funeral Home, Inc. WV Blue Ridge Memorial Gardens, Inc. WV C.G.R., Inc. WV Eastern Cemetery Associates, Inc. WV Eastlawn Memorial Gardens, Inc. VA Findlay Cemetery, Inc. OH Grandview Memory Gardens, Inc. VA Greenhills Memory Gardens, Inc. VA Highland Memory Gardens, Inc. VA Holly Memorial Gardens, Inc. VA Kanawha Plaza Partnership WV Legacy One Tennessee, Inc. TN Monticello Memory Gardens, Inc. VA Mountain View Memory Gardens, Inc. WV National Exchange Trust, Ltd. WV National Funeral Services, Inc. WV Pleasant View Memory Gardens, Inc. WV Williams-Blue Ridge Funeral Home, Inc. WV Memorial Services of Columbia, Inc. MO Lincoln Memorial Mortuary, Inc. NE The Lincoln Memorial Park Cemetery Association NE Memorial Funeral Home, Inc. MO Metairie Cemetery Association LA All Faiths Funeral Home, Inc. LA Pine Crest Cemetery, Inc. AL -116- Montlawn Memorial Park, Inc. NC Mount Olivet Cemetery, Inc. LA The Nashville Historic Cemetery Association, Inc. TN Pasadena Funeral Home, Inc. TX Restland Funeral Home, Inc. TX Anderson-Clayton Bros. Funeral Homes, Inc. TX Little Bethel Memorial Park, Inc. TX Roselawn Memorial Gardens, Inc. TX Belew Funeral Home, Inc. TX Bexar County Mortuary Services, Inc. TX Bluebonnet Hills Memorial Park, Inc. TX Bluebonnet Hills Funeral Home, Inc. TX Bright-Holland Funeral Home, Inc. TX Crespo & Sons, Incorporated TX Dalton & Son Funeral Home, Inc. TX Emerald Hills Funeral Corporation TX J.E. Foust & Son Funeral Directors, Inc. TX Guardian Cremation Society, Inc. TX Guardian Funeral Home, Inc. TX Hilltop Memorial Park TX Laurel Land Memorial Park, Inc. TX Laurel Land Funeral Home, Inc. TX Singing Hills Funeral Home, Inc. TX Laurel Land of Fort Worth, Inc. TX Laurel Land Funeral Home of Fort Worth, Inc. TX Lyons Funeral Home, Inc. TX Metrocrest Funeral Home, Inc. TX Restland of Dallas, Inc. TX Abbey Plan of Texas, Inc. TX Highland Memorial Gardens, Inc. TX Simplicity Plan of Texas, Inc. TX Southpark Funeral Home, Inc. TX South Memorial Park, Inc. TX Rocky Mount Memorial Park, Inc. NC Rose Haven Funeral Home & Cemetery, Inc. GA Santa Barbara Funeral Services, Inc. CA St. Bernard Memorial Gardens, Inc. LA St. Bernard Memorial Funeral Home, Inc. LA St. Vincent de Paul Cemetery Association LA S.E. Acquisition of California, Inc. CA All Souls Mortuary, Inc. CA Ashes to Ashes, Inc. CA Assumption Mortuary, Inc. CA Barstow Funeral Homes, Inc. CA Buchheim Family, Inc. CA Calvary Mortuary of Los Angeles, California, Inc. CA Catholic Mortuary Services, Inc. CA N.D. Davis & Associates, Inc. CA DeYoung Memorial Chapel, Inc. CA Holy Cross Mortuary of Culver City, California, Inc. CA Holy Cross Mortuary of Pomona, California, Inc. CA Lombard & Co. CA -117- Queen of Heaven Mortuary, Inc. CA Resurrection Mortuary, Inc. CA Richard Pierce Funeral Service, Inc. CA River Cities Funeral Chapel, Inc. CA San Fernando Mission Mortuary, Inc. CA Santa Clara Mortuary, Inc. CA Scovern Mortuary, A California Corporation CA SDCA Holdings, Inc. CA San Diego Cemetery Association CA S.E. Acquisition of Delano, California, Inc. CA S.E. Acquisition of Glendale, California, Inc. CA S.E. Acquisition of Lancaster, California, Inc. CA S.E. Acquisition of Los Osos Mortuary and Memorial Park, Inc. CA S.E. Acquisition of Oakhurst, California, Inc. CA S.E. Acquisition of Oroville, California, Inc. CA Sentinel Cremation Societies, Inc. DE Simplicity Plan of California, Inc. CA Stewart Pre-Need Services, Inc. CA Stricklin/Snively Mortuary CA Catalina Channel Cremation Society CA Wallace E. White & Howard J. Callanan, Inc. CA Woodside Chapel of Crippen & Flynn CA S.E. Acquisition of Nevada, Inc. NV Desert Memorial, Inc. NV Neptune Society of Nevada, Inc. NV S.E. Acquisition of Reno, Nevada, Inc. NV Reno Memorial, Inc. NV S.E. Acquisition of Oregon, Inc. OR Amling/Schroeder Funeral Service, Inc. OR Cascade Crematory, Inc. OR Chapel of the Roses, Inc. OR Chapel of the Valley Funeral Home, Inc. OR Dutton, Inc. OR J. P. Finley & Son Mortuary, Inc. OR Sunset Hills Memorial Park OR Greenwood Cemetery, Inc. OR Niswonger & Reynolds, Inc. OR S.E. Acquisition of Myrtle Creek, Oregon, Inc. OR S.E. Acquisition of Reedsport, Oregon, Inc. OR Tabor's Desert Hills Mortuary, Inc. OR S.E. Acquisition of Washington, Inc. WA E.R. Butterworth & Sons WA Cremation Society Northwest, Inc. WA Evergreen Staples Funeral Chapel,Inc. WA S.E. Australia, Inc. LA S.E. Mid-Atlantic, Inc. MD C. J. Applegate & Sons, Inc. NY Bartlett-Burdette-Cox Funeral Home,Inc. WV Benjamin Franklin P.M., Inc. PA Blue Ridge Memorial Gardens, Inc. VA Bounds Funeral Home, Inc. MD Brown Memorials, Inc. NC -118- Calfee Funeral Service of Pineville, Inc. WV Casdorph & Curry Funeral Home, Inc. WV Catawba Memorial Park, Inc. NC Cedar Hill Cemetery Company, Inc. MD Central Stone Works, Incorporated NC Clinch Valley Memorial Cemetery, Inc. VA Crest Lawn Memorial Gardens, Inc. MD Harold C. Davis, Inc. NC Dodd-Payne-Hess Funeral Home, Inc. WV Dunbar Funeral Home SC Evans Funeral Home, Inc. NC Evans Funeral Home, Inc. WV Evergreen Memorial Gardens, Inc. NC Everly Funeral Homes, Incorporated VA Everly PFP, Inc. VA Fairfax Funeral Home, Inc. VA Fine Finishes, Inc. NC Fort Lincoln Cemetery, Inc. MD Fort Lincoln Funeral Home, Inc. MD Gallery Granite Corporation MD Gardinier Colletti Memorial Home, Inc. NY Garner Family Funeral Home, Inc. GA Garrett-Hillcrest, Inc. NC George Washington Memorial Park, Inc. PA Gorny & Gorny Paterson-Clifton Mortuary NJ Graceland Mausoleum, Inc. WV Haisten Funeral Homes, Inc. GA Haisten Funeral Home of Henry County, Inc. GA Higgins and Son Funeral Home, Inc. GA Highland Memory Gardens of Franklin County, Inc. NC Hillcrest Memorial Cemetery, Inc. MD Hines-Rinaldi Funeral Home, Inc. MD Johnson Funeral Home, Inc. NC Kimes Funeral Home, Inc. WV Kirk & Nice, Inc. PA Kirk & Nice Suburban Chapel, Inc. PA Klingel-Carpenter Mortuary, Inc. WV Lancaster Funeral Homes, Inc. NC Loudon Park Cemetery Company MD Druid Ridge Cemetery Company MD Loudon Park Funeral Home, Inc. MD The Mackey Mortuary, Inc. SC Cannon Funeral Home, Inc. SC Memorial Parks, Incorporated NC McLaurin's Funeral Home, Inc. NC Miller-Lee, Inc. NC Monte Vista Burial Park, Inc. TN Murphy Funeral Service, Inc. NY National Harmony Memorial Park, Inc. MD Nulton , Mattle & Ashton Funeral Home, Inc. NY Oconee Memorial Funeral Home, Inc. SC Otto Redanz Funeral Home, Inc. NY -119- Cornell & Daggett, Inc. NY Parklawn, Inc. MD Parklawn Memorial Gardens, Inc. NC The Parkwood Cemetery Company MD Parkwood Management Co. MD Pineview, Inc. SC Pollock Wells Funeral Service, Inc. NC Richmond Memorial Parks, Inc. VA S.E. Acquisition of Charleston, Inc. SC S.E. Acquisition of Clifton, New Jersey, Inc. NJ S.E. Acquisition of Fredonia, New York, Inc. NY S.E. Acquisition of Malden, West Virginia, Inc. WV S.E. Acquisition of Pennsylvania, Inc. PA S.E. Acquisition of South Carolina, Inc. SC S.E. Cemetery Management of Pennsylvania, Inc. PA Stephens Services, Inc. NC Sunset Memorial Park Company PA Pet Haven, Inc. PA John M. Taylor Funeral Home, Inc. MD Taylor M. Simpson Co. NC Joseph W. Teague Funeral Home, Inc. VA Thomas-Yelverton Company NC Washington Memorial Cemetery, Incorporated VA William W. Chambers, Inc. MD Wilson Funeral Home, Inc. WV Wise Corporation VA S.E. South-Central, Inc. LA Cemetery Services, Inc. WI D.W. Newcomer's Sons, Inc. MO DWN Properties, Inc. MO Funeral Security Plans, Inc. MO Ellison Funeral Home, Inc. AL Kilgore - Green Funeral Home, Inc. AL Knutson Funeral Homes, Inc. IA Lathan Funeral Home, Inc. AL Andrew J. McGann & Son Funeral Home, Inc. IL Mt. Juliet Funeral Home, Inc. TN Mt. Juliet Memorial Gardens, Inc. TN Nave Funeral Home of Lebanon, Inc. TN Pauley Funeral Home, Inc. IA Pine Crest Funeral Home, Inc. AL Faith Memorial Park & Mausoleum Company, Inc. AL Valhalla Memory Gardens and Funeral Home, Inc. AL Professional Funeral Services, Inc. LA Rockco's Funeral Homes, Inc. AL Rockco and Son Funeral Home, Inc. AL Runyan Mangold, Inc. KS S.E. Acquisition of Albuquerque, New Mexico, Inc. NM S.E. Acquisition of Blue Island, Illinois, Inc. IL S.E. Acquisition of Boonville, Missouri, Inc. MO S.E. Acquisition of Lithonia, Georgia, Inc. GA S.E. Acquisition of Muskogee, Oklahoma, Inc. OK -120- S.E. Acquisition of Oak Lawn & Orland Park, Illinois, Inc. IL S.E. Acquisition of Santa Fe, New Mexico, Inc. NM Theis-Gorski Funeral Home, Inc. IL West Lawn Cemetery NE Wisconsin Memorial Park Company, Inc. WI Time-Lock Insurance Agency, Inc. WI Wyuka Funeral Home, Inc. NE Wyuka Simplicity Plan, Inc. NE S.E. of Tucson, Arizona, Inc. AZ Simple Tribute, Inc. LA S.E. of Maryland, Inc. MD Simple Tribute of Florida, Inc. FL Simple Tribute of Tennessee, Inc. TN Stewart Enterprises (Europe), Inc. LA Stewart Resource Center, Inc. LA Stewart Services, Inc. LA Stewart Worldwide N.V. Netherlands Stewart International (Netherlands) B.V. Netherlands Stewart Cementerios Puerto Rico Holding II B.V. Netherlands Empresas Stewart-Cementerios Puerto Rico Stewart Cementerios Puerto Rico Holding I B.V. Netherlands Stewart Funerarias Puerto Rico Holding II B.V. Netherlands Empresas Stewart - Funerarias Puerto Rico Stewart Funerarias Puerto Rico Holding I B.V. Netherlands Stewart Simplicity Plan of Puerto Rico Holding II B.V. Netherlands Stewart Simplicity Plan of Puerto Rico Holding I B.V. Netherlands The Simplicity Plan of Puerto Rico Puerto Rico Strong & Burns Funeral Home, Inc. NY -121- EX-23 7 d11054exv23.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Forms S-3 (File Nos. 333-59339 and 333-68563), S-4 (File No. 333-360) and S-8 (File Nos. 33-49726, 33-02374, 333-34766, 33-64106 and 333-104551) of Stewart Enterprises, Inc. and Subsidiaries of our report dated December 16, 2003 relating to the consolidated financial statements, which appears in this Form 10-K. We also consent to the incorporation by reference of our report dated December 16, 2003 relating to the financial statement schedule, which appears in this Form 10-K. PricewaterhouseCoopers LLP New Orleans, Louisiana January 14, 2004 -122- EX-31.1 8 d11054exv31w1.txt CERT.OF WILLIAM E. ROWE PURSUANT TO SECTION 302 Exhibit 31.1 CERTIFICATIONS REQUIRED BY RULE 13a-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934 I, William E. Rowe, certify that: 1. I have reviewed this annual report on Form 10-K of Stewart Enterprises, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 14, 2004 /s/ WILLIAM E. ROWE - ----------------------------------------- William E. Rowe Chairman of the Board, Chief Executive Officer and President -123- EX-31.2 9 d11054exv31w2.txt CERT.OF KENNETH C. BUDDE PURSUANT TO SECTION 302 EXHIBIT 31.2 CERTIFICATIONS REQUIRED BY RULE 13a-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934 I, Kenneth C. Budde, certify that: 1. I have reviewed this annual report on Form 10-K of Stewart Enterprises, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 14, 2004 /s/KENNETH C. BUDDE - ----------------------------------------------------- Kenneth C. Budde Executive Vice President and Chief Financial Officer -124- EX-32 10 d11054exv32.txt CERTIFICATIONS PURSUANT TO SECTION 906 Exhibit 32 CERTIFICATION OF FORM 10-K FOR THE YEAR ENDED OCTOBER 31, 2003, PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned Chief Executive Officer and Chief Financial Officer of Stewart Enterprises, Inc. certify, pursuant to Section 906 of the Sarbanes-Oxley Act, that: - - the Annual Report on Form 10-K for the year ended October 31, 2003 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and - - the information contained in the Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Stewart Enterprises, Inc. This certification is being furnished solely to comply with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as a part of the Form 10-K. A signed original of this written statement required by Section 906 has been provided to Stewart Enterprises, Inc. and will be retained by Stewart Enterprises, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. Dated: January 14, 2004 /s/ WILLIAM E. ROWE ------------------------------------- William E. Rowe Chairman of the Board, Chief Executive Officer and President /s/ KENNETH C. BUDDE ------------------------------------- Kenneth C. Budde Executive Vice President and Chief Financial Officer -125- -----END PRIVACY-ENHANCED MESSAGE-----

EX-3.2

                                     BY-LAWS
                                       OF
                            STEWART ENTERPRISES, INC.
               (as amended and restated as of September 24, 2003)

                                    SECTION 1

                                     OFFICES

         1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall be
located at 110 Veterans Memorial Boulevard, Metairie, Louisiana 70005.

         1.2 ADDITIONAL OFFICES. The Corporation may have such offices at such
other places as the Board of Directors may from time to time determine or the
business of the Corporation may require.

                                    SECTION 2

                              SHAREHOLDERS MEETINGS

         2.1 PLACE OF MEETINGS. Unless otherwise required by law or these
By-laws, all meetings of the shareholders shall be held at the principal office
of the Corporation or at such other place, within or without the State of
Louisiana, as may be designated by the Board of Directors.

         2.2 ANNUAL MEETINGS; NOTICE THEREOF. An annual meeting of the
shareholders shall be held each year on the date and at the time as the Board of
Directors shall designate, for the purpose of electing directors and for the
transaction of such other business as may be properly brought before the
meeting. If no annual shareholders' meeting is held for a period of eighteen
months, any shareholder may call such meeting to be held at the registered
office of the Corporation as shown on the records of the Secretary of State of
the State of Louisiana.

         2.3 SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, may be called by the Board of Directors, the Chairman of
the Board, or the President. At any time, upon the written request of any
shareholder or group of shareholders holding in the aggregate at least 25% of
the Total Voting Power (as defined in Article III(D) of the Articles of
Incorporation), the Secretary shall call a special meeting of shareholders to be
held at the registered office of the Corporation at such time as the Secretary
may fix, not less than 15 nor more than 60 days after the receipt of such
request, and if the Secretary shall neglect or refuse to fix such time or to
give notice of the meeting, the shareholder or shareholders making the request
may do so. Such request must state the specific purpose or purposes of the
proposed special meeting and the business to be conducted thereat shall be
limited to such purpose or purposes.



         2.4 NOTICE OF MEETINGS. Except as otherwise provided by law, the
authorized person or persons calling a shareholders' meeting shall cause written
notice of the time, place and purpose of the meeting to be given to all
shareholders entitled to vote at such meeting, at least 10 days and not more
than 60 days prior to the day fixed for the meeting. Notice of the annual
meeting need not state the purpose or purposes thereof, unless action is to be
taken at the meeting as to which notice is required by law or the By-laws.
Notice of a special meeting shall state the purpose or purposes thereof, and the
business conducted at any special meeting shall be limited to the purpose or
purposes stated in the notice.

         2.5 LIST OF SHAREHOLDERS. At every meeting of shareholders, a list of
shareholders entitled to vote, arranged alphabetically and certified by the
Secretary or by the agent of the Corporation having charge of transfers of
shares, showing the number and class of shares held by each such shareholder on
the record date for the meeting and confirming the number of votes per share as
to which each such shareholder is entitled, shall be produced on the request of
any shareholder.

         2.6 QUORUM. At all meetings of shareholders, the holders of a majority
of the Total Voting Power (as defined in Article III(D) of the Articles of
Incorporation) shall constitute a quorum, provided, however, that this
subsection shall not have the effect of reducing the vote required to approve
any matter that may be established by law, the Articles of Incorporation or
these By-laws.

         2.7 VOTING. When a quorum is present at any shareholders' meeting, the
vote of the holders of a majority of that portion of the Total Voting Power (as
defined in Article III(D) of the Articles of Incorporation) that is present in
person or represented by proxy, voting together as a single class, shall decide
each question brought before such meeting, unless the resolution of the question
requires, by express provision of law, the Articles of Incorporation or these
By-laws, a different vote or one or more separate votes by the holders of a
class or series of capital stock, in which case such express provision shall
apply and control the decision of such question. Directors shall be elected by
plurality vote.

         2.8 PROXIES.

                  (a) At any meeting of the shareholders, every shareholder
having the right to vote shall be entitled to vote in person or by proxy
authorized by such shareholder and bearing a date not more than eleven months
prior to the meeting, unless the instrument provides for a longer period, but in
no case will an outstanding proxy be valid for longer than three years from the
date of its execution; provided, however, that in no event may a proxy be voted
at a meeting called pursuant to La. R.S. 12:138 unless it is executed and dated
by the shareholder within 30 days of the date of such meeting. The person
appointed as proxy need not be a shareholder of the Corporation.

                                      -2-


                  (b) The following are valid means by which a shareholder may
authorize another person or persons to act for him as proxy:

                           (i) A shareholder may execute a writing authorizing
                  another person or persons to act for him as proxy. Execution
                  may be accomplished by the shareholder or his authorized
                  officer, director, employee or agent signing such writing or
                  causing his signature to be affixed to such writing by any
                  reasonable means, including but not limited to facsimile
                  signature.

                           (ii) A shareholder may authorize another person or
                  persons to act for him as proxy by transmitting or authorizing
                  the transmission of a telegram, cablegram or other means of
                  electronic transmission (including but not limited to
                  transmission by telephone, the Internet or e-mail) to the
                  person who will be the holder of the proxy, or to a proxy
                  solicitation firm, proxy support service organization or like
                  agent duly authorized by the person who will be the holder of
                  the proxy to receive such transmission; however, any such
                  telegram, cablegram or other means of electronic transmission
                  shall be submitted with information from which it can be
                  determined that the telegram, cablegram or other electronic
                  transmission was authorized by the shareholder. If it is
                  determined that such telegrams, cablegrams or other electronic
                  transmissions are valid, the inspectors or other such persons
                  making that determination shall specify the information upon
                  which they relied.

         2.9 ADJOURNMENTS. Adjournments of any annual or special meeting of
shareholders may be taken without new notice being given unless a new record
date is fixed for the adjourned meeting, but any meeting at which directors are
to be elected shall be adjourned only from day to day until such directors shall
have been elected.

         2.10 WITHDRAWAL. If a quorum is present or represented at a duly
organized shareholders' meeting, such meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum as fixed in Section 2.6 of these By-laws, or the refusal of any
shareholders to vote.

         2.11 LACK OF QUORUM. If a meeting cannot be organized because a quorum
has not attended, those present may adjourn the meeting to such time and place
as they may determine, subject, however, to the provisions of Section 2.9
hereof. In the case of any meeting called for the election of directors, those
who attend the second of such adjourned meetings, although less than a quorum as
fixed in Section 2.6 hereof, shall nevertheless be deemed to constitute a quorum
for the purpose of electing directors.

         2.12 PRESIDING OFFICER. The Chairman of the Board or the Chief
Executive Officer, or in their absence a chairman designated by the Board of
Directors, shall preside at all shareholders' meetings.

                                      -3-


         2.13 DEFINITION OF SHAREHOLDER. As used in these By-laws, and unless
the context otherwise requires, the term shareholder shall mean a person who is
the record holder of shares of the Corporation's capital stock or a registered
holder of any bonds, debentures or similar obligations granted voting rights by
the Corporation pursuant to La. R.S. 12:75H.

         2.14 BUSINESS TO BE CONDUCTED AT ANNUAL AND SPECIAL MEETINGS OF
SHAREHOLDERS.

                  (a) At any annual meeting of shareholders, only such business
shall be conducted as shall have been brought before the meeting (i) by or at
the direction of the Board of Directors, or (ii) by any shareholder of record
entitled to vote at such meeting who complies with the procedures set forth in
this Section 2.14.

                  (b) At any special meeting of shareholders called at the
request of a shareholder, or group of shareholders, of record in accordance with
the Corporation's Articles of Incorporation and these By-laws, only such
business shall be conducted as shall have been (i) submitted by the shareholder,
or group of shareholders of record requesting the meeting, (ii) described in the
request for the meeting, and (iii) described in the notice of the meeting.

                  (c) At any special meeting of shareholders called at the
request of the Board of Directors, the Chairman of the Board or the President of
the Corporation, only such business shall be conducted as shall have been
brought before the meeting (i) by or at the direction of the Board of Directors,
the Chairman of the Board or the President or (ii) by any shareholder of record
entitled to vote at such meeting who complies with the procedures set forth in
this Section 2.14.

                  (d) No proposal by a shareholder, or group of shareholders, of
record of the Corporation shall be considered at an annual shareholders' meeting
unless Sufficient Notice (as described in subparagraph (f) hereof) of the
proposal is received by the Secretary of the Corporation not less than 120
calendar days in advance of the date in the current year that corresponds to the
date on which proxy materials were first mailed by the Corporation in connection
with the previous year's annual meeting. If the date of the annual meeting is
changed to a date that is 30 calendar days earlier or later than the date in the
current year that corresponds to the date on which the annual meeting was held
in the previous year, or if no annual meeting was held in the previous year,
Sufficient Notice of the proposal must be received by the Secretary of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event less than 70 days notice or prior public
disclosure of the date of the meeting is given or made to shareholders,
Sufficient Notice of the proposal must be received by the Secretary of the
Corporation no later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made.

                                      -4-


                  (e) No proposal by a shareholder, or group of shareholders, of
record of the Corporation shall be considered at a special meeting of
shareholders called by the Board of Directors, the Chairman of the Board or the
President unless Sufficient Notice (as described in subparagraph (f) hereof) of
the proposal is received by the Secretary of the Corporation not less than 60
days nor more than 90 days prior to the meeting; provided, however, that in the
event less than 70 days notice or prior public disclosure of the date of the
meeting is given or made to shareholders, Sufficient Notice of the proposal must
be received by the Secretary of the Corporation no later than the close of
business on the tenth day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made.

                  (f) Notice of a proposal shall constitute Sufficient Notice
only if it contains (i) a complete and accurate description of the proposal;
(ii) a statement that the shareholder (or the shareholder's legal
representative) intends to attend the meeting and present the proposal and that
the shareholder intends to hold of record securities of the Corporation entitled
to vote at the meeting through the meeting date; (iii) the shareholder's name
and address and the number of shares of the Corporation's voting securities that
the shareholder holds of record and beneficially as of the notice date; and (iv)
a complete and accurate description of any material interest of such shareholder
in such proposal.

                  (g) Notwithstanding compliance with this Section 2.14, no
shareholder proposal shall be deemed to be properly brought before a
shareholders' meeting if it is not a proper subject for action by shareholders
under Louisiana law or the Articles of Incorporation.

                  (h) Any shareholder proposal failing to comply with this
Section 2.14 shall not be considered at the meeting and, if introduced at the
meeting, shall be ruled out of order.

                  (i) Nothing in this Section 2.14 is intended to confer any
rights to have any proposal included in the notice of any meeting or in proxy
materials related to such meeting.

                  (j) Notwithstanding the requirement in this Section 2.14 that
a shareholder be a shareholder of record in order to present a shareholder
proposal at a shareholders' meeting, a beneficial owner of shares entitled to
vote at the meeting shall be entitled to present a proposal at a meeting if such
beneficial owner complies with Rule 14a-8 promulgated under the Securities
Exchange Act of 1934 and the proposal has been included in the Corporation's
proxy statement for the meeting pursuant to Rule 14a-8.

                                      -5-


                                    SECTION 3

                                    DIRECTORS

         3.1 NUMBER. All of the corporate powers shall be vested in, and the
business and affairs of the Corporation shall be managed by, a Board of
Directors. Except as otherwise fixed by or pursuant to Article III of the
Articles of Incorporation (as it may be duly amended from time to time) relating
to the rights of the holders of any class or series of stock having a preference
over the Class A and Class B Common Stock as to dividends or upon liquidation to
elect additional directors by class vote, the Board of Directors shall consist
of up to 12 natural persons, the exact number of which shall be fixed each year
by resolution of the Board of Directors, provided that, if after proxy materials
for any meeting of shareholders at which directors are to be elected are mailed
to shareholders any person or persons named therein to be nominated at the
direction of the Board of Directors become unable or unwilling to serve, the
number of directors fixed by the Board or Directors for such year shall be
automatically reduced by a number equal to the number of such persons unless the
Board of Directors selects an additional nominee or nominees to replace such
persons. No director need be a shareholder. The Secretary shall have the power
to certify at any time as to the number of directors authorized and as to the
class to which each director has been elected or assigned. No person shall be
eligible for nomination, election or appointment to the Board of Directors
unless such person will not have achieved his or her 70th birthday on or prior
to the date on which his or her election or appointment would otherwise become
effective; provided, however, that (i) the foregoing shall not be applied in a
manner that would shorten the current term of office of any incumbent director
on the date of the adoption of this by-law, (ii) the Board may, by a vote of
two-thirds of its members who are not affected by the decision, exempt any
Director from the foregoing limitation in order that such Director may serve one
additional term of office; and (iii) such limitation shall not apply to Frank B.
Stewart, Jr. so long as he is the record and/or beneficial owner of not less
than 3.5 million shares of the Company's Class B Common Stock (as such number
may be adjusted from time to time to reflect stock dividends, stock splits, a
recapitalization or other similar transactions).

         3.2 POWERS. The Board may exercise all such powers of the Corporation
and do all such lawful acts and things which are not by law, the Articles of
Incorporation or these By-laws directed or required to be done by the
shareholders.

         3.3 CLASSES. The Board of Directors, other than those directors who may
be elected by the holders of any class or series of stock having preference over
the Class A and Class B Common Stock as to dividends or upon liquidation, shall
be divided, with respect to the time during which they shall hold office, into
three classes as nearly equal in number as possible, with the initial term of
office of Class I directors expiring at the annual meeting of shareholders to be
held in 1993, of Class II directors expiring at the next succeeding annual
meeting of shareholders and of Class III directors expiring at the second
succeeding annual meeting of shareholders, with all such directors to hold
office until their successors are elected and qualified. Any increase or
decrease in the number

                                      -6-


of directors shall be apportioned by the Board of Directors so that all classes
of directors shall be as nearly equal in number as possible. At each annual
meeting of shareholders, directors chosen to succeed those whose terms then
expire shall be elected to hold office for a term expiring at the annual meeting
of shareholders held in the third year following the year of their election and
until their successors are duly elected and qualified.

         3.4 GENERAL ELECTION. At each annual meeting of shareholders, directors
shall be elected to succeed those directors whose terms then expire. No decrease
in the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.

         3.5 VACANCIES. Except as otherwise provided in the Articles of
Incorporation or these By-laws, the office of a director shall become vacant if
he dies, resigns or is duly removed from office and the Board of Directors may
declare vacant the office of a director if he is interdicted or adjudicated an
incompetent, is adjudicated a bankrupt, in the sole opinion of the Board of
Directors becomes incapacitated by illness or other infirmity so that he is
unable to perform his duties for a period of six months or longer, or ceases at
any time to have the qualifications required by law, the Articles of
Incorporation or these By-laws.

         3.6 FILLING VACANCIES. Except as otherwise provided in Section 3.8 of
these By-laws, any vacancy on the Board (including any vacancy resulting from an
increase in the authorized number of directors or from failure of the
shareholders to elect the full number of authorized directors) may,
notwithstanding any resulting absence of a quorum of directors, be filled by a
two-thirds vote of the Board of Directors remaining in office, provided that the
shareholders shall have the right, at any special meeting called for such
purpose prior to any such action by the Board, to fill the vacancy. A director
elected pursuant to this section shall serve until the next shareholders'
meeting held for the election of directors of the class to which he shall have
been appointed and until his successor is elected and qualified.

         3.7 NOTICE OF SHAREHOLDER NOMINEES. Except as otherwise provided in
Section 3.8 of these By-laws, only persons who are nominated in accordance with
the procedures set forth in this section shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of shareholders by or at the direction of
the Board of Directors or by any shareholder of record of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this section. Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice must be delivered or mailed and received at the
principal office of the Corporation not less than 45 days nor more than 90 days
prior to the meeting, provided, however, that in the event that less than 55
days notice or prior public disclosure of the date of the meeting is given or
made to shareholders, notice by the shareholder to be timely must be received no
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such

                                      -7-


public disclosure was made. Such shareholder's notice shall set forth or include
the following:

         a.       as to each person whom the shareholder proposes to nominate
                  for election or reelection as a director the name, age,
                  business address and residential address of such person, the
                  principal occupation or employment of such person, the class
                  and number of shares of capital stock of the Corporation of
                  which such person is the beneficial owner (as defined in Rule
                  13d-3 promulgated under the Securities Exchange Act of 1934),
                  such person's written consent to being named in the proxy
                  statement as a nominee and to serve as a director if elected
                  and any other information relating to such person that would
                  be required to be disclosed in solicitations of proxies for
                  election of directors, or would be otherwise required, in each
                  case pursuant to Regulation 14A under the Securities Exchange
                  Act of 1934; and

         b.       as to the shareholder of record giving the notice, (i) the
                  name and address of such shareholder and (b) the class and
                  number of shares of capital stock of the Corporation of which
                  such shareholder is the beneficial owner (as defined in Rule
                  13d-3 promulgated under the Securities Exchange Act of 1934).
                  If requested in writing by the Secretary the Corporation at
                  least 15 days in advance of the meeting, such shareholder
                  shall disclose to the Secretary, within ten days of such
                  request, whether such person is the sole beneficial owner of
                  the shares held of record by him, and, if not, the name and
                  address of each other person known by the shareholder of
                  record to claim or have a beneficial interest in such shares.

At the request of the Board of Directors, any person nominated by or at the
direction of the Board of Directors for election as a director shall furnish to
the Secretary of the Corporation that information required to be set forth in a
shareholder's notice of nomination which pertains to the nominee. If a
shareholder seeks to nominate one or more persons as directors, the Secretary
shall appoint two inspectors, who shall not be affiliated with the Corporation,
to determine whether the shareholder has complied with this section. If the
inspectors shall determine that the shareholder has not complied with this
section, the defective nomination shall be disregarded and the inspectors shall
direct the Chairman of the meeting to declare at the meeting that such
nomination was not made in accordance with the procedures prescribed by the
Articles of Incorporation and these By-laws.

         3.8 DIRECTORS ELECTED BY PREFERRED SHAREHOLDERS. Notwithstanding
anything in these By-laws to the contrary, whenever the holders of any one or
more classes or series of stock having a preference over the Class A and Class B
Common Stock as to dividends or upon liquidation shall have the right, voting
separately as a class, to elect one or more directors of the Corporation, the
provisions of the Articles of Incorporation (as they may be duly amended from
time to time) fixing the rights and preferences of such preferred stock shall
govern with respect to the nomination, election, term, removal, vacancies or
other related matters with respect to such directors.

                                      -8-


         3.9 COMPENSATION OF DIRECTORS. Directors shall receive such
compensation for their services, in their capacity as directors, as may be fixed
by resolution of the Board of Directors, provided, however, that nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.

         3.10 VICE CHAIRMAN OF THE BOARD. The Board of Directors may appoint a
Vice Chairman of the Board, who shall perform such duties as the Chairman of the
Board or the Board of Directors shall prescribe.

                                    SECTION 4

                              MEETINGS OF THE BOARD

         4.1 PLACE OF MEETINGS. The meetings of the Board of Directors may be
held at such place within or without the State of Louisiana as a majority of the
directors may from time to time appoint.

         4.2 REGULAR MEETINGS; NOTICE. Regular meetings of the Board may be held
at such times as the Board may from time to time determine. Notice of regular
meetings of the Board of Directors shall be required, but no special form of
notice or time of notice shall be necessary.

         4.3 SPECIAL MEETINGS; NOTICE. Special meetings of the Board may be
called by the Chairman of the Board or the President on reasonable notice given
to each director, either personally or by telephone, mail, telex, telecopy or
any other comparable form of facsimile communication. Special meetings shall be
called by the Secretary in like manner and on like notice on the written request
of a majority of the directors and if such officer fails or refuses, or is
unable within 24 hours to call a meeting when requested, then the directors
making the request may call the meeting on two days' written notice given to
each director. The notice of a special meeting of directors need not state its
purpose or purposes, but if the notice states a purpose or purposes and does not
state a further purpose to consider such other business as may properly come
before the meeting, the business to be conducted at the special meeting shall be
limited to the purpose or purposes stated in the notice.

         4.4 WAIVER OF NOTICE. Directors present at any regular or special
meeting shall be deemed to have received due, or to have waived, notice thereof,
provided that a director who participates in a meeting by telephone (as
permitted by Section 4.8 hereof) shall not be deemed to have received or waived
due notice if, at the beginning of the meeting, he objects to the transaction of
any business because the meeting is not lawfully called.

         4.5 QUORUM. A majority of the Board shall be necessary to constitute a
quorum for the transaction of business, and except as otherwise provided by law,
the


                                      -9-


Articles of Incorporation or these By-laws, the acts of a majority of the
directors present at a duly-called meeting at which a quorum is present shall be
the acts of the Board. If a quorum is not present at any meeting of the Board of
Directors, the directors present may adjourn the meeting from time to time
without notice other than announcement at the meeting, until a quorum is
present.

         4.6 WITHDRAWAL. If a quorum is present when the meeting convened, the
directors present may continue to do business, taking action by vote of a
majority of a quorum as fixed in Section 4.5 hereof, until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum
as fixed in Section 4.5 hereof or the refusal of any director present to vote.

         4.7 ACTION BY CONSENT. Any action that may be taken at a meeting of the
Board, or any committee thereof, may be taken by a consent in writing signed by
all of the directors or by all members of the committee, as the case may be, and
filed with the records of proceedings of the Board or committee.

         4.8 MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATION. Members of the
Board may participate at and be present at any meeting of the Board or any
committee thereof by means of conference telephone or similar communications
equipment if all persons participating in such meeting can hear and communicate
with each other.

                                    SECTION 5

                             COMMITTEES OF THE BOARD

         5.1 GENERAL. The Board may designate one or more committees, each
committee to consist of one or more of the directors of the Corporation (and one
or more directors may be named as alternate members to replace any absent or
disqualified regular members), which, to the extent provided by resolution of
the Board or these By-laws, shall have and may exercise the powers of the Board
in the management of the business and affairs of the Corporation, and may have
power to authorize the seal of the Corporation to be affixed to documents, but
no such committee shall have power or authority to amend the Articles of
Incorporation, adopt an agreement of merger, consolidation or share exchange,
recommend to the shareholders the sale, lease or exchange of all or
substantially all of the Corporation's assets, recommend to the shareholders a
dissolution of the Corporation or a revocation of dissolution, remove or
indemnify directors, or amend these By-laws; and unless the resolution expressly
so provides, no such committee shall have the power or authority to declare a
dividend or authorize the issuance of stock. Such committee or committees shall
have such name or names as may be stated in these By-laws, or as may be
determined, from time to time, by the Board. Any vacancy occurring in any such
committee shall be filled by the Board, but the President may designate another
director to serve on the committee pending action by the Board. Each such member
of a committee shall hold office during the term designated by the Board.

                                      -10-


         5.2 STANDING COMMITTEES. The standing committees of the Board of
Directors shall be the Audit Committee, the Compensation Committee and the
Corporate Governance and Nominating Committee, which committees shall have such
authority and be comprised of such members as designated by the Board.

                                    SECTION 6

                            REMOVAL OF BOARD MEMBERS

         Except as may be otherwise provided in Section 3.8 of these By-laws,
any director may be removed, with or without cause, by a two-thirds vote of the
Board of Directors and any director or the entire Board of Directors may be
removed at any time, with or without cause, by the affirmative vote of the
holders of not less than two-thirds of that portion of the Total Voting Power
(as defined in Article III(D) of the Articles of Incorporation) that is present
or represented at a special shareholders' meeting called for that purpose,
voting together as a single class. At the same meeting in which the Board of
Directors or the shareholders remove one or more directors, a successor or
successors may be elected for the unexpired term of the director or directors
removed. Except as provided in the Articles of Incorporation and in this Section
6, directors shall not be subject to removal.

                                    SECTION 7

                                     NOTICES

         7.1 FORM OF DELIVERY. Whenever under the provisions of law, the
Articles of Incorporation or these By-laws notice is required to be given to any
shareholder or director, it shall not be construed to mean personal notice
unless otherwise specifically provided in the Articles of Incorporation or these
By-laws, but such notice may be given by mail, addressed to such shareholder or
director at his address as it appears on the records of the Corporation, with
postage thereon prepaid, or in such other manner as may be specified in these
By-laws. Notices given by mail shall be deemed to have been given at the time
they are deposited in the United States mail, and all other notices shall be
deemed to have been given upon receipt.

         7.2 WAIVER. Whenever any notice is required to be given by law, the
Articles of Incorporation or these By-laws, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent thereto. In addition, notice
shall be deemed to have been given to, or waived by, any shareholder or director
who attends a meeting of shareholders or directors in person, or is represented
at such meeting by proxy, without protesting at the commencement of the meeting
the transaction of any business because the meeting is not lawfully called or
convened.

                                      -11-


                                    SECTION 8

                                    OFFICERS

         8.1 DESIGNATIONS. The Board of Directors shall elect a Chairman of the
Board, Chief Executive Officer, President, Secretary and Treasurer. The Chief
Executive Officer may appoint such other officers as he or she shall deem
necessary or appropriate, and shall present to the Board a list of such officers
at least annually. More than one office may be held by one person, provided that
no person holding more than one office may sign, in more than one capacity, any
certificate or other instrument required by law to be signed by two officers.

         8.2 DUTIES AND TERMS OF OFFICE. Officers shall exercise such powers and
perform such duties as the Chief Executive Officer may from time to time direct,
provided that their powers and duties are not inconsistent with these By-laws or
any Board resolution. Except as otherwise provided in the resolution of the
Board of Directors electing any officer, each officer elected by the Board shall
hold office until the first meeting of the Board of Directors after the annual
meeting of shareholders next succeeding his or her election, and until his or
her successor is elected or until his or her earlier resignation or removal.
Officers appointed by the Chief Executive Officer shall hold such office for the
term designated by the Chief Executive Officer or, if none, until his or her
successor is elected or until his or her earlier resignation or removal. Any
officer may resign at any time upon written notice to the Board, Chief Executive
Officer or Secretary of the Corporation. Such resignation shall take effect at
the time specified therein and acceptance of such resignation shall not be
necessary to make it effective. The Board may remove any officer with or without
cause at any time. Any officer appointed by the Chief Executive Officer may be
removed by the Chief Executive Officer with or without cause at any time. Any
such removal shall be without prejudice to the contractual rights of such
officers, if any, with the Corporation, but the election of an officer shall not
in and of itself create contractual rights. Any vacancy occurring in any office
of the Corporation by death, resignation, removal or otherwise may be filled for
the unexpired portion of the term by the Board at any regular or special
meeting, or, if the appointment of the officer did not require Board approval,
by the Chief Executive Officer.

         8.3 THE CHAIRMAN OF THE BOARD. The Chairman of the Board or a director
designated by him shall preside at meetings of the Board of Directors and the
shareholders and perform such other duties as may be designated by the Board of
Directors or these By-laws.

         8.4 THE CHIEF EXECUTIVE OFFICER AND PRESIDENT. The office of Chief
Executive Officer and President shall be held by one person unless the Board
otherwise determines. Subject to such determination, the Chief Executive Officer
and President shall, subject to the powers of the Chairman of the Board, have
general and active responsibility for the management of the business of the
Corporation, shall be the chief executive officer of the Corporation, shall
supervise the daily operations of the business


                                      -12-


of the Corporation and shall ensure that all orders, policies and resolutions of
the Board are carried out.

         8.5 THE SECRETARY. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the shareholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose. He or she
shall give, or cause to be given, notice of all meetings of the shareholders and
regular and special meetings of the Board, and shall perform such other duties
as may be prescribed by the Board or the Chief Executive Officer. He or she
shall keep in safe custody the seal of the Corporation, if any, and affix such
seal to any instrument requiring it.

         8.6 THE TREASURER. The Treasurer shall have the custody of the
corporate funds and shall keep or cause to be kept full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation. He or she shall keep a proper accounting of all receipts and
disbursements and shall disburse the funds of the Corporation only for proper
corporate purposes or as may be ordered by the Board and shall render to the
Chief Executive Officer and the Board at the regular meetings of the Board, or
whenever they may require it, an account of all his or her transactions as
Treasurer.

                                    SECTION 9

                                      STOCK

         9.1 CERTIFICATES. Every holder of stock in the Corporation shall be
entitled to have a certificate signed by the President or a Vice President and
the Secretary or an Assistant Secretary evidencing the number and class (and
series, if any) of shares owned by him, containing such information as required
by law and bearing the seal of the Corporation. If any stock certificate is
manually signed by a transfer agent or registrar other than the Corporation
itself or an employee of the Corporation, the signature of any such officer may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be an officer, transfer agent or registrar of the Corporation before
such certificate is issued, it may be issued by the Corporation with the same
effect as if such person or entity were an officer, transfer agent or registrar
of the Corporation on the date of issue.

         9.2 MISSING CERTIFICATES. The President or any Vice President may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the Corporation's receipt of an
affidavit of that fact from the person claiming the certificate of stock to be
lost, stolen or destroyed. As a condition precedent to the issuance of a new
certificate or certificates, the officers of the Corporation shall, unless
dispensed with by the President, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to give the
Corporation a bond or enter into a written indemnity agreement, in each case in
an amount appropriate to


                                      -13-

indemnify the Corporation against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.

         9.3 TRANSFERS. Upon surrender to the Corporation or the transfer agent
of the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.

                                   SECTION 10

                          DETERMINATION OF SHAREHOLDERS

         10.1 RECORD DATE. For the purpose of determining shareholders entitled
to notice of and to vote at a meeting, or to receive a dividend, or to receive
or exercise subscription or other rights, or to participate in a
reclassification of stock, or in order to make a determination of shareholders
for any other proper purpose, the Board of Directors may fix in advance a record
date for determination of shareholders for such purpose, such date to be not
more than 60 days and, if fixed for the purpose of determining shareholders
entitled to notice of and to vote at a meeting, not less than 10 days, prior to
the date on which the action requiring the determination of shareholder is to be
taken.

         10.2 REGISTERED SHAREHOLDERS. Except as otherwise provided by law, the
Corporation and its directors, officers and agents may recognize and treat a
person registered on its records as the owner of shares as the owner in fact
thereof for all purposes, and as the person exclusively entitled to have and to
exercise all rights and privileges incident to the ownership of such shares, and
the Corporation's rights under this section shall not be affected by any actual
or constructive notice that the Corporation, or any of its directors, officers
or agents, may have to the contrary.

                                   SECTION 11

                                 INDEMNIFICATION

         11.1 DEFINITIONS. As used in this section the following terms shall
have the meanings set forth below:

                  (a) "Board" - the Board of Directors of the Corporation.

                  (b) "Claim" - any threatened, pending or completed claim,
action, suit, or proceeding, whether civil, criminal, administrative or
investigative and whether made judicially or extrajudicially, or any separate
issue or matter therein, as the context requires.

                                      -14-


                  (c) "Determining Body" - those members of the Board who are
not named as parties to the Claim for which indemnification is being sought
("Impartial Directors"), if there are at least three Impartial Directors, a
committee of at least three Impartial Directors appointed by the Board
(regardless whether the members of the Board of Directors voting on such
appointment are Impartial Directors) or if there are fewer than three Impartial
Directors or if the Board of Directors or the committee appointed pursuant to
clause (ii) of this paragraph so directs (regardless whether the members thereof
are Impartial Directors), independent legal counsel, which may be the regular
outside counsel of the Corporation.

                  (d) "Disbursing Officer" - the President of the Corporation
or, if the President is a party to the Claim for which indemnification is being
sought, any officer not a party to such Claim who is designated by the President
to be the Disbursing Officer with respect to indemnification requests related to
the Claim, which designation shall be made promptly after receipt of the initial
request for indemnification with respect to such Claim.

                  (e) "Expenses" - any expenses or costs (including, without
limitation, attorney's fees, judgments, punitive or exemplary damages, fines and
amounts paid in settlement).

                  (f) "Indemnitee" - each person who is or was a director or
officer of the Corporation.

         11.2 INDEMNITY.

         (a) To the extent such Expenses exceed the amounts reimbursed or paid
pursuant to policies of liability insurance maintained by the Corporation, the
Corporation shall indemnify each Indemnitee against any Expenses actually and
reasonably incurred by (as they are incurred) in connection with any Claim
either against him or as to which he is involved solely as a witness or person
required to give evidence, by reason of his position as a director or officer of
the Corporation, as a director or officer of any subsidiary of the Corporation
or as a fiduciary with respect to any employee benefit plan of the Corporation,
or as a director, officer, partner, employee or agent of another Corporation,
partnership, joint venture, trust or other for-profit or not-for-profit entity
or enterprise, if such position is or was held at the request of the
Corporation, whether relating to service in such position before or after the
effective date of this Section, if he (i) is successful in his defense of the
Claim on the merits or otherwise or (ii) has been found by the Determining Body
(acting in good faith) to have met the Standard of Conduct (defined below);
provided that (A) the amount otherwise payable by the Corporation may be reduced
by the Determining Body to such amount as it deems proper if it determines that
the Claim involved the receipt of a personal benefit by Indemnitee, and (B) no
indemnification shall be made in respect of any Claim as to which Indemnitee
shall have been adjudged by a court of competent jurisdiction, after exhaustion
of all appeals therefrom, to be liable for willful or intentional misconduct in
the performance of his duty to the Corporation or to have obtained an improper
personal benefit, unless, and


                                      -15-


only to the extent that, a court shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as
the court deems proper.

         (b) The Standard of Conduct is met when the conduct by an Indemnitee
with respect to which a Claim is asserted was conduct that was in good faith and
that he reasonably believed to be in, or not opposed to, the best interest of
the Corporation, and, in the case of a criminal action or proceeding, that he
had no reasonable cause to believe was unlawful. The termination of any Claim by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not meet the Standard of Conduct.

         (c) Promptly upon becoming aware of the existence of any Claim as to
which he may be indemnified hereunder, Indemnitee shall notify the President of
the Corporation of the Claim and whether he intends to seek indemnification
hereunder. If such notice indicates that Indemnitee does so intend, the
President shall promptly advise the Board thereof and notify the Board that the
establishment of the Determining Body with respect to the Claim will be a matter
presented at the next regularly scheduled meeting of the Board. After the
Determining Body has been established the President shall inform the Indemnitee
thereof and Indemnitee shall immediately provide the Determining Body with all
facts relevant to the Claim known to him. Within 60 days of the receipt of such
information, together with such additional information as the Determining Body
may request of Indemnitee, the Determining Body shall determine, and shall
advise Indemnitee of its determination, whether Indemnitee has met the Standard
of Conduct.

         (d) During such 60-day period, Indemnitee shall promptly inform the
Determining Body upon his becoming aware of any relevant facts not therefore
provided by him to the Determining Body, unless the Determining Body has
obtained such facts by other means.

         (e) In the case of any Claim not involving a proposed, threatened or
pending criminal proceeding,

                  (i) if Indemnitee has, in the good faith judgment of the
Determining Body, met the Standard of Conduct, the Corporation may, in its sole
discretion after notice to Indemnitee, assume all responsibility for the defense
of the Claim, and, in any event, the Corporation and the Indemnitee each shall
keep the other informed as to the progress of the defense, including prompt
disclosure of any proposals for settlement; provided that if the Corporation is
a party to the Claim and Indemnitee reasonably determines that there is a
conflict between the positions of the Corporation and Indemnitee with respect to
the Claim, then Indemnitee shall be entitled to conduct his defense, with
counsel of his choice; and provided further that Indemnitee shall in any event
be entitled at his expense to employ counsel chosen by him to participate in the
defense of the Claim; and

                                      -16-


                  (ii) the Corporation shall fairly consider any proposals by
Indemnitee for settlement of the Claim. If the Corporation (A) proposes a
settlement acceptable to the person asserting the Claim, or (B) believes a
settlement proposed by the person asserting the Claim should be accepted, it
shall inform Indemnitee of the terms thereof and shall fix a reasonable date by
which Indemnitee shall respond. If Indemnitee agrees to such terms, he shall
execute such documents as shall be necessary to effect the settlement. If he
does not agree he may proceed with the defense of the Claim in any manner he
chooses, but if he is not successful on the merits or otherwise, the
Corporation's obligation to indemnify him for any Expenses incurred following
his disagreement shall be limited to the lesser of (A) the total Expenses
incurred by him following his decision not to agree to such proposed settlement
or (B) the amount the Corporation would have paid pursuant to the terms of the
proposed settlement. If, however, the proposed settlement would impose upon
Indemnitee any requirement to act or refrain from acting that would materially
interfere with the conduct of his affairs, Indemnitee may refuse such settlement
and proceed with the defense of the Claim, if he so desires, at the
Corporation's expense without regard to the limitations imposed by the preceding
sentence. In no event, however, shall the Corporation be obligated to indemnify
Indemnitee for any amount paid in a settlement that the Corporation has not
approved.

         (f) In the case of a Claim involving a proposed, threatened or pending
criminal proceeding, Indemnitee shall be entitled to conduct the defense of the
Claim, and to make all decisions with respect thereto, with counsel of his
choice, provided, however, that the Corporation shall not be obligated to
indemnify Indemnitee for an amount paid in settlement that the Corporation has
not approved.

         (g) After notifying the Corporation of the existence of a Claim,
Indemnitee may from time to time request the Corporation to pay the Expenses
(other than judgments, fines, penalties or amounts paid in settlement) that he
incurs in pursuing a defense of the Claim prior to the time that the Determining
Body determines whether the Standard of Conduct has been met. If the Disbursing
Officer believes the amount requested to be reasonable, he shall pay to
Indemnitee the amount requested (regardless of Indemnitee's apparent ability to
repay such amount) upon receipt of an undertaking by or on behalf of Indemnitee
to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation under the circumstances. If the
Disbursing Officer does not believe such amount to be reasonable, the
Corporation shall pay the amount deemed by him to be reasonable and Indemnitee
may apply directly to the Determining Body for the remainder of the amount
requested.

         (h) After the Determining Body has determined that the Standard of
Conduct was met, for so long as and to the extent that the Corporation is
required to indemnify Indemnitee under this Agreement, the provisions of
Paragraph (g) shall continue to apply with respect to Expenses incurred after
such time except that (i) no undertaking shall be required of Indemnitee and
(ii) the Disbursing Officer shall pay to Indemnitee such amount of any fines,
penalties or judgments against him which have become final as the Corporation is
obligated to indemnify him.

                                      -17-


         (i) Any determination by the Corporation with respect to settlements of
a Claim shall be made by the Determining Body.

         (j) The Corporation and Indemnitee shall keep confidential, to the
extent permitted by law and their fiduciary obligations, all facts and
determinations provided or made pursuant to or arising out of the operation of
this Section, and the Corporation and Indemnitee shall instruct its or his
agents and employees to do likewise.

         11.3 ENFORCEMENT.

                  (a) The rights provided by this Section shall be enforceable
by Indemnitee in any court of competent jurisdiction.

                  (b) If Indemnitee seeks a judicial adjudication of his rights
under this Section Indemnitee shall be entitled to recover from the Corporation,
and shall be indemnified by the Corporation against, any and all Expenses
actually and reasonably incurred by him in connection with such proceeding but
only if he prevails therein. If it shall be determined that Indemnitee is
entitled to receive part but not all of the relief sought, then the Indemnitee
shall be entitled to be reimbursed for all Expenses incurred by him in
connection with such judicial adjudication if the amount to which he is
determined to be entitled exceeds 50% of the amount of his claim. Otherwise, the
Expenses incurred by Indemnitee in connection with such judicial adjudication
shall be appropriately prorated.

                  (c) In any judicial proceeding described in this subsection,
the Corporation shall bear the burden of proving that Indemnitee is not entitled
to any Expenses sought with respect to any Claim.

         11.4 SAVING CLAUSE. If any provision of this Section is determined by a
court having jurisdiction over the matter to require the Corporation to do or
refrain from doing any act that is in violation of applicable law, the court
shall be empowered to modify or reform such provision so that, as modified or
reformed, such provision provides the maximum indemnification permitted by law,
and such provision, as so modified or reformed, and the balance of this Section,
shall be applied in accordance with their terms. Without limiting the generality
of the foregoing, if any portion of this Section shall be invalidated on any
ground, the Corporation shall nevertheless indemnify an Indemnitee to the full
extent permitted by any applicable portion of this Section that shall not have
been invalidated and to the full extent permitted by law with respect to that
portion that has been invalidated.

         11.5 NON-EXCLUSIVITY.

                  (a) The indemnification and advancement of Expenses provided
by or granted pursuant to this Section shall not be deemed exclusive of any
other rights to which Indemnitee is or may become entitled under any statute,
article of incorporation, by-law, authorization of shareholders or directors,
agreement, or otherwise.

                                      -18-


                  (b) It is the intent of the Corporation by this Section to
indemnify and hold harmless Indemnitee to the fullest extent permitted by law,
so that if applicable law would permit the Corporation to provide broader
indemnification rights than are currently permitted, the Corporation shall
indemnify and hold harmless Indemnitee to the fullest extent permitted by
applicable law notwithstanding that the other terms of this Section would
provide for lesser indemnification.

         11.6 SUCCESSORS AND ASSIGNS. This Section shall be binding upon the
Corporation, its successors and assigns, and shall inure to the benefit of the
Indemnitee's heirs, personal representatives, and assigns and to the benefit of
the Corporation, its successors and assigns.

         11.7 INDEMNIFICATION OF OTHER PERSONS. The Corporation may indemnify
any person not covered by Sections 11.1 through 11.6 to the extent provided in a
resolution of the Board or a separate section of these By-laws.

                                   SECTION 12

                                   AMENDMENTS

         12.1 ADOPTION OF BY-LAWS; AMENDMENTS THEREOF. By-laws of the
Corporation may be adopted only by a majority vote of the Board of Directors.
By-laws may be amended or repealed only by (i) a majority vote of the Board of
Directors, except that any amendment to or repeal of Section 6 of these By-laws
shall require an affirmative vote of at least three-quarters of the Board, or
(ii) the affirmative vote of the holders of at least two-thirds of that portion
of the Total Voting Power (as defined in Article III(D) of the Articles of
Incorporation), voting together as a single class, that is present in person or
by proxy at any regular or special meeting of shareholders, the notice of which
expressly states that the proposed amendment or repeal is to be considered at
the meeting.

         12.2 NEW BY-LAWS; AMENDMENTS. Any purported amendment to these By-laws
which would add hereto a matter not covered herein prior to such purported
amendment shall be deemed to constitute the adoption of a By-law provision and
not an amendment to the By-laws.

                                   SECTION 13

                                  MISCELLANEOUS

         13.1 DIVIDENDS. Except as otherwise provided by law or the Articles of
Incorporation, dividends upon the stock of the Corporation may be declared by
the Board of Directors at any regular or special meeting. Dividends may be paid
in cash, property, or shares of stock, subject to the limitations specified in
the Articles of Incorporation.

                                      -19-


         13.2 VOTING OF SHARES OWNED BY CORPORATION. Unless otherwise directed
by the Board, any shares of capital stock issued by a wholly-owned subsidiary of
the Corporation may be voted by the President of the Corporation at any
shareholders' meeting of the subsidiary (or in connection with any written
consent in lieu thereof).

         13.3 CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate. Signatures of
the authorized signatories may be by facsimile.

         13.4 FISCAL YEAR. The Board of Directors may adopt for and on behalf of
the Corporation a fiscal or a calendar year.

         13.5 SEAL. The Board of Directors may adopt a corporate seal, which
shall have inscribed thereon the name of the Corporation. The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise. Failure to affix the seal shall not, however, affect the validity of
any instrument.

         13.6 GENDER. All pronouns and variations thereof used in these By-laws
shall be deemed to refer to the masculine, feminine or neuter gender, singular
or plural, as the identity of the person, persons, entity or entities referred
to may require.

         13.7 LOUISIANA'S FAIR PRICE STATUTE. The Company expressly opts into,
and accepts the benefits of, La. R.S. 12:132-134, as they may be amended from
time to time.

         13.8 CONTROL SHARE ACQUISITION STATUTE. The Company expressly waives
the benefits of La. R.S. 12:135-140.2, as they may be amended from time to time.


                                      -20-

EX-12

                                                                      Exhibit 12

                            STEWART ENTERPRISES, INC.
                                AND SUBSIDIARIES

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

                                   (UNAUDITED)



                                                                                 YEARS ENDED OCTOBER 31,
                                                        ---------------------------------------------------------------------
                                                             2003           2002           2001           2000        1999
                                                        -------------    ----------  ----------------   --------   ----------
                                                                                                    
Earnings (loss) from operations
  before income taxes................................     $(69,470)(2)   $ 49,321(3)  $(196,301)(4)(5)  $105,187   $  142,551(6)

Fixed charges:
  Interest charges (1)...............................       53,797         62,655        64,235           62,748       55,543
  Interest portion of lease expense..................        1,933          2,258         2,882            3,379        2,859
                                                          --------      ----------    ---------         --------   ----------
Total fixed charges..................................       55,730         64,913        67,117           66,127       58,402

Earnings (loss) from operations before income
  taxes and fixed charges, less capitalized
  interest...........................................     $(14,059)(2)   $113,918(3)  $(129,847)(4)(5)  $169,960   $  200,118(6)
                                                          ========       ========     =========         ========   ==========
Ratio of earnings to fixed charges...................            - (2)       1.75(3)          - (4)(5)      2.57         3.43(6)
                                                          ========       ========     =========         ========   ==========


- ----------
(1) Includes capitalized interest expense of $319, $316, $663, $1,354, and $835
    for 2003, 2002, 2001, 2000 and 1999, respectively.

(2) Includes a charge of $11,289 for the loss on early extinguishment of debt
    recorded in connection with the redemption of the Remarketable Or Redeemable
    Securities and a noncash charge of $107,300 recorded in connection with
    goodwill impairment and long-lived asset impairment charges. As a result of
    these charges, the Company's earnings for fiscal year 2003 were insufficient
    to cover its fixed charges, and an additional $69,789 in pretax earnings
    would have been required to eliminate the coverage deficiency.

(3) Includes a noncash charge of $18,500 recorded in connection with the
    writedown of assets held for sale.

(4) Excludes cumulative effect of change in accounting principles of $250,004
    (net of a $166,669 income tax benefit).

(5) Includes a noncash charge of $269,158 recorded in connection with the
    writedowns of assets held for sale and other charges and a charge of $9,120
    for the loss on early extinguishment of debt. As a result of these charges,
    the Company's earnings for fiscal year 2001 were insufficient to cover its
    fixed charges, and an additional $196,964 in pretax earnings would have been
    required to eliminate the coverage deficiency.

(6) Excludes cumulative effect of change in accounting principle of $50,101 (net
    of $28,798 income tax benefit).

- --------------------------
         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.

                                     -114-

EX-14

                       CODE OF BUSINESS CONDUCT AND ETHICS

OUR COMMITMENT TO ETHICAL CONDUCT

Stewart Enterprises, Inc. is committed to maintaining high ethical standards
that are essential to our continued success. Our policy, as expressed in this
Code of Business Conduct and Ethics, is to operate our businesses with integrity
and to comply with all laws applicable to our business. Our Company is owned by
its stockholders. They expect and require all directors, officers and employees,
by virtue of their association or employment with the Company, to adhere to the
highest standards of integrity and to comply with all laws. We expect compliance
with this Code by each director, officer and employee of the Company.

This Code explains the basic principles of business conduct and ethics for our
Company. No code or policy can anticipate every situation a director, officer or
employee might confront. Accordingly, this Code is intended to serve as a source
of guiding principles for directors, officers and employees, who are expected to
apply them to their day-to-day activities and seek advice whenever they are
unsure about a particular situation.

The purpose of this Code is to enhance the awareness of all personnel of our
commitment to integrity, to deter any wrongdoing and to promote the following
objectives, which are key to the success of our Company:

         o        Honest and ethical conduct, including the ethical handling of
                  actual or apparent conflicts of interest between personal and
                  professional relationships.

         o        Avoidance of conflicts of interest, including disclosure to an
                  appropriate person or persons identified in the Code, of any
                  material transaction or relationship that reasonably could be
                  expected to give rise to such a conflict.

         o        Full, fair, accurate, timely and understandable disclosure in
                  reports and documents that we file with or submit to the SEC
                  and other public communications made by the Company.

         o        Compliance with applicable governmental laws, rules and
                  regulations.

         o        The prompt internal reporting to an appropriate person or
                  persons identified in the Code of violations of the Code.

         o        Accountability for adherence to the Code.



EMPLOYEE RESPONSIBILITIES: INTERPRETATION, COMPLIANCE AND REPORTING

Employees should address questions concerning the application of laws, this Code
or any other Company policy, and should report violations of any law, this Code
or any other Company policy, as set forth below:

         o        First, an employee should direct questions or report
                  violations to his or her supervisor or manager.

         o        If an employee believes his or her questions or concerns have
                  not been addressed satisfactorily by the supervisor or
                  manager, or if an employee is uncomfortable discussing
                  questions or concerns with or reporting violations to the
                  supervisor or manager, the matter should be addressed with the
                  next level of management, a senior manager, the Division
                  President, a Human Resources representative or by calling the
                  Employee Hotline at 1-800-401-2119. You do not have to
                  identify yourself when calling the Employee Hotline, but you
                  should provide enough information so that a reasonable inquiry
                  can be conducted. All calls to the Employee Hotline will be
                  handled on a confidential basis.

         o        Calls to the Employee Hotline regarding accounting, internal
                  accounting controls or auditing matters will be handled by
                  senior members of the Company's Internal Audit Department. If
                  you are uncomfortable with this arrangement and would rather
                  register a complaint directly with the Audit Committee of the
                  Board of Directors regarding accounting, internal accounting
                  controls or auditing matters, or if you wish to deliver an
                  anonymous submission of concerns regarding questionable
                  accounting or auditing matters, you can call counsel to the
                  Audit Committee, Mr. L. R. McMillan, II (504-582-8188), who
                  has been instructed by the Audit Committee to maintain the
                  confidentiality of anyone who calls him.

Each employee must be alert and sensitive to situations that could result in
illegal, unethical or otherwise improper actions, either by him or herself or
other employees. Also, employees should be aware that failure to comply with the
provisions outlined in this Code may result in disciplinary action, up to and
including termination of employment, and in the case of an illegal act, referral
for criminal prosecution. No violation of this Code, any other Company policy,
or any law will be justified by a claim that it was ordered by someone in higher
authority. No one, regardless of his or her position, is authorized to direct an
employee to commit an illegal act.

If any employee observes or becomes aware of a possible violation of this Code,
any other Company policy, or any law, the employee is obligated to report the
matter as directed above. Reporting a known or suspected violation should not be
considered an act of disloyalty, but an action that shows a sense of
responsibility that will help safeguard the reputation of the Company and its
employees. Failure to report a known

                                       2


violation may result in disciplinary action, up to and including termination of
employment.

Should it be discovered that an employee has been arrested for suspected
criminal conduct, either on or off the job, the Company may conduct an
independent review of the available facts and determine whether disciplinary or
employment action is warranted.

DIRECTOR AND OFFICER RESPONSIBILITIES: INTERPRETATION, COMPLIANCE AND REPORTING

The Company's directors and officers are expected to comply with this Code,
other applicable Company policies, and all laws. They are also expected to
promote ethical behavior by (1) encouraging employees to talk to supervisors,
managers and other appropriate personnel when in doubt about the best course of
action in a particular situation; (2) encouraging employees to report violations
of laws, this Code, or any other Company policy to appropriate personnel; and
(3) reminding employees that the Company will not permit retaliation for reports
made in good faith.

Company directors and officers who become aware of violations of law, this Code
or any other Company policy are expected to stop the violations and, if
necessary, conduct an investigation with assistance of Company counsel if
appropriate.

A failure of any director or officer to comply with any law, this Code, or any
other applicable Company policy may result in disciplinary action, removal or
dismissal, and, if warranted, legal proceedings.

PROTECTION FOR PERSONS REPORTING QUESTIONABLE BEHAVIOR

All directors, officers and employees are required to cooperate fully in any
internal investigation. If an employee discovers the need to report a suspected
violation of law, this Code, or any Company policy, that employee will not be
disciplined for (1) making a report of a violation or suspected violation in
good faith and on the basis of a reasonable belief that a violation has occurred
or will occur or (2) assisting with any ensuing investigation. To the extent
permissible, the Company will endeavor to keep confidential the identity of
anyone reporting possible violations.

CONFLICTS OF INTEREST

Actual and Apparent Conflicts of Interest

This Code requires directors, officers and employees to avoid any situation that
would create a conflict between their own interests and the interests of the
Company. Personal interest that causes a conflict may extend to a family member,
friend, or other associate of a director, officer or employee, rather than
directly to those persons. All persons subject to this Code should avoid
situations that would reasonably appear to adversely affect the independence and
objectivity of their judgment, or interfere with the timely and effective
performance of their duties and responsibilities. Director, officer and employee

                                       3

actions should be based primarily upon what is in the best interests of the
Company, rather than upon personal considerations or relationships.

It is not possible to describe every conflict of interest. Some of the more
common conflict circumstances are set forth below. Questions about possible
conflicts of interest should be discussed as set forth in this Code.

     o    Gifts, entertainment and payments - The undisclosed acceptance of
          gifts, entertainment, money or anything else of value from outsiders,
          which may influence the performance of duties, should be avoided at
          all times. Notwithstanding the foregoing, employees may accept without
          disclosure nominal gifts (valued at less than $250), which are gifts
          of token value or gifts used for advertising or promotion, as long as
          they are customarily given in the regular course of business. In
          addition, employees may accept ordinary business entertainment without
          disclosure if it is reasonable in the context of the business and it
          is either associated with a necessary business meeting or it advances
          the Company's business interests. In all cases, the acceptance of
          gifts valued at $250 or greater or the acceptance of extraordinary
          business entertainment must be disclosed to and approved by:



                       Recipient                              Required Approval
          --------------------------------------   -------------------------------------
                                                
          Company Employee .....................   Regional COO, Division CFO, Corporate
                                                   Vice President, or Division President

          Regional COO or Division CFO .........   Division President

          Senior Sales Executive ...............   Division President

          Corporate Vice President .............   Company Chief Financial Officer

          Division President ...................   Company Chief Operating Officer

          Chief Financial Officer or Company
          Chief Operating Officer ..............   Chief Executive Officer

          Chief Executive Officer ..............   Chairman of the Audit Committee


          Under no circumstances (except for tipping, as described below) is the
          acceptance of money from third parties permitted. This includes cash
          equivalents such as checks, money orders, securities or other items
          that may be readily converted to cash. An employee who is offered
          money should report the offer immediately to his or her supervisor.

                                       4


          In regard to tipping, no employee may solicit or accept any gratuity,
          tip or money of any amount. Generally, when offered an unsolicited
          tip, employees should politely decline by saying, "I'm here to serve
          your family, and appreciate your offer, but nothing additional is
          required." If and only if the prevailing cultural norms provide for
          tipping of employees and it would be insulting to refuse such tips,
          then these tips may be accepted on behalf of the entire firm, with the
          knowledge of local management. Such tips should be combined and used
          for the benefit of all the location's staff, not individual employees.

     o    Preferential treatment in providing services - It is a conflict of
          interest to favor the interests of certain customers, suppliers or
          fellow employees over those of similarly situated individuals or
          companies. Of course, extra effort to provide superior service for all
          customers is encouraged, as long as those efforts fall within standard
          Company procedures. Examples of conflicts involving preferential
          treatment include handling business transactions of family members,
          being personally involved in a business deal or providing special
          treatment because of a personal relationship. We expect all
          transactions with Company stakeholders to be at "arms length" and to
          have no appearance of undue favoritism or impropriety.

     o    Purchase and sale of Company assets - Employees may purchase equipment
          or vehicles from the Company only with the prior written consent of
          the Company's Chief Operating Officer or Chief Financial Officer.

Avoidance of Conflicts of Interest: Disclosure of Material Transactions or
Relationships that Could be Expected to Give Rise to Conflicts of Interest

Each director, officer and employee is responsible for recognizing situations in
which a conflict of interest is present or might arise and for taking
appropriate action to eliminate or prevent such conflict, including disclosing
any material transaction or relationship that reasonably could be expected to
give rise to such conflict, to their immediate supervisor, a senior manager, a
Division President, a Human Resources representative or, in the case of
directors and officers, to the Audit Committee of the Board of Directors.

In some instances conflict of interest situations may be permitted if disclosed
to and approved in writing by, (1) in the case of an employee, a Regional Chief
Operating Officer, a Senior Sales Executive or a Corporate Vice President or (2)
in the case of a director or officer, the Audit Committee of the Board of
Directors.

CUSTOMER RELATIONS

An employee should never knowingly misrepresent any product or service of the
Company. Employees should always exhibit the highest possible ethical and
professional standards when dealing with our customers.

                                       5


PROPERTY RIGHTS OF OTHERS

Copyright infringement - Copyright laws prohibit the unauthorized duplication of
computer software and other published works. Copyrighted materials should not be
reproduced for personal or Company use without verifying that duplication is
permissible. Unauthorized copying of computer software, video, written,
photographic or audio material subject to copyright protection could result in
claims of copyright infringement. Utmost care should be taken to avoid the
unauthorized reproduction of any copyrighted materials.

Intellectual property - In the conduct of business, the Company has occasion to
receive and use proprietary information of others. This information can be used
only in accordance with the agreements under which it has been received.
Employees should not engage in unauthorized copying, revealing or using the
intellectual property of a former employer or a competitor in connection with
employment, including competitor information such as customer lists or
operational data.

INVOLVEMENT IN POLITICS, OUTSIDE ACTIVITIES AND THE COMMUNITY

Political activities - The Company may choose to make contributions to political
candidates or political parties if permitted by applicable laws. Employees may
not make any contribution on behalf of the Company or use the Company's name,
funds, property or services for support of political parties or candidates
unless the contribution is permitted by law and specifically authorized in
writing by the Company. Employees are encouraged to participate in the political
process by voting and otherwise being involved in political activity. However,
employees engaging in political activity will do so as private citizens and not
as representatives of the Company. An employee's personal political
affiliations, involvement or contributions will not influence the employee's
compensation, job security or opportunities for advancement. Under no
circumstances will any employee be reimbursed by the Company for personal
political contributions.

Outside activities - Employees are expected to give their work the attention
necessary for quality performance. Any outside business interest, including
other employment, is not permitted if it is in direct competition with Company
business, interferes with the timely and effective performance of job duties,
creates a conflict of interest or prevents devotion of full time (or, in the
case of part-time employees, their full part-time commitment) and energy to the
job when at work. Employees may not solicit other employees or distribute
literature of any sort during work time or in work areas.

Community activities - Employees are encouraged to be involved in volunteer
activities and organizations that improve or help their communities according to
the following criteria:

     o    The involvement must be undertaken in accordance with applicable laws;

     o    The involvement must not interfere with an employee's ability to do
          his or her job with the Company;

                                       6


     o    The involvement must be such that the employee does not appear to
          represent or make decisions on behalf of the Company; and

     o    The involvement must not create a conflict of interest or other
          problem related to employment.

USE AND PROTECTION OF COMPANY ASSETS

Protection of Company property is vital to our business. It is the
responsibility of every employee to protect these assets from loss, damage,
misuse or theft.

Company property includes tangible assets such as buildings, equipment,
vehicles, customer contracts and payments, and office supplies, as well as
intangible assets such as software and other intellectual property rights,
business concepts and strategies, employee time, financial data and other
information about the Company.

Directors, officers and employees are prohibited from taking for themselves
business or corporate opportunities that are discovered through the use of
Company property or information or through the individual's position, provided,
however, if the Company's disinterested directors or an appropriate committee of
the Board of Directors determines in writing that the Company will not pursue an
opportunity that relates to the Company's business, a director, officer or
employee may do so.

The Company considers all data and communications transmitted or received by or
contained in the Company's electronic or telephonic equipment and systems or
maintained in written form to be Company property. Employees and other users of
the equipment or systems should have no expectation of privacy with respect to
those data and communications.

Company property should be used for the benefit of the Company and not for
personal gain.

COMPANY RECORDS AND FINANCIAL STATEMENTS - ACCURACY, ACCOUNTING, ACCOUNTING
PRACTICES

The integrity of the Company's financial reporting is of the utmost importance.
All transactions must be accurately reflected in the Company's books and records
in accordance with generally accepted accounting principles and in compliance
with all laws and Company policies regarding the maintenance of accounts and
records. All financial data should be prepared promptly, carefully, and honestly
and treated with discretion.

Management will establish and maintain internal standards and a system of
internal accounting controls designed to provide that transactions are recorded
accurately and honestly.

                                       7


Falsifying or altering records or reports or knowingly approving false or
altered records or reports is prohibited.

Records should always be retained or destroyed according to the Company's
records retention procedures.

FULL, FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE DISCLOSURE IN (1) REPORTS AND
DOCUMENTS THAT THE COMPANY FILES WITH, OR SUBMITS TO, THE SECURITIES AND
EXCHANGE COMMISSION AND (2) OTHER PUBLIC COMMUNICATIONS MADE BY THE COMPANY

Filings Submitted to the Securities and Exchange Commission

The Company's Disclosure Committee has adopted a set of written Disclosure
Controls and Procedures designed to enhance the accuracy and completeness of the
Company's SEC filings. All officers and employees involved with the preparation
of the Company's SEC filings are expected to comply fully with the Company's
Disclosure Controls and Procedures.

Other Public Communications

No director, officer or employee shall make statements or provide any
information to the press, financial analysts, or any public forum about the
Company and its business prospects unless they have specific authorization to do
so. The potential legal risks from inaccurate statements include claims of false
advertising, misrepresentation, breach of contract, securities fraud or
antitrust violations.

In order to ensure that communications to the public about the Company are
accurate and widely disseminated to all investors, directors, unauthorized
officers and employees may not communicate any material nonpublic information
about the Company outside of the Company. Only the Company's President and Chief
Executive Officer, Chief Financial Officer and Vice President of Investor
Relations, or employees specifically authorized by them, are authorized to speak
with financial analysts or securities professionals. If an employee or director
receives an inquiry from a journalist or financial analyst, he or she should
refer it to the Investor Relations Department or the Corporate Communications
Department, as appropriate.

CONFIDENTIALITY

It is a conflict of interest for a director, officer or employee, during or
subsequent to association or employment with the Company and without proper
authority, to give or make available to anyone, or use for his or her own
benefit, information of a confidential nature derived from association or
employment with the Company. Directors, officers and employees may not use their
positions with the Company for outside gain or benefit, nor may they use
confidential information in any outside activity or employment.

                                       8


Directors, officers and employees of the Company are expected not to divulge
confidential information about the Company's business or customers and are
expected to use confidential information only in the performance of their
duties.

Examples of confidential information include, but are not limited to, financial
earnings results before they are released to the public, pending negotiations
regarding financing or the acquisition or sale of businesses, and
attorney-client communications. For more information, refer to the Company
policy on Trading of Company Securities and Handling of Non-Public Information.

INSIDER INFORMATION

Many directors, officers and employees may learn of or have access to
proprietary information about the Company that is not generally known to the
public and if disclosed could affect the market value of Company stock or that
of other companies. This information could include trade secrets, business
plans, marketing and sales programs, audits, dividend policy, earnings or other
confidential or proprietary information that could financially affect the
Company. This is known as "insider information" and must be held in the
strictest confidence.

Disclosing "insider information" is a violation of federal law. Any director,
officer or employee participating in such activities may be subject to civil or
criminal penalties. For more information, refer to the Company policy on Trading
of Company Securities and Handling of Non-Public Information.

NONDISCRIMINATION

The Company strives to maintain an environment free of discrimination on the
basis of race, color, religion, sex (including sexual harassment), national
origin, age, disability, veteran status or any other unlawful discrimination.

If an employee believes he or she has been discriminated against or sexually
harassed, the procedures outlined in the Company's Workplace Harassment Policy
should be followed to report discrimination or harassment.

SAFETY, HEALTH AND THE ENVIRONMENT

The Company is committed to providing a safe and healthy workplace for its
employees and for visitors to all facilities. All employees are expected to
actively participate in this effort and immediately report any suspected unsafe
or unhealthy conditions in the workplace to a manager, safety director or a
Human Resources representative.

The Company's policy on Safety and Health is available in the HR Policy Guide.

                                       9


ANTITRUST LAWS

Antitrust laws have been developed to encourage healthy competition among
businesses by defining what conduct or activities are unacceptable and unlawful.
The Company must compete solely on the merits of its products and services and
must not engage in any form of unfair competition. Agreements between
competitors that unfairly limit competition are a violation of antitrust laws.
Oral discussions and informal arrangements may be considered "agreements," so
employees should be extremely careful when meeting with competitors, including
contacts at trade associations and professional gatherings. When engaged in
conversation with competitors, employees must not discuss or listen to a
discussion of present or future prices, profit margins or costs, bids or
intended bids, terms or conditions of sale, market share, sales territories,
distribution practices or other competitive information.

INTERNATIONAL BUSINESS

Employees are expected to obey the laws and respect the customs of countries in
which the Company operates and transacts business. If the laws do not address a
particular situation or are unclear or conflicting, consult a Regional Chief
Operating Officer or Division President for guidance.

GENERAL CONDUCT

Employee conduct should always reflect favorably on the Company. This includes
respecting the personal and property rights of others, acting in a courteous and
considerate manner with others, representing the Company in the community in a
positive and law-abiding manner and complying with the Company's policies and
procedures such as:

     o    Taking responsibility for work attendance and performance;

     o    Exhibiting courtesy, honesty, integrity and trustworthiness in conduct
          with other employees and visitors;

     o    Treating others with dignity and respect;

     o    Helping to keep our workplace safe and desirable;

     o    Not engaging in or tolerating any form of harassment or
          discrimination; and

     o    Following the Company's Standards of Conduct and Work Rules.

COMPLIANCE

Each director, officer and employee is required to comply with the Code of
Business Conduct and Ethics. Directors, officers and employees have the
following responsibilities with regard to the Code's administration:

     o    Every supervisor or manager is required to administer and enforce the
          Code within his or her area of responsibility by:

                                       10

     o    Ensuring that each employee reads and reviews a copy of the Code;

     o    Ensuring that employees are aware that they may make a good faith
          report of a violation or suspected violation of the law or the Code
          without fear of reprisals;

     o    Ensuring that any standards and procedures developed for their areas
          of responsibility comply with the Code; and

     o    Reporting any possible violations of the Code, or situations that
          could result in Code violations or be perceived as Code violations.

o    All directors and key officers are required to certify compliance with the
     Code on an annual basis. Those officers required to certify compliance
     annually include Regional Chief Operating Officers, Division Chief
     Financial Officers, Division Presidents, Corporate Vice Presidents, the
     Chief Financial Officer, the Chief Operating Officer, and the Chief
     Executive Officer.

o    All directors, officers and employees (including supervisors and managers)
     are responsible for:

     o    Reviewing and familiarizing themselves with the Code;

     o    Keeping a copy of the Code or having access to it for personal
          reference;

     o    Complying with the policies set forth in the Code;

     o    Seeking advice and information when uncertain whether particular
          activities are in compliance with the Code; and

     o    Reporting violations of the Code using appropriate channels described
          in the Code.

REVIEW AND CHANGE OF POLICY

The Human Resources Department has administrative responsibility for monitoring
compliance with the Code on the employee level. The Audit Committee of the
Company's Board of Directors is responsible for monitoring compliance with the
code on the director and officer level. The Internal Audit Department is
responsible for conducting a periodic review of the Code and for recommending
necessary changes. The Audit Committee of the Company's Board of Directors must
approve any changes to the Code.

Any waiver of any requirement of this Code for senior officers or directors may
be made only by the Audit Committee of the Company's Board of Directors and all
such waivers of or changes in Code provisions must be promptly disclosed to
shareholders in accordance with the rules of the Securities and Exchange
Commission and the trading markets on which the Company's securities are traded.


                                       11

EX-21

                                                                      Exhibit 21

                                  SUBSIDIARIES

     The following is a list of all direct and indirect subsidiaries of the
Company and their jurisdictions of incorporation as of October 31, 2003. The
name of each indirect subsidiary is indented under the name of its parent
company.



                                                                                                  JURISDICTION OF
           STEWART ENTERPRISES, INC.                                                               INCORPORATION
           -------------------------                                                              ----------------
                                                                                               
      Acme Mausoleum Corporation                                                                        LA
      Carolina Financial Corporation of Pickens                                                         SC
           Hill-Crest Memorial Park                                                                     SC
           Oconee Memorial Gardens, Inc.                                                                SC
      Cemetery Management, Inc.                                                                         FL
           Arlington Memorial Park Cemetery and Funeral Home, Inc.                                      FL
           Baldwin-Fairchild Funeral Homes, Inc.                                                        FL
                All Faiths Memorial Park, Inc.                                                          FL
                The Simplicity Plan, Inc.                                                               FL
           Bay Area Crematory, Inc.                                                                     FL
           Beth David Funeral Chapel Tampa, Inc.                                                        FL
           Beth David Memorial Chapel, Inc.                                                             FL
           Bruce Ocala Funeral Home, Inc.                                                               FL
           Chapel Hill Cemetery, Inc.                                                                   FL
                Glen Haven Memorial Park, Inc.                                                          FL
                      Highland Memory Gardens, Inc.                                                     FL
                Semoran Funeral Home, Inc.                                                              FL
           Cheatham Hill Memorial Park, Inc.                                                            GA
           David C. Gross Funeral Home, Inc.                                                            FL
           Empresas Stewart - Cementerios, Inc.                                                         LA
           Empresas Stewart - Funerarias, Inc.                                                          LA
           Florida Hills Memorial Gardens, Inc.                                                         FL
           Garden of Memories, Inc.                                                                     FL
                A.P. Boza Funeral Home, Inc.                                                            FL
                Curry and Son Funeral Home, Inc.                                                        FL
                 Woodlawn Memory Gardens, Inc.                                                          FL
           Good Shepherd Memorial Gardens, Inc.                                                         FL
           Hubbell Funeral Home and Crematory, Inc.                                                     FL
           Kent R. Palmer, Inc.                                                                         FL
           Kicliter Funeral Home, Inc.                                                                  FL
           Madcem of Florida, Inc.                                                                      FL
           Memorial Park Cemetery, Inc.                                                                 FL
           Oaklawn Park Cemetery and Funeral Home, Inc.                                                 FL
           Roberts Funeral Home, Inc.                                                                   FL
           Royal Palm Memorial Gardens, Inc.                                                            FL
           Sylvan Abbey Memorial Park, Inc.                                                             FL
           Trinity Memorial Gardens of Lakeland, Inc.                                                   FL
           Turner Crematory, Inc.                                                                       FL
           Turner Funeral Homes, Inc.                                                                   FL
           Walsh & Wood Funeral Home, Inc.                                                              FL
           Woodlawn Park Cemetery Company                                                               FL


                                      -115-



                                                                                                     
                Memorial Sunset Park, Inc.                                                              FL
                South Dade-Palms Memorial Park, Inc.                                                    FL
      Cole & Garrett Funeral Homes, Inc.                                                                TN
      Cunningham Memorial Park, Inc.                                                                    WV
      Victor V. Desrosier, Inc.                                                                         CA
      Dilday Brothers Huntington Valley Mortuary                                                        CA
      Dillard Memorial, Inc.                                                                            SC
      Eastlawn Corporation                                                                              GA
      Griffin Leggett, Inc.                                                                             AR
           Forest Hills Cemetery, Inc.                                                                  AR
           Griffin Leggett Healey & Roth, Inc.                                                          AR
           Griffin Leggett Insurance Agency, Inc.                                                       AR
           Gross Funeral Home, Inc.                                                                     AR
           Rest Hills Memorial Park, Inc.                                                               AR
      Griffin Leggett-Conway, Inc.                                                                      AR
      Highland Memorial Cemetery, Inc.                                                                  TN
      Holly Hill Memorial Park, Inc.                                                                    GA
      Holly Hills, Inc.                                                                                 TN
      Hopson Mortuary, Inc.                                                                             CA
      Investors Trust, Inc.                                                                             TX
      Kingsport Cemetery Corporation                                                                    TN
      Lake Lawn Metairie Funeral Home, Inc.                                                             LA
      Lake Lawn Metairie Funeral Home (Joint Venture)                                                   LA
      Lake Lawn Park, Inc.                                                                              LA
      Lakewood Memorial Park, Inc.                                                                      MS
      Lassila Funeral Chapels, Inc.                                                                     CA
      Legacy One, Inc.                                                                                  WV
           Blue Ridge Funeral Home, Inc.                                                                WV
           Blue Ridge Memorial Gardens, Inc.                                                            WV
           C.G.R., Inc.                                                                                 WV
           Eastern Cemetery Associates, Inc.                                                            WV
           Eastlawn Memorial Gardens, Inc.                                                              VA
           Findlay Cemetery, Inc.                                                                       OH
           Grandview Memory Gardens, Inc.                                                               VA
           Greenhills Memory Gardens, Inc.                                                              VA
           Highland Memory Gardens, Inc.                                                                VA
           Holly Memorial Gardens, Inc.                                                                 VA
           Kanawha Plaza Partnership                                                                    WV
           Legacy One Tennessee, Inc.                                                                   TN
           Monticello Memory Gardens, Inc.                                                              VA
           Mountain View Memory Gardens, Inc.                                                           WV
           National Exchange Trust, Ltd.                                                                WV
           National Funeral Services, Inc.                                                              WV
           Pleasant View Memory Gardens, Inc.                                                           WV
           Williams-Blue Ridge Funeral Home, Inc.                                                       WV
      Memorial Services of Columbia, Inc.                                                               MO
           Lincoln Memorial Mortuary, Inc.                                                              NE
           The Lincoln Memorial Park Cemetery Association                                               NE
           Memorial Funeral Home, Inc.                                                                  MO
      Metairie Cemetery Association                                                                     LA
           All Faiths Funeral Home, Inc.                                                                LA
           Pine Crest Cemetery, Inc.                                                                    AL



                                     -116-


                                                                                                     
      Montlawn Memorial Park, Inc.                                                                      NC
      Mount Olivet Cemetery, Inc.                                                                       LA
      The Nashville Historic Cemetery Association, Inc.                                                 TN
      Pasadena Funeral Home, Inc.                                                                       TX
      Restland Funeral Home, Inc.                                                                       TX
           Anderson-Clayton Bros. Funeral Homes, Inc.                                                   TX
                Little Bethel Memorial Park, Inc.                                                       TX
                Roselawn Memorial Gardens, Inc.                                                         TX
           Belew Funeral Home, Inc.                                                                     TX
           Bexar County Mortuary Services, Inc.                                                         TX
           Bluebonnet Hills Memorial Park, Inc.                                                         TX
                Bluebonnet Hills Funeral Home, Inc.                                                     TX
           Bright-Holland Funeral Home, Inc.                                                            TX
           Crespo & Sons, Incorporated                                                                  TX
           Dalton & Son Funeral Home, Inc.                                                              TX
           Emerald Hills Funeral Corporation                                                            TX
           J.E. Foust & Son Funeral Directors, Inc.                                                     TX
           Guardian Cremation Society, Inc.                                                             TX
           Guardian Funeral Home, Inc.                                                                  TX
           Hilltop Memorial Park                                                                        TX
           Laurel Land Memorial Park, Inc.                                                              TX
                Laurel Land Funeral Home, Inc.                                                          TX
                Singing Hills Funeral Home, Inc.                                                        TX
           Laurel Land of Fort Worth, Inc.                                                              TX
                Laurel Land Funeral Home of Fort Worth, Inc.                                            TX
           Lyons Funeral Home, Inc.                                                                     TX
           Metrocrest Funeral Home, Inc.                                                                TX
           Restland of Dallas, Inc.                                                                     TX
                Abbey Plan of Texas, Inc.                                                               TX
                Highland Memorial Gardens, Inc.                                                         TX
           Simplicity Plan of Texas, Inc.                                                               TX
           Southpark Funeral Home, Inc.                                                                 TX
                South Memorial Park, Inc.                                                               TX
      Rocky Mount Memorial Park, Inc.                                                                   NC
      Rose Haven Funeral Home & Cemetery, Inc.                                                          GA
      Santa Barbara Funeral Services, Inc.                                                              CA
      St. Bernard Memorial Gardens, Inc.                                                                LA
           St. Bernard Memorial Funeral Home, Inc.                                                      LA
      St. Vincent de Paul Cemetery Association                                                          LA
      S.E. Acquisition of California, Inc.                                                              CA
           All Souls Mortuary, Inc.                                                                     CA
           Ashes to Ashes, Inc.                                                                         CA
           Assumption Mortuary, Inc.                                                                    CA
           Barstow Funeral Homes, Inc.                                                                  CA
           Buchheim Family, Inc.                                                                        CA
           Calvary Mortuary of Los Angeles, California, Inc.                                            CA
           Catholic Mortuary Services, Inc.                                                             CA
           N.D. Davis & Associates, Inc.                                                                CA
           DeYoung Memorial Chapel, Inc.                                                                CA
           Holy Cross Mortuary of Culver City, California, Inc.                                         CA
           Holy Cross Mortuary of Pomona, California, Inc.                                              CA
           Lombard & Co.                                                                                CA



                                      -117-



                                                                                                     
     Queen of Heaven Mortuary, Inc.                                                                     CA
     Resurrection Mortuary, Inc.                                                                        CA
     Richard Pierce Funeral Service, Inc.                                                               CA
     River Cities Funeral Chapel, Inc.                                                                  CA
     San Fernando Mission Mortuary, Inc.                                                                CA
     Santa Clara Mortuary, Inc.                                                                         CA
     Scovern Mortuary, A California Corporation                                                         CA
     SDCA Holdings, Inc.                                                                                CA
          San Diego Cemetery Association                                                                CA
     S.E. Acquisition of Delano, California, Inc.                                                       CA
     S.E. Acquisition of Glendale, California, Inc.                                                     CA
     S.E. Acquisition of Lancaster, California, Inc.                                                    CA
     S.E. Acquisition of Los Osos Mortuary and Memorial Park, Inc.                                      CA
     S.E. Acquisition of Oakhurst, California, Inc.                                                     CA
     S.E. Acquisition of Oroville, California, Inc.                                                     CA
     Sentinel Cremation Societies, Inc.                                                                 DE
     Simplicity Plan of California, Inc.                                                                CA
     Stewart Pre-Need Services, Inc.                                                                    CA
     Stricklin/Snively Mortuary                                                                         CA
          Catalina Channel Cremation Society                                                            CA
     Wallace E. White & Howard J. Callanan, Inc.                                                        CA
     Woodside Chapel of Crippen & Flynn                                                                 CA
S.E. Acquisition of Nevada, Inc.                                                                        NV
     Desert Memorial, Inc.                                                                              NV
     Neptune Society of Nevada, Inc.                                                                    NV
     S.E. Acquisition of Reno, Nevada, Inc.                                                             NV
          Reno Memorial, Inc.                                                                           NV
S.E. Acquisition of Oregon, Inc.                                                                        OR
     Amling/Schroeder Funeral Service, Inc.                                                             OR
     Cascade Crematory, Inc.                                                                            OR
     Chapel of the Roses, Inc.                                                                          OR
     Chapel of the Valley Funeral Home, Inc.                                                            OR
     Dutton, Inc.                                                                                       OR
     J. P. Finley & Son Mortuary, Inc.                                                                  OR
          Sunset Hills Memorial Park                                                                    OR
     Greenwood Cemetery, Inc.                                                                           OR
     Niswonger & Reynolds, Inc.                                                                         OR
     S.E. Acquisition of Myrtle Creek, Oregon, Inc.                                                     OR
     S.E. Acquisition of Reedsport, Oregon, Inc.                                                        OR
     Tabor's Desert Hills Mortuary, Inc.                                                                OR
S.E. Acquisition of Washington, Inc.                                                                    WA
     E.R. Butterworth & Sons                                                                            WA
     Cremation Society Northwest, Inc.                                                                  WA
     Evergreen Staples Funeral Chapel,Inc.                                                              WA
S.E. Australia, Inc.                                                                                    LA
S.E. Mid-Atlantic, Inc.                                                                                 MD
     C. J. Applegate & Sons, Inc.                                                                       NY
     Bartlett-Burdette-Cox Funeral Home,Inc.                                                            WV
     Benjamin Franklin P.M., Inc.                                                                       PA
     Blue Ridge Memorial Gardens, Inc.                                                                  VA
     Bounds Funeral Home, Inc.                                                                          MD
     Brown Memorials, Inc.                                                                              NC



                                     -118-



                                                                                                     
     Calfee Funeral Service of Pineville, Inc.                                                          WV
     Casdorph & Curry Funeral Home, Inc.                                                                WV
     Catawba Memorial Park, Inc.                                                                        NC
     Cedar Hill Cemetery Company, Inc.                                                                  MD
     Central Stone Works, Incorporated                                                                  NC
     Clinch Valley Memorial Cemetery, Inc.                                                              VA
     Crest Lawn Memorial Gardens, Inc.                                                                  MD
     Harold C. Davis, Inc.                                                                              NC
     Dodd-Payne-Hess Funeral Home, Inc.                                                                 WV
     Dunbar Funeral Home                                                                                SC
     Evans Funeral Home, Inc.                                                                           NC
     Evans Funeral Home, Inc.                                                                           WV
     Evergreen Memorial Gardens, Inc.                                                                   NC
     Everly Funeral Homes, Incorporated                                                                 VA
     Everly PFP, Inc.                                                                                   VA
     Fairfax Funeral Home, Inc.                                                                         VA
     Fine Finishes, Inc.                                                                                NC
     Fort Lincoln Cemetery, Inc.                                                                        MD
     Fort Lincoln Funeral Home, Inc.                                                                    MD
     Gallery Granite Corporation                                                                        MD
     Gardinier Colletti Memorial Home, Inc.                                                             NY
     Garner Family Funeral Home, Inc.                                                                   GA
     Garrett-Hillcrest, Inc.                                                                            NC
     George Washington Memorial Park, Inc.                                                              PA
     Gorny & Gorny Paterson-Clifton Mortuary                                                            NJ
     Graceland Mausoleum, Inc.                                                                          WV
     Haisten Funeral Homes, Inc.                                                                        GA
     Haisten Funeral Home of Henry County, Inc.                                                         GA
     Higgins and Son Funeral Home, Inc.                                                                 GA
     Highland Memory Gardens of Franklin County, Inc.                                                   NC
     Hillcrest Memorial Cemetery, Inc.                                                                  MD
     Hines-Rinaldi Funeral Home, Inc.                                                                   MD
     Johnson Funeral Home, Inc.                                                                         NC
     Kimes Funeral Home, Inc.                                                                           WV
     Kirk & Nice, Inc.                                                                                  PA
     Kirk & Nice Suburban Chapel, Inc.                                                                  PA
     Klingel-Carpenter Mortuary, Inc.                                                                   WV
     Lancaster Funeral Homes, Inc.                                                                      NC
     Loudon Park Cemetery Company                                                                       MD
          Druid Ridge Cemetery Company                                                                  MD
     Loudon Park Funeral Home, Inc.                                                                     MD
     The Mackey Mortuary, Inc.                                                                          SC
          Cannon Funeral Home, Inc.                                                                     SC
     Memorial Parks, Incorporated                                                                       NC
     McLaurin's Funeral Home, Inc.                                                                      NC
     Miller-Lee, Inc.                                                                                   NC
     Monte Vista Burial Park, Inc.                                                                      TN
     Murphy Funeral Service, Inc.                                                                       NY
     National Harmony Memorial Park, Inc.                                                               MD
     Nulton , Mattle & Ashton Funeral Home, Inc.                                                        NY
     Oconee Memorial Funeral Home, Inc.                                                                 SC
     Otto Redanz Funeral Home, Inc.                                                                     NY



                               -119-


                                                                                                     
          Cornell & Daggett, Inc.                                                                       NY
     Parklawn, Inc.                                                                                     MD
     Parklawn Memorial Gardens, Inc.                                                                    NC
     The Parkwood Cemetery Company                                                                      MD
          Parkwood Management Co.                                                                       MD
     Pineview, Inc.                                                                                     SC
     Pollock Wells Funeral Service, Inc.                                                                NC
     Richmond Memorial Parks, Inc.                                                                      VA
     S.E. Acquisition of Charleston, Inc.                                                               SC
     S.E. Acquisition of Clifton, New Jersey, Inc.                                                      NJ
     S.E. Acquisition of Fredonia, New York, Inc.                                                       NY
     S.E. Acquisition of Malden, West Virginia, Inc.                                                    WV
     S.E. Acquisition of Pennsylvania, Inc.                                                             PA
     S.E. Acquisition of South Carolina, Inc.                                                           SC
     S.E. Cemetery Management of Pennsylvania, Inc.                                                     PA
     Stephens Services, Inc.                                                                            NC
     Sunset Memorial Park Company                                                                       PA
          Pet Haven, Inc.                                                                               PA
     John M. Taylor Funeral Home, Inc.                                                                  MD
     Taylor M. Simpson Co.                                                                              NC
     Joseph W. Teague Funeral Home, Inc.                                                                VA
     Thomas-Yelverton Company                                                                           NC
     Washington Memorial Cemetery, Incorporated                                                         VA
     William W. Chambers, Inc.                                                                          MD
     Wilson Funeral Home, Inc.                                                                          WV
     Wise Corporation                                                                                   VA
S.E. South-Central, Inc.                                                                                LA
     Cemetery Services, Inc.                                                                            WI
     D.W. Newcomer's Sons, Inc.                                                                         MO
     DWN Properties, Inc.                                                                               MO
          Funeral Security Plans, Inc.                                                                  MO
     Ellison Funeral Home, Inc.                                                                         AL
     Kilgore - Green Funeral Home, Inc.                                                                 AL
     Knutson Funeral Homes, Inc.                                                                        IA
     Lathan Funeral Home, Inc.                                                                          AL
     Andrew J. McGann & Son Funeral Home, Inc.                                                          IL
     Mt. Juliet Funeral Home, Inc.                                                                      TN
     Mt. Juliet Memorial Gardens, Inc.                                                                  TN
     Nave Funeral Home of Lebanon, Inc.                                                                 TN
     Pauley Funeral Home, Inc.                                                                          IA
     Pine Crest Funeral Home, Inc.                                                                      AL
          Faith Memorial Park & Mausoleum Company, Inc.                                                 AL
          Valhalla Memory Gardens and Funeral Home, Inc.                                                AL
     Professional Funeral Services, Inc.                                                                LA
     Rockco's Funeral Homes, Inc.                                                                       AL
     Rockco and Son Funeral Home, Inc.                                                                  AL
     Runyan Mangold, Inc.                                                                               KS
     S.E. Acquisition of Albuquerque, New Mexico, Inc.                                                  NM
     S.E. Acquisition of Blue Island, Illinois, Inc.                                                    IL
     S.E. Acquisition of Boonville, Missouri, Inc.                                                      MO
     S.E. Acquisition of Lithonia, Georgia, Inc.                                                        GA
     S.E. Acquisition of Muskogee, Oklahoma, Inc.                                                       OK



                               -120-



                                                                                                 
     S.E. Acquisition of Oak Lawn & Orland Park, Illinois, Inc.                                         IL
     S.E. Acquisition of Santa Fe, New Mexico, Inc.                                                     NM
     Theis-Gorski Funeral Home, Inc.                                                                    IL
     West Lawn Cemetery                                                                                 NE
     Wisconsin Memorial Park Company, Inc.                                                              WI
          Time-Lock Insurance Agency, Inc.                                                              WI
     Wyuka Funeral Home, Inc.                                                                           NE
     Wyuka Simplicity Plan, Inc.                                                                        NE
S.E. of Tucson, Arizona, Inc.                                                                           AZ
Simple Tribute, Inc.                                                                                    LA
     S.E. of Maryland, Inc.                                                                             MD
     Simple Tribute of Florida, Inc.                                                                    FL
     Simple Tribute of Tennessee, Inc.                                                                  TN
Stewart Enterprises (Europe), Inc.                                                                      LA
Stewart Resource Center, Inc.                                                                           LA
Stewart Services, Inc.                                                                                  LA
Stewart Worldwide N.V.                                                                              Netherlands
     Stewart International (Netherlands) B.V.                                                       Netherlands
          Stewart Cementerios Puerto Rico Holding II B.V.                                           Netherlands
                Empresas Stewart-Cementerios                                                        Puerto Rico
                Stewart Cementerios Puerto Rico Holding I B.V.                                      Netherlands
          Stewart Funerarias Puerto Rico Holding II B.V.                                            Netherlands
                Empresas Stewart - Funerarias                                                       Puerto Rico
                Stewart Funerarias Puerto Rico Holding I B.V.                                       Netherlands
          Stewart Simplicity Plan of Puerto Rico Holding II B.V.                                    Netherlands
                Stewart Simplicity Plan of Puerto Rico Holding I B.V.                               Netherlands
                The Simplicity Plan of Puerto Rico                                                  Puerto Rico
Strong & Burns Funeral Home, Inc.                                                                       NY



                                     -121-

EX-23

                                                                      Exhibit 23

                       CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statement on Forms S-3 (File Nos. 333-59339 and 333-68563), S-4 (File No.
333-360) and S-8 (File Nos. 33-49726, 33-02374, 333-34766, 33-64106 and
333-104551) of Stewart Enterprises, Inc. and Subsidiaries of our report dated
December 16, 2003 relating to the consolidated financial statements, which
appears in this Form 10-K. We also consent to the incorporation by reference of
our report dated December 16, 2003 relating to the financial statement schedule,
which appears in this Form 10-K.

PricewaterhouseCoopers LLP

New Orleans, Louisiana
January 14, 2004

                                     -122-

EX-31.1

                                                                    Exhibit 31.1

CERTIFICATIONS REQUIRED BY RULE 13a-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, William E. Rowe, certify that:

1.       I have reviewed this annual report on Form 10-K of Stewart Enterprises,
         Inc.;

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
         control over financial reporting (as defined in Exchange Act Rules
         13a-15(f) and 15d-15(f)) for the registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Designed such internal control over financial reporting, or
                  caused such internal control over financial reporting to be
                  designed under our supervision, to provide reasonable
                  assurance regarding the reliability of financial reporting and
                  the preparation of financial statements for external purposes
                  in accordance with generally accepted accounting principles;

         (c)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (d)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: January 14, 2004

/s/ WILLIAM E. ROWE
- -----------------------------------------
William E. Rowe
Chairman of the Board, Chief Executive Officer and President

                                     -123-

EX-31.2

                                                                    EXHIBIT 31.2

CERTIFICATIONS REQUIRED BY RULE 13a-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Kenneth C. Budde, certify that:

1.       I have reviewed this annual report on Form 10-K of Stewart Enterprises,
         Inc.;

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
         control over financial reporting (as defined in Exchange Act Rules
         13a-15(f) and 15d-15(f)) for the registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Designed such internal control over financial reporting, or
                  caused such internal control over financial reporting to be
                  designed under our supervision, to provide reasonable
                  assurance regarding the reliability of financial reporting and
                  the preparation of financial statements for external purposes
                  in accordance with generally accepted accounting principles;

         (c)      Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (d)      Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: January 14, 2004

/s/KENNETH C. BUDDE
- -----------------------------------------------------
Kenneth C. Budde
Executive Vice President and Chief Financial Officer

                                     -124-

EX-32

                                                                      Exhibit 32

  CERTIFICATION OF FORM 10-K FOR THE YEAR ENDED OCTOBER 31, 2003, PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned Chief Executive Officer and Chief Financial Officer of Stewart
Enterprises, Inc. certify, pursuant to Section 906 of the Sarbanes-Oxley Act,
that:

- -        the Annual Report on Form 10-K for the year ended October 31, 2003
         fully complies with the requirements of Section 13(a) of the Securities
         Exchange Act of 1934, and

- -        the information contained in the Annual Report on Form 10-K fairly
         presents, in all material respects, the financial condition and results
         of operations of Stewart Enterprises, Inc.

This certification is being furnished solely to comply with the requirements of
Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as a part
of the Form 10-K.

A signed original of this written statement required by Section 906 has been
provided to Stewart Enterprises, Inc. and will be retained by Stewart
Enterprises, Inc. and furnished to the Securities and Exchange Commission or its
staff upon request.

Dated:  January 14, 2004

                                                  /s/ WILLIAM E. ROWE
                                         -------------------------------------
                                                    William E. Rowe
                                                Chairman of the Board,
                                         Chief Executive Officer and President

                                                 /s/ KENNETH C. BUDDE
                                         -------------------------------------
                                                   Kenneth C. Budde
                                               Executive Vice President
                                              and Chief Financial Officer

                                     -125-