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Stewart Enterprises (STEI)

Q1 2013 Earnings Call

March 12, 2013 11:00 am ET

Executives

Martin R. de Laurèal - Senior Vice President of Corporate Development & Investor Relations

Thomas M. Kitchen - Chief Executive Officer, President, Director and Member of Investment Committee

Lewis J. Derbes - Chief Financial Officer, Senior Vice President and Treasurer

Thomas J. Hirsch - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Treasurer and Assistant Secretary

Analysts

Christian Rigg - Susquehanna Financial Group, LLLP, Research Division

James Clement - Sidoti & Company, LLC

Robert M. Willoughby - BofA Merrill Lynch, Research Division

Clint D. Fendley - Davenport & Company, LLC, Research Division

Dick Innes - JC Clark Ltd.

Presentation

Operator

Good day, everyone, and welcome to Stewart Enterprises Conference Call for the First Quarter of Fiscal Year 2013. As a reminder, today's call is being recorded. [Operator Instructions] I would now like to turn the conference call over to Martin de Laurèal, Senior Vice President of Corporate Development and Investor Relations. Please go ahead.

Martin R. de Laurèal

Thank you, John, and good morning, everyone. On behalf of Stewart Enterprises, I would like to welcome you. By now, you should have already received a copy of the press release. If not, please visit Stewart's website at www.stei.com.

On today's call, management will provide an overview of the first quarter of fiscal year 2013, and then we'll open the call up for your questions.

The information contained on this call is current only at the time of the call. Statements made by the company that are not historical facts are forward looking statements. The company assumes no obligation to update any statements, including forward-looking statements made during the call. Examples of forward-looking statements include: projections of revenue or earnings, growth rates, free cash flow, debt levels, tax benefits or other financial items; statements regarding plans and objectives of the company or its management; statements regarding industry trends, competitive trends or their effect on future performance; and assumptions underlying the forward-looking statements regarding the company or its business.

The company's actual results could differ materially from any forward-looking statements due to several important factors, which are described in the company's Form 10-K for the year ended October 31, 2012.

The company uses adjusted earnings, adjusted EPS, adjusted EBITDA, net debt, free cash flow, cash flow per share as financial measures. These financial measures are not in accordance with accounting principles generally accepted in the United States of America, or GAAP, and are intended to supplement rather than replace or supersede any information presented in accordance with GAAP. A reconciliation to the most directly comparable GAAP financial measures can be found on the company's website, again, at www.stei.com under Investor Information. A reconciliation of non-GAAP financial measures can also be found on the company's press release dated March 11, 2013.

That said, I'd like to introduce management of Stewart Enterprises. On the call today, we have Tom Kitchen, President and Chief Executive Officer; and Lew Derbes, our Chief Financial Officer.

At this time, I'd like to turn the call over to Tom. Please go ahead.

Thomas M. Kitchen

Thank you, Martin. Good morning, and thank you for joining us on the call today. As usual, I'll offer a few opening comments, and then I'll turn the call over to Lew, who will cover the financial performance in more detail before we open up for some Q&A.

Let me begin by noting that it's an exaggeration to say fiscal year 2013 is off to a superb start. The significant increases in revenue and profitability continuing the positive momentum we generated during fiscal year 2012. For the first quarter of 2013, we reported an 80% increase in earnings per share to $0.18 and generated $15.5 million in net earnings. I'm pleased to note, this is the highest quarterly net earnings in earnings per share in more than 10 years. Overall, total revenue improved 9%, which led to a 27% improvement in gross profit and a 340 basis point expansion in gross profit margin compared to the same period of last year. We believe these strong results demonstrate the power of leverage in our business and the importance of continuing to effectively manage our costs.

Our Funeral business turned in stellar performances, an 8.5% improvement in funeral revenue and a 14% improvement in funeral gross profit, highlighted by more than 8% increase in same-store funeral services. We're also proud of the strong performance of our Cemetery segment, which generated a 9% increase in cemetery revenue, a 63% improvement in cemetery gross profit and a 620 basis point improvement in cemetery gross profit margin. We consider the results to be significant in that both of our segments performed equally well at a very high level of achievement.

In addition, I'm very pleased with the strong performance of our investment portfolio, with double-digit average annual total returns over the last 3 years. Since the end of the first quarter of last year, our trust portfolio has improved by more than $53 million. This improvement is significant as it will enhance revenue and profitability in future periods.

These results don't happen by accident. The result of focused efforts of the company's dedicated employees, our management team, that provides the right leadership and direction in accomplishing the company's goals and objectives. I'm fortunate to have this team and are very grateful to each member for their contributions. We believe the inevitable demographics of our industry, combined with our proven business model, and experienced management team, provide the foundation for our future's success.

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