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Stewart Enterprises (STEI)
Q1 2011 Earnings Call
March 10, 2011 11:00 am ET
Thomas Kitchen - Chief Financial Officer, Senior Executive Vice President, Director and Member of Investment Committee
Scott Eckstein - Director of Account Services
Thomas Crawford - Chief Executive Officer, President and Director
Nicholas Jansen - Raymond James
Clint Fendley - Davenport & Company, LLC
James Clement - Sidoti & Company, LLC
Albert Rice - Susquehanna Financial Group, LLLP
Previous Statements by STEI
» Stewart Enterprises CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Stewart Enterprises, Inc. F2Q10 (Qtr End 04/30/10) Earnings Call Transcript
» Stewart Enterprises, Inc. F1Q10 (Qtr End 01/31/10) Earnings Call Transcript
Thank you, operator. Good morning. On behalf of Stewart Enterprises, I'd like to welcome, everyone. By now, you should have all received a copy of the press release. If not, please visit Stewart's website at www.stewartenterprises.com for a copy.
Management will provide an overview of the first quarter, and then we'll open the call to your questions.
Before I turn the call over to management, please be advised that the information contained in this call is current only as of the time of this call. And the company assumes no obligation to update any statements, including forward-looking statements made during this call. Statements made by the company that are not historical facts are forward-looking statements. Examples of forward-looking statements include projections of revenue earnings, growth rates, free cash flow, debt levels, tax benefits and other financial items, statements regarding plans and objectives of the company or its management, statements regarding industry trends, competitive trends and their effect on future performance and assumptions underlying the forward-looking statements regarding the company and its business. The company's actual results could differ materially from any forward-looking statement due to several important factors, which are described in the company's Form 10-K for the year ended October 31, 2010.
The company uses adjusted earnings, adjusted EPS, EBITDA, net debt and free cash flow 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. Reconciliation and the most directly comparable GAAP financial measures can be found on the company's website, at www.stewartenterprises.com under Investor Information Reconciliation of Non-GAAP Financial Measures and can also be found on the company's press release dated March 9, 2011.
With that said, I'd like to introduce the management of Stewart Enterprises. On the line, we have Tom Crawford, President and Chief Executive Officer; and Tom Kitchen, Senior Executive Vice President and Chief Financial Officer.
At this time, I'd like to turn the call over to Tom Crawford. Please go ahead, sir.
Scott, thank you very much. Good morning to everyone. On behalf of all of us at Stewart Enterprises, we welcome you and thank you for joining us on the call this morning.
Let me simply say that we are pleased and encouraged with the progress our company has made over the longer-time horizon, and the strong results of the quarter further reinforced that point. We believe the strength of the quarter is found in the adjusted earnings, where we better evaluate performance on an apples-to-apples basis against the previous period.
For the quarter, adjusted earnings grew by 27% and earnings per share by 33% period-to-period or to $0.12. While Tom will provide more of the details, let me summarize by saying that we're encouraged and pleased with the performance and major drivers of our business that contributed to our strong results.
Funeral volume increased by 1.1%, which by all the indicators we evaluate, is better than the conditions in our specific markets. Our average revenue per event increased for both traditional burial and cremation services by 1.4% and 4.8%, respectively. Our cemetery property sales generated growth of 10%. Our preneed funeral sales grew by nearly 3%. And we continued to emphasize cost management and productivity in the field, as well as the home office, resulting in the expansion of our Funeral and Cemetery margins by 70 and 290 basis points, respectively.
It's our stated intent to manage the business where low single-digit improvement in the top line yield double-digit growth to the bottom line. We achieved that desired outcome, as we did throughout 2010, with the results of the first quarter.
Overall, revenue grew by 4%. With our improved systems, controls and better management of costs, we generated a 12% growth in gross profit. Throughout last fiscal year, we continued to repurchase debt at favorable prices, which allowed us to further lower first quarter interest expense by 12%. The reduction of interest expense and the continued emphasis on managing our costs contributed to a 32% increase in pretax income. While we don't expect that rate of progression to be that steep in the future, we will continue to manage the business to generate double-digit growth from single-digit increases in the top line.
We are encouraged with our strong performance in both the Cemetery and Funeral segments for the quarter. Cemetery revenue grew by 6%, largely due, as I mentioned earlier, to a 10% growth in cemetery property sales. A leverage of that revenue growth with the continued emphasis on controlling costs, generated an increasing gross profit of 33%. And gross margins improved by 290 basis points compared to the first quarter of 2010.