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Stewart Enterprises (STEI)

Q4 2011 Earnings Call

December 16, 2011 11:00 am ET

Executives

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

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

Unknown Executive -

Analysts

Seth Rosen - Eminence Capital, LLC

James Clement - Sidoti & Company, LLC

Dick Innes - JC Clark Ltd.

Albert J. Rice - Susquehanna Financial Group, LLLP, Research Division

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

Colin Stewart - JC Clark Ltd.

Presentation

Operator

Good morning, and welcome to the Stewart Enterprises Inc. Fourth Quarter 2011 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Han Wei [ph]. Please go ahead.

Unknown Executive

Thank you, Valerie. Good morning, everyone. On behalf of Stewart Enterprises, I would 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.stei.com. On today's call, management will provide an overview of fiscal year 2011 and then we will open up the call for your questions.

The information contained in this call is current only at the time of this call. 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 the 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 statements due to several important factors, which are described in the company's Form 10-K for the year ended October 31, 2011.

The company uses adjusted earnings, adjusted EPS, adjusted 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. A reconciliation to the most directly comparable GAAP financial measure can be found on the company's website, at www.stei.com under the Investor Information or in the company's press release dated December 16, 2011.

With that said, I'd like to introduce the management of Stewart Enterprises. On the line, we have Tom Kitchen, President and Chief Executive Officer; and Lew Derbes, Chief Financial Officer. At this time, I'd like to turn the call over to Tom. Please go ahead.

Thomas M. Kitchen

Thank you. Good morning, and thank you for joining us on the call today. I'll offer a few summary comments and then I'll turn the call over to Lew for him to cover the financial performance in more detail before opening up for any Q&A.

Overall, very proud of our performance in fiscal year 2011, including a strong finish in the fourth quarter. This has been the best fiscal year in the past 3 years and includes achieving the highest net earnings and earnings per share, highest increase in same-store funeral calls, the highest annual cemetery property sales, and the lowest corporate G&A expenses.

Underlying core operations performed well as demonstrated by an $8 million increase in funeral revenue, resulting primarily from increases in both average revenue per call, and the number of same-store funerals performed. Based on the data we reviewed, we believe our funeral call performance appears to be tracking ahead in the markets that we serve. Which is an indication of an overall increase in market share.

We also produced almost $100 million or a 2% increase in net preneed funeral sales compared to last year. More significantly we gained momentum during the year and finished with an increase of nearly 9% to $27.5 million for our fourth quarter. Preneed sales are important to the company's long-term potential and they help maintain and build market share.

On the Cemetery side, we produced over $100 million in cemetery property sales or an increase of 8% over last year. We also realized a strong finish to our fiscal year of a more than 14% improvement in property sales to $28 million during our last quarter. Preneed funeral and cemetery property sales are impressive, especially in light of uncertainties in the overall economy. Other significant accomplishments for the fiscal year include settling that litigation related to Hurricane Katrina for $12.4 million, repurchasing 5% of the company's common stock for nearly $30 million and announcing a 17% increase in our dividend to $0.14 per share, resulting in nearly $12 million in return to our shareholders during the year.

In this latest change, we've increased our dividend by 40% over the past 2 years. The decision to increase the cash dividend reflects both the board and management's confidence in the company's current financial condition and our ability to consistently generate strong positive cash flow. It's the board's intention to periodically reevaluate the company's dividend policy for a potential increase in the future.

We've also invested $9 million in acquisitions during the current fiscal year. While we would have liked to acquire more businesses, we have followed a disciplined process to identify those that best fit our model with regard to size, location and projected returns.

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