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Stewart Enterprises, Inc. (NASDAQ:STEI)

Q4 2008 Earnings Call

December 19, 2008 11:00 am ET

Executives

Leslie Loyet – Financial Relations Board

Thomas Crawford – President & CEO

Thomas Kitchen – Sr. EVP & CFO

Analysts

Jamie Clement – Sidoti & Company

[Charlie Carter] – SunTrust Robinson Humphrey

Robert Willoughby – Banc of America

Mike Scarangella – Merrill Lynch

Clint Fendley – Davenport & Company

[Richard Inness] – JC Clark Limited

Herb Bookbinder – Wachovia

Operator

Welcome to today’s Stewart Enterprises, Inc. fourth quarter 2008 earnings conference call. (Operator Instructions) I would now like to turn the call over to Ms. Leslie Loyet of the Financial Relations Board.

Leslie Loyet

Good morning and thank you all for joining us. On behalf of Stewart Enterprises, I’d like to welcome everyone. By now you should have all received a copy of the press release that was issued yesterday. If not, please call Liz Dolezal at 312-640-6771 and she will send you a copy immediately, or visit Stewart’s website at www.stewartenterprises.com for a copy. Management will provide an overview of the fourth quarter and year and then we’ll open the call up 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 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 revenues, 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 statements due to several important factors which are described in the company’s Form 10-K for the year ended October 31, 2007.

The company uses EBITDA and free cash flow as financial measures. These financial measures are not in accordance with the accounting principals 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 to the most directly comparable GAAP financial measures can be found on the company’s website, again at www.stewartenterprises.com under Investor Information, reconciliation of non-GAAP financial measures and can also be found in the company’s press release dated December 19, 2008.

Joining us today from management of Stewart Enterprises we have Thomas Crawford, President and Chief Executive Officer, and Thomas Kitchen, Senior Executive Vice President and Chief Financial Officer.

At this point I’d like to turn the call over to Thomas Crawford.

Thomas Crawford

Leslie, thank you very much. Good morning and welcome to everyone who is on the call today. We appreciate your time and look forward to explaining the results of the quarter and the year.

Given the fact that we are reporting a loss for the quarter which resulted in a loss for the year, we will spend a large portion of the call going over the events that produced the loss to try and give you greater clarity on the situation.

Before we do that there are three messages I hope you will take away from our call today. First as disappointed as we are to report a loss, the loss for the quarter and the year was driven by severe declines in the financial markets and in relation to some of our investments.

Additionally the decline in the financial markets plus reduced property sales resulted in a goodwill impairment and the loss that we recorded and reported was not the result of operating performance.

Second while there is always room for improvement for the quarter and the year we are pleased with our operating performance and believe our initiatives are strengthening the business at the rooftop levels and we’re pleased with that. We do think we’re pointed in the right direction. We believe we are doing the right things to make the business stronger and more valuable over the long-term.

The third message is that even in today’s economy and the turbulence from financial markets the company’s balance sheet remains strong and we expect to continue generating consistent cash flow over time.

In relation to the drivers of the quarterly loss, we are witnessing an unprecedented time of turbulence in capital markets in relation to market and stock volatility, and also the swiftness of those declines.

Investors have felt it on both the equities and in the debt markets and we here at Stewart are not immune nor is our industry. We have felt the effects of the financial meltdown most acutely as the result of the investments we made in preferred equities of Lehman Brothers, Fannie Mae, and Freddie Mac, plus holdings in Washington Mutual and AIG, all of which have little or no value today.

Now we have reviewed the situation over and over again and as we look back at that decision at the time the investments were made, the criteria was that the decisions would be made in only A rated or better companies at the time.

The decision to go on a preferred route was tried, to reduce the volatility where we get income regardless of market swings. While we could be more disappointed with the outcome but at the time the decisions were made we believed they were prudent.

The condition of the equity market also resulted in the need to reevaluate goodwill in some of our cemeteries. With lower trust earnings plus lower property sales in 2008 it required us to look at our goodwill and to take an impairment of $26 million in our Eastern division cemeteries.

These two situations were the major cause for both the loss for the quarter that we reported. Thomas Kitchen will provide more detail on the call as we go on.

While we’re not happy in reporting the loss after adjusting for write-downs we are pleased with the operational performance of the company given the state of the economy, consumer attitudes, and confidence, and in relation to the industry statistics that we look at.

As you read from the press release our adjusted results are as follows. For the quarter net income grew from $5.3 million to $8.3 million for the same period for an increase of 56%. Earnings per share also increased from $0.05 to $0.08 for an increase of 60%.

For the year, net income grew to $40.2 million versus $36.7 million for the same period last year or an increase of 9.5%. Earnings per share for the year grew to $0.43 from $0.35 or an increase of 23%.

We believe the year results are particularly significant given the slow start we had in the first quarter of 2008. We are seeing positive evidence of the impact of initiatives rolled out during the year. As mentioned on previous calls, we rolled out the Best in Class initiative in 2008.

The purpose of the Best in Class is to capitalize on a size and scale by replicating the best practices we have at individual locations throughout the company. Our Best in Class initiative is comprised of our Stewart cultural standards. We believe that any great company has articulated values and published those values throughout the organization.

It also is comprised of consistent performance standards and measures. We have identified the top drivers of performance, we’ve put performance dashboards in place to measure and inform, and we are trying to institutionalize the best practices by performance standards so they can be applied throughout the company.

We also apply a continuous improvement mind set where we are evaluating processes to eliminate waste and inefficiency. The desired outcome of our Best in Class initiative is to improve profits, cash flow, and return on capital.

By doing that we intend to improve revenue per event, reduce our labor cost at a field level, and also reduce our corporate G&A. The evidences that we see in the quarter are as follows.

We have seen improvement in our average revenue per event. Our traditional services were up 5.2%. Cremation was up 7.3%. In total our averages for the quarter were up 5.3%. We see that same trend on a year-to-date basis as well. For the year, traditional were up 2.7%, cremation up 4.1%, and in total 3%, and we’ve seen greater progress as the year went on.

In relation to cost improvement we’ve had greater utilization of our field labor as we measure that as a percent of revenue. Our funeral margins for the quarter were also up 250 basis points despite the [cost] being down by 4.5% for the quarter and they were flat for the year.

And our total margins also improved for the quarter. From a corporate G&A standpoint we’ve seen that increase for the year however, when you reduce the cost associated with evaluating the SCI offer, our G&A costs were flat. Then when you also consider the fact that we have invested heavily in information technology and also continuous improvement then our corporate G&A costs have in fact declined.

And both the technology investment and the continuous improvement investments made during the year we believe will have good payback beginning in 2009.

The evidence of the Best in Class initiatives that we put in place also show up in our margin progressions and when you look at our progressions which is one of the things that we measure, our revenue was up 3.2%, our gross profit was up 6%, income up 56%, and EPS up 60%. And you see the same kind of progression for the year, just not as steep and again the margins that I talked about on our progressions for the quarter, we don’t believe those are sustainable at that level but our intent is that we get a multiplying effect as we go from revenue, through gross profit, income and EPS through the year.

In relation to the strength of the balance sheet and cash flow, cash on hand right now is $73 million. Our operating cash flow is $85 million for the year and again Thomas will talk more in detail about this.

Our net debt remained constant over the year at $377 million. However, that should be considered in relation to the fact that dividends and share repurchases totaled nearly $60 million in outflow for the company in 2008.

Now I’d like to turn the call over to Thomas Kitchen, the company’s Senior Vice President, Senior Executive Vice President, and Chief Financial Officer, and Thomas will review in detail the impact of the market decline on our income and balance sheet.

Thomas Kitchen

Thanks Thomas, and good morning to everyone. This morning’s call I’m going to discuss several items impacting the results which are covered in more detail then our Form 10-K to give you the context within which we view these items.

First I’ll comment a bit about our investment strategy and then talk about the impact of financial market declines and the effect on our trust funds. Then I’ll discuss how the financial stated impact of these declines differ amongst our different types of trusts.

I’ll also walk you through how this resulted in a goodwill impairment charge and the resulted impact of all of these items on our tax rate. And finally I’ll take you through what we view to be a strong liquidity position and where we stand in renewing our credit facility that matures in November of 2009.

Our strategy for our investment portfolio has been based on a traditional asset allocation consisting of common stocks, fixed income, cash, and preferred securities. The majority of our equity exposure has been in S&P 500 large cap domestic stocks with some exposure to small and mid cap stocks.

In addition our investment policy requires that fixed income and preferred security to be invested in companies rated A or better by one of the rating agencies at the time of purchase. The strategy of investing in high quality preferred stocks like Fannie Mae and Freddie Mac were believed to be sound and offered the company a higher return from dividends and interest within very acceptable risk tolerances.

It also reduced our reliance on capital gains and gave us a more predictable source of income and cash flow. The strategy proved effective especially for our perpetual care trust where you can only remove the income from the trust and can never reduce the underlying principal or corpus that was contributed to these funds.

Unfortunately the losses in our portfolio have been caused by the sudden unprecedented decline in the financial markets. In particular the financial sector was hard hit in firms like Lehman Brothers who survived the Great Depression, declared bankruptcy while government-sponsored entities like Fannie Mae and Freddie Mac were taken over by the government and both the common and preferred securities rendered practically worthless.

We evaluated these securities and selected others that we did not intend to hold and realized a total investment related loss of approximately $51 million in our portfolio. Approximately $13 million of these losses are in our perpetual care funds.

The purpose of these funds is to set aside a portion of the revenue from cemetery property sales and to generate income that is used to defer the cost of maintaining that cemetery. The assets deposited into perpetual care funds act as an endowment fund for the principal or corpus of the investment is to be maintained at all times.

Though the income from these assets is distributed periodically during the year, we’ve determined that its probable under certain state regulations that capital losses suffered in the perpetual care fund will have to be reimbursed or capital gains were considered income.

As such, we recorded a $13.3 million charge in cemetery costs during the fourth quarter related to this obligation. We will fund these losses over time beginning in fiscal year 2009. The balance of our capital losses of approximately $38 million exist in our preneed funeral and cemetery merchandise and services trust.

Typically realized gains and losses in these trusts have no immediate impact on our reported results. These realized gains and losses are allocated across all undelivered contracts and are recognized as revenue when the services performed or the product is delivered in a future period.

Many of these undelivered contracts will not mature for 10 or more years and therefore we have an opportunity with improved investment returns in the future as the overall market recovers. In analyzing the $38 million loss a portion of some $23 million of this realized capital loss occurred in trust funds where the company retains the income tax characteristics for the trust income.

To explain this further these are funds where the company as opposed to the customer is the grantor for tax purposes. Therefore the significance of this for example is that if the trust received dividend income then it is taxed currently to the company as a dividend at effective tax rates applicable to dividends.

Capital gains in these trusts are taxed as capital gains to the company. As we all probably know capital losses can only be deducted for tax purposes to the extent you have capital gains in the statutorily defined carryforward periods.

While we have recognized significant capital gains in the past, they have been used to offset capital losses from earlier periods for tax purposes. Consequently in light of our inability to demonstrate that we can utilize this capital loss in the future, offset it against currently available capital gains we recorded a tax valuation allowance of some $7.4 million during the fourth quarter, even though for book purposes these realized losses are deferred until the underlying contracts are delivered.

If over the next five years which is the capital loss carryforward period, we are able to realize capital gains we can reverse the valuation allowance and recognize an income tax benefit.

As I stated earlier for preneed funeral and cemetery merchandise trusts for book purposes, we allocate all earnings realized including capital gains and losses to the underlying contracts and recognize those earnings as funeral or cemetery revenue in the period the contracts are delivered.

An important point to consider is as of October 31, 2008 we had $241 million in earnings that have been realized and allocated to contracts that we will recognize in the future when the underlying contracts are performed.

So while we have a net unrealized loss or losses in the portfolio of $253 million in the funeral and cemetery merchandise and services trust, the $241 million of accumulated earnings and realized gains that have not yet been recognized as revenue will offset against these losses when they are ultimately realized.

In addition we have performed our analysis of contracts including these unrealized losses and the accumulated earnings and realized gains in the backlog and the contracts continue to be profitable. To put all of this discussion in context, for fiscal 2009 based on current realized losses and assuming current market conditions do not improve, we believe the decrease in revenue from trust earnings recognized on the delivery of preneed services and merchandise, cemetery perpetual care trust earnings, and our trust management fees could be as much as $10 million.

Or stated in terms related to fiscal year 2008 approximately 2% of fiscal year 2008 revenue and approximately 10% of fiscal year 2008 gross profit. We will continue to monitor our investment strategy to seek the proper asset allocation and diversification to mitigate the risk in this difficult environment.

Ultimately these declines led to a goodwill impairment charge in the fourth quarter of fiscal year 2008. Goodwill of a reporting until must 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. In addition to annual review we assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value of goodwill may be greater then its fair value.

The economic downturn throughout fiscal year 2008 impacted our cemetery property sales in our Eastern division and this was described in our second and third quarter 10-Qs. When we performed our evaluation of goodwill during the fourth quarter of 2008 particularly taking into account the reduction in trust earnings the funding obligation related to perpetual care trust and a decline in property sales, a non-cash goodwill impairment charge of $26 million related to the Eastern division cemetery segment was required.

This eliminated the goodwill for our cemeteries in our Eastern division. After this impairment the company has $247 million of goodwill remaining on its books of which approximately $48.7 million related to cemetery goodwill in our Western division.

Now I want to walk you through our fiscal year 2008 tax rate. For the year our effective tax rate for continuing operations was 119.7% compared to 31.5% for the same period of 2007. The increased rate in fiscal year 2008 is primarily due to the $26 million goodwill impairment charge of which $25 million was non-deductible for tax purposes.

In addition as I previously mentioned we reported a $7.4 million valuation allowance to reserve for the unrealized capital loss carryforward related to the realized losses in our preneed, funeral and cemetery merchandise and services trust which are recognized for tax purposes.

Currently this impacts the tax rate because the realized losses are deferred for book purposes but not for tax purposes.

Moving on to our liquidity and notwithstanding our realized losses related to the financial markets our liquidity position remains very strong. Our balance sheet and cash flow are solid with $73 million of cash on hand at October 31, 2008 and $85 million of operating cash flow for fiscal year 2008 compared to $82 million in the prior year.

The strong cash position is after we paid dividends of some $9.4 million and repurchased 48.4 million of our Class A common stock through our share repurchase program. We have no amounts drawn on our $125 million revolving credit facility which expires in November of 2009.

In addition we have no significant scheduled principal payments on our long-term debt until fiscal year 2013. All of our debt is fixed rate with a weighted average rate of under 5%. We are not and do not expect to be in breach of any covenants in our debt agreements.

We are currently working with our bank group to renew or replace our credit facility. Although we have nothing drawn we do have some $12 million in letters of credit and a $30.8 million bond that we may be required to cover with cash on hand should we not obtain a new facility by next November.

However based on recent discussions with our bank group we are confident that we will be able to obtain an acceptable credit facility reflecting current market conditions. While we continue to expect solid cash flow in fiscal 2009 we believe that it will be less then fiscal year 2008 due to the estimated probable perpetual care funding obligation as I previously mentioned, and non-recurring tax refunds in the current fiscal year.

We received approximately $21.8 million in tax refunds in fiscal year 2008 compared to some $5.8 million in tax refunds in fiscal year 2007. The timing of additional refunds cannot be predicted at this time although we continually review our tax planning strategy looking for opportunities to reduce our obligations.

Finally we believe that the use of our cash to pay dividends, construct funeral homes, make acquisitions, [solve our] investments in [inaudible] or related businesses, or repurchase our outstanding debt and stock are attractive options.

Currently we have $27 million available in our share repurchase program.

Now I’m going to turn the call back over to Thomas.

Thomas Crawford

Thanks Thomas. We hope that has been helpful. Obviously a very complex issue and distilled it down into what I think are the best and most essential pieces to understand. I hope that is of benefit to everyone on the call.

The question that I think everyone would like to know is what can you expect from the company during 2009 especially given market conditions and the potential of a deepening recession.

As you are aware its not our policy or practice to give guidance. As we’ve said before this industry is recession-resistant, that it is not recession proof.

And Thomas has mentioned that if financial markets don’t make any more improvement during the year over what they are, then the impact could be $10 million in revenue and pre-tax profitability. Additionally when you look at the marketplace the majority of our cemetery property sales are on a preneed basis.

They can be postponed by the consumer in difficult and trying economic times. However what was postponed in one year may be at need the next year so they don’t disappear but they can be postponed.

Additionally if financially stressed consumer on the funeral side may have a couple of options. Deaths will continue to occur but there may be a spike in the cremation rate if low price is the objective. Additionally on the at need side, consumers may [mix] down to conserve money.

Right now in our data we don’t have any evidence of this taking place but that is the potential. We have run multiple scenarios to determine the impacts on profit and cash flow in various environments, both positive and those that might be less then positive.

I will tell you that we do have action plans identified to reduce costs in the event of a less then desirable downturn and also we have action plans in place to preserve our cash flow and our capital. I will tell you that we will continue to pursue our Best in Class and continuous improvement initiatives and mine the maximum value out of both.

We have made great progress during the year but I will tell you we’re not hitting on all cylinders just yet and we think that’s a huge opportunity for us going forward. We believe we will continue to work on improving our averages, improving our field labor utilization, improving our technology and systems to eliminate multiple handling of contracts and to reduce our overhead.

We will continue to move forward this strategic platform that we have articulated in the past and that platform consists of three components; Best in Class, new invention, and acquisitions. And that’s simply restated, using our cash wisely and putting it where we can earn the best and highest returns.

We talked about Best in Class over and over again in previous calls, I would like to turn a little bit of attention to some new invention initiatives.

During 2008 we made a small investment in an internet-based company called Tributes.com. The inventor and partner of Tributes.com was the founder of Monster.com and Monster.com was interesting because the principal philosophy was to go in and to disrupt existing revenue streams that were not consumer oriented, they were not timely, and they were not efficient.

They attacked an existing revenue stream that was related to want ads in the papers and they found a way as you’ve probably seen advertised, a way of putting job seekers with job providers in a much more efficient and effective manner and really changed the channel context.

Tributes is trying to change, do that same thing but from a funeral standpoint relating that to the concept of the obituaries and change in the way obituaries are looked at going forward. Right now obituaries are time constrained, you have so much time from the time of death to getting that in. They are limited in duration when they’re published, usually they are one, at most two days.

They are fact oriented and not life oriented and clearly they’re not geared toward the consumer. Tributes.com is attempting to change that, to make lasting tributes to loved ones that can be expanded. They are not time constrained and in a sense they are perpetual in nature.

We like that because they are going after existing revenue streams right now in the marketplace today. They are related but they are different then what we would pursue. Right now funeral operations provide the labor for doing the obituaries but receive zero revenue or profit which goes elsewhere.

This is intended to be consumer-oriented. It doesn’t matter whether the family chooses a traditional burial or a cremation. It doesn’t matter. The tribute can go on in either category. We believe the potential is significant for our company and we’re rolling that out as we speak. We believe it is exceptionally good for the families that we serve.

We believe it is good for Stewart Enterprise because that is a revenue stream that we’re losing today and we’ve got the labor but no revenue and profitability. We also believe that this is good for the industry and it is our intent as we move this forward in our company and make it successful within our locations, that the industry will take advantage of this as well and benefit all the families that the industry serves.

Additionally we are in early stages of development to capitalize on generating new revenue and profits from visitors that enter either Stewart properties or visit our websites. We believe that’s an asset that can be further mined over what we have done today.

In relation to the acquisition plank on the strategic platform, as Thomas described we are working to get our new credit facility in place. Additionally we’ll continue to evaluate our options for free cash flow as opportunities arise and the best use of that free cash flow.

We will also evaluate improving our capital structure with a potential of debt repurchases. We turned off the spigot in 2007 and 2008 in relation to pursuing growth via acquisition of other funeral or cemetery operations and with the exception of a tuck-in cemetery acquisition in 2008 that has been the case.

In 2009 we intend to open up the spigot a bit more and be more aggressive in exploring and evaluating candidates for acquisition. We believe that makes sense where we can take advantage of an infrastructure that has been improved as a result of our continuous improvement actions and that also we can apply the things that we have learned from a Best in Class practice and that we will be able to add more value.

Now with those comments we are now ready to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Jamie Clement – Sidoti & Company

Jamie Clement – Sidoti & Company

As you think about continuous improvements and that sort of thing can you kind of give us a little bit more information what you feel you accomplished successfully looking back over the last 12 months and where your priorities are for the next 12 months.

Thomas Crawford

What happened over the last 12 months we put an incredible amount of time working with consultants to identify opportunities within the company. From that the first phase was pursued where we looked at the handling of our documents in the field. We’ve got a very complex business in relation to paper flow and how we handle our paper and what we do to check the quality throughout the organization.

As we look at all the steps and all the rework in the organization we have identified patterns that can be pursued and actions to take place. As a matter of fact during the latter part of this year we actually established a continuous improvement function within the company and so we’ve highlighted that to focus on exploring the opportunities we had to eliminate waste in efficiency.

And also we have really standardized our contracts and our packages as a way of eliminating mistakes that take place from one document to the other. It is our intent to try and streamline that process. It is our intent to eliminate the number of times a contract is touched and the number of times that we go through a quality review.

Jamie Clement – Sidoti & Company

It seems like you all may have gotten some positive news over the last couple of weeks on the litigation front and I know that there is some disclosure in your 10-K about that, what is your sense of what you’re legal spending might look like this coming year in relation to fiscal 2008.

Thomas Kitchen

There really were two components of that, the antitrust litigation, actually for the last year has been fairly modest in relation to the first couple of years that we had that and that was because we were waiting for the Magistrate’s decision with regard to the class action certification.

So at this point in time, I’m not expecting large increase but there is going to be some continuing ongoing expenditures with regard to litigation costs for the antitrust. Its hard at this point in time to forecast what’s going to happen there.

Another component of our let’s say legal fees incurred during the year related to the SEC investigation and we’re happy to report that we believe that we’ve got a resolution to that. Resolution required us to pay no monetary amounts but just to recognize that we had a books and records violation and we’re glad that that’s behind us and that was probably almost $1.5 to $2 million of legal expenses that we incurred during the course of the year and we don’t expect that to continue.

So there were really components with regard to some of the professional fees that we incurred in the past year. The biggest one at this point was related to the SEC inquiry and then also too we did incur a significant legal fee related to the SCI inquiry and the offer to buy the company.

We had in addition to our own corporate legal counsel engaged some special legal counsel for the committee, the Board and those costs were incurred and prior to the announcement SCI was withdrawing their offer so obviously that’s not going to repeat itself either.

Jamie Clement – Sidoti & Company

Its sounds as if you all from the antitrust perspective, you all are just waiting on the District Judge right now to see if he basically upholds the recommendation of the Magistrate Judge not to certify the class, am I right about that?

Thomas Kitchen

That’s correct. Also there is a possibility of an appeal but we don’t know what to expect after the Judge and we’re just waiting for him to make his decision.

Operator

Your next question comes from the line of [Charlie Carter] – SunTrust Robinson Humphrey

[Charlie Carter] – SunTrust Robinson Humphrey

On the dividend I’m asking this question because we, our specific investment strategy requires a dividend and you had a couple of different comments in the prepared remarks concerning the dividend, it being a priority for free cash flow but then you also noted that you would take whatever actions necessary to preserve cash or capital in the current environment. I just wanted to get a bit more background on management’s commitment to the dividend seeing that you all eliminated it in the earlier part of the decade.

Thomas Crawford

Right now we have absolutely no plans to eliminate the dividend. We have ranked and categorized the actions that we would take in a very deepened recession and eliminating dividends doesn’t even make it to that list at this point in time.

Now in extreme situation we would consider everything but right now we believe we have plenty of levers to push and pull on before we touch dividends.

[Charlie Carter] – SunTrust Robinson Humphrey

What percentage of revenue and operating earnings come from preneed sales?

Thomas Crawford

Right now our preneed sales, our preneed turned at need is about 37% on the funeral side.

[Charlie Carter] – SunTrust Robinson Humphrey

And you said preneed is 37% not at need.

Thomas Crawford

That’s right if you look at our mix of that, on a percentage basis, that 37% turns from a preneed standpoint to at need.

Thomas Kitchen

Actually there are several components to that. The preneed property sales of our cemetery revenue, the sales portion is about 75%, 80% related to preneed. But the sales represents about 40% of the total cemetery revenue that we recognize.

So from preneed property sales there is approximately maybe 15% of the company’s revenue that relates to preneed property sales. Now with regard to what we recognize from our backlog in terms of funeral revenue that’s approximately maybe 10% of the funeral backlog that’s recognized from the preneed to the at need bucket on an annual basis.

[Charlie Carter] – SunTrust Robinson Humphrey

So if I understood you correctly, preneed represents generally 75% of your business but the way its posted on the P&L generally shakes out to somewhere in the range of 10% to 15%, is that, did I understand correctly?

Thomas Kitchen

On preneed property, because the property sales represent let’s say approximately 40% of the cemetery revenue so therefore the preneed property and the preneed property sales represent about 75% of the property sales so it works out to approximately 15% of the total revenue stream from the company comes from preneed property sales that are recognized in the current period as revenue.

Operator

Your next question comes from the line of Robert Willoughby – Banc of America

Robert Willoughby – Banc of America

I think you’ve mentioned at a conference presentation with us awhile back that there might be $30 million in the neighborhood of that of cost savings opportunities, efficiency gains, and I know you’ve cited a number of things anecdotally that you’ve done but can you give us a sense what percentage of that that maybe we’re seeing in the numbers currently, what’s left on the table to do.

Thomas Crawford

As far as quantifying the absolute numbers, I can’t do that right now. What we have seen as I said with Best in Class we’re beginning, we rolled that out in 2008, we’re beginning to scratch the surface on that. We said our gains would come in the form of labor and they would come in overhead as we focus on continuous improvement and they would come in margin revenue recognition above and beyond what we typically have.

Now on the revenue side we think we’re starting to capture some of that right now and as I alluded to on the call on the labor we have made progress and as I’ve said we expect to make more progress going forward so I would say right now in 2008 for the results that we reported, we’re just beginning to scratch the surface on that right now.

Robert Willoughby – Banc of America

The second or third inning perhaps, not fourth or fifth?

Thomas Crawford

Yes. I don’t think we’re, this is a cultural issue throughout a lot of rooftops that we have to have this in place for some period of time. That’s why we’ve made some changes within the organization to drive that further throughout the rooftops and I said, we rolled it out, I think its going to take us a year to two years to release our hit on all cylinders, but we’re encouraged with what we see.

Robert Willoughby – Banc of America

I’m actually surprised revenue per service on the funeral side stronger then where we thought it would be despite the economy, where are your expectations going forward, can you continue to push those comps numbers up 5% or should we be more, should we take that more conservative view.

Thomas Crawford

Again, we’ve done a lot of work in 2008 on reviewing our packages, and making those more consistent, easier to use across the company so that’s a big plus. That will continue to operate in 2009. we also feel that we can do a much better job in how we present the family with the evidence that we’ve had on our own analysis by rooftop.

And so as far as what we saw in the third quarter we’re extremely pleased with that. To me that’s on a high end especially given the environment we’re in right now. So we’d be delighted if that continued on but I wouldn’t be surprised if it stayed at that level.

Robert Willoughby – Banc of America

DSO, any idea, the receivables look like they fell pretty sharply sequentially, was there something one-time in nature there or what do I conclude on the receivables.

Thomas Kitchen

The tax receipt, we received a refund during our fourth quarter for some taxes that had been classified as current I believe last year so that’s the biggest reason for the decline year-over-year. And quite frankly it’s the biggest reason for the decline from the third to fourth quarter. We received approximately $12.5 million, about $10.5 million related to taxes and there was some interest accrued on that tax as well.

Robert Willoughby – Banc of America

Don’t know if you can forecast this or predict it or not, but just insurance recoveries on hurricane issues, is that likely to be meaningful do you think in the 2009 timeframe or should we just keep that zero until we know better.

Thomas Kitchen

Its I think the latter because its, right now we’re having to, we had to file suit against our carrier. The trial date has been set or actually was set for December but it was pushed back to April of 2009. At this point in time we’ll continue to do everything we can to achieve a favorable settlement but that’s completely unpredictable at this point.

We think we’ve got a strong case and obviously would not be pursuing this unless we felt that we were entitled to some refund.

Robert Willoughby – Banc of America

Is there a target amount you’re shooting for?

Thomas Kitchen

Of course, in our litigation, we have claimed that we’re entitled to approximately $20 million of unreimbursed costs related to the hurricane damage that we experienced.

Operator

Your next question comes from the line of Mike Scarangella – Merrill Lynch

Mike Scarangella – Merrill Lynch

The $13 million charge to make up for the underfunding on the perpetual care assets, is that, do you determine that that’s the amount that you’re short or is that as per state statutory requirements, that’s how it comes out.

Thomas Kitchen

Well it’s a state-by-state determination and so we experienced those realized losses as a result of some of those Fannie and Freddie securities, and AIG and some other securities. We did a state-by-state analysis to determine what our obligations would be with regard to repaying the shortfall and our determination was that there were probable cause, or at least probable expectation that in those states we would be obligated to repay or refund approximately $13.3 million.

And there’s the possibility of let’s say a contingent liability which we disclosed of approximately $1.2 million. So it is a state-by-state determination that’s made based on the statutes and the regulations that we are governed by with regard to the management and the income recognition related to the perpetual care funds.

Mike Scarangella – Merrill Lynch

And that changes every day, if the market goes down over the next couple of months that number grows, right.

Thomas Kitchen

No, not really. Its based on a realized loss so the fact that we had to make this repayment was because we determined that there was some $13.3 million of realized losses when you consider Fannie and Freddie and Lehman and those shares are let’s say either or represented, that they’re taken over by the government or they’re in bankruptcy and so we consider that to be a [bright line] event that, consider it to be a realized loss.

At this point in perpetual care trust funds our strategy there is leaning more toward a current income form of let’s say, that we would look for, like dividends, interest, and so at this point when we buy the securities and put them into the perpetual care trust fund it’s a buy and [hold] mentality.

And so to the extent that there’s no external event happens or to the extent that we don’t turn over the stock and realize a loss, then the fact that there’s an unrealized loss of those funds would not require any repayment of that shortfall.

So its really based on realized losses that occur in the perpetual care and this time it really was due to these securities where these external events occurred and then there was some additional securities that we decided that we weren’t going to hold onto for any longer period of time.

Mike Scarangella – Merrill Lynch

Just so I understand the perspective on the other trust, your own cemetery merchandise trust, I think I heard you say even if you allocate your losses in those funds you still feel like those preneed contracts are profitable so I interpret that as you’re still sufficiently funded in those trust funds as of the end of the quarter, is that right?

Thomas Kitchen

That’s right.

Mike Scarangella – Merrill Lynch

And just specifically you said you would fund the $13 million over time, does that mean the next year, is that realistic?

Thomas Kitchen

Well there are a couple of alternatives that we could follow with regard to the funding and we need to make the determination and we’ll probably do that in conjunction with some discussions that we may have with some of the regulators in each of the states so its not a case where you sit down tomorrow and write out a check.

Quite frankly some of these assets we’re talking about such as Lehman or Fannie and Freddie may have some residual value and we’ll just have to wait until the dust settles with regard to those in terms of what the ultimate obligation is going to be. So we’ll give it some time during 2009, monitor the situation and we’ll certainly comply with all the regulations with regard to any repayment.

Mike Scarangella – Merrill Lynch

With regard to the composition of the trust, obviously financials were a big part of the problem that got you here, I’m looking at your K, it looks like financials are still the biggest concentration in the perpetual care trust and the merchandise trust, is it your intent to maintain a concentration of financials?

Thomas Kitchen

Our intent first of all is to take a hard look at our asset allocation and to select an asset allocation as more representative of a broader base or a more, a better distribution among the different asset classes that we have so we’re going to continue to work toward moderating that but we don’t want to do anything at this point in time with regard to triggering some losses just for the sake of triggering losses.

The analysis at this point is really to assess what’s the upside potential possibility for us going forward and at this point we intend to hold these securities for a period of time until we see some improvement.

Mike Scarangella – Merrill Lynch

I know you do this all in-house, might you look to get some outside advice on some of these portfolio decisions going forward?

Thomas Kitchen

We do have in some consultants that give us some advice with regard to asset allocations and looking at different investment strategies. We plan on maintaining our current strategy with regard to our in-house investment advisor to manage those funds going forward.

Mike Scarangella – Merrill Lynch

You make a comment in the press release that the funeral trust income was up, I’m not sure how I understand how that could be the case given what’s gone on in the trust funds.

Thomas Kitchen

It really deals with some prior year investment gains.

Mike Scarangella – Merrill Lynch

On the current state of things in the business, how do the preneed sales look, I’m trying to see if there’s a lot of economic sensitivity there. I think preneed funeral sales were down 9.7%, how about preneed cemetery?

Thomas Crawford

Our cemetery sales were off for the quarter and for the year. They were, so we have felt the impact of the economy for the entire year on the cemetery side and from the funeral side so those are the two things that are the most sensitive to the economy going forward.

Mike Scarangella – Merrill Lynch

So the year-over-year change for preneed cemetery sales, preneed funeral sales given the press release were down 9.7%, I’m just trying to get the corresponding number.

Thomas Crawford

Our cemetery revenues for the quarter were up 5.3% but there were also some other measures in there as well. When you look at the property sales by themselves, for the year they’re down 5.6% and for the quarter about 12%.

Mike Scarangella – Merrill Lynch

And just lastly funeral volumes were down 4.5%, that looks softer then I think we’ve seen in a while, just your comments on that trend there.

Thomas Crawford

It is and we’re disappointed with that. When we look at the data that we have, CDC for the cities that we operate in and again CDC as we’ve said continually is a measure, its not a great measure but it’s a measure. CDC was for the cities that we operate in was probably about five-tenths of a percent.

And so by that measure we didn’t keep pace for the quarter however when you look at the year, we started out very strong for the first and second quarter and then dropped back a little bit for the third and fourth and for the year we’re basically flat relative to the previous year.

Mike Scarangella – Merrill Lynch

Coming into the first quarter do you see any kind of reversal of those trends or too soon to say.

Thomas Crawford

What I’ve seen in this industry from time to time, it will bounce around. You will see you’ll be off by months and by the quarters but it tends to balance out on the year and that’s what we’ve seen in the business, again flat for the year but then everything came back around the normal expectation.

Operator

Your next question comes from the line of Clint Fendley – Davenport & Company

Clint Fendley – Davenport & Company

Given the magnitude of the impairment charges here and the significant exposure to the financial services sector, why don’t you not prerelease the results here.

Thomas Kitchen

We determined that we needed to research all the issues related to the accounting, the tax valuation was something that I think you’ll acknowledge that appears unusual and we wanted to make sure that we handled that appropriately. We also needed to research all the different state regulations regarding the obligation with regard to the perpetual care funding and we also wanted to give our outside accountants an opportunity to review the numbers and to stress test and poke holes in it and when we put all those components together it was approximately a week or so ago and then we debated about any preannouncement we knew that it was going to be a complicated subject to communicate.

It was going to require some time and effort for us and we decided that the best course of action for us was to continue working toward finalizing our 10-K, finalizing our press release for the quarter and the year and to have the conference call today.

Actually the K is not due until the end of December so we are sitting here nearly two weeks before the end of the year with regard to our filing. So we considered that and after all the factors we felt that it was the best interest of all of our shareholders for us to get our arms around the numbers, finalize our reports and to go through with our plan in terms of the disclosures today.

Thomas Crawford

Just to add on that, that was something discussed right off the bat. I can’t tell you how many times the organization has had to take me through all the puts and takes along the way and while we debated that the decision was because there was so many moving parts to make sure we are right and it was complex and what we didn’t want to do is make one disclosure without having been thoroughly vetted and then have to come back and either recant or do something else.

So that was, it was clearly discussed but the prudent decision was due to the complexity to make sure its right and handle it once, and as Thomas said, by the time that finally worked around we were right where we are right now.

Clint Fendley – Davenport & Company

Switching to the cemetery segment the gross margin on the merchandise have gone down significantly on a sequential from, if my calculations are right, from say the mid-40s down to below 9% this quarter. I realize you don’t give guidance but how should we think about that number going forward in 2009 given the movement that we’ve seen in the investment trusts.

Thomas Kitchen

With regard to the margin in the current period, the $13.3 million perpetual care obligation really effects the current period more. With regard to going forward, you’re right we don’t give guidance on that so and we’re not going to change that policy at this point.

Clint Fendley – Davenport & Company

But wouldn’t the maturity of the future maturity of the preneed effect, is that, that has to be a factor going forward on the margins I would think and should we expect them to stay in this low level here.

Thomas Kitchen

In our, in my comments and also in the course of the different filings we’ve made, we’ve indicated that we believe that during the course of 2009 our revenue will be impacted by approximately $10 million and that comes from a variety of sources. Its not only reduced earnings that we would recognize from the funeral and cemetery trust funds but its reduction in any income that we see coming out of our perpetual care trust funds as well as reduction of our trust management fees that we would realize.

We have tried to give some expectation with regard to revenue and we estimate that number based on market conditions in effect during the recent couple of months, that that number could be $10 million at the top line.

We also have tried to give some appreciation of what to expect as far as free cash flow in the 2009 year by relating it to what we did in 2008. In 2008 we had some significant tax refunds of approximately $21 million that we benefited from and then we also have factored into our own internal plans to obligation to repay that $13.3 million.

So when you consider those two factors the free cash flow for 2009 will be impacted but I also said during my comments that we continue to look at our tax planning strategies in order for us to minimize our tax obligations and we continue to do that quite frankly going into 2009.

Clint Fendley – Davenport & Company

Could you remind us on the cemetery side about how large is your sales force for this segment?

Thomas Crawford

Typically we have about around 1,000 sales people. That will ebb and flow but 1,000 is a good number.

Clint Fendley – Davenport & Company

And are they compensated based on a total commission or is it a base plus bonus structure.

Thomas Crawford

They are based on a commission basis and selling the property from cemetery to also preneed funeral.

Operator

Your next question comes from the line of [Richard Inness] – JC Clark Limited

[Richard Inness] – JC Clark Limited

On Q4 where the revenue per call was outstanding at plus 5.3%, however the calls were down 4.5% is there any concern there that you’re too aggressive on price and there’s a trade-off.

Thomas Crawford

That’s the age-old question, when we look at, we’ve had our calls drop when our prices haven’t increased and we’ve seen our calls go up when they have. So that’s something that continually ebbs and flows. When we look at our position in the marketplace we are not the lowest priced supplier out there nor do we want to be but we’re also not the highest priced either.

So I think as a complaint on us in some of our markets, we could probably improve our prices more then we have.

[Richard Inness] – JC Clark Limited

So what you’re saying it isn’t really impacting that 4.5% then.

Thomas Crawford

We don’t believe at this time. Again when we look at how are we getting that 4.5, if we just jack up prices without giving anything back, that’s a concern. And what we try to do is manage our packages better then we have. We’ve had those for two years. They have a constant refinement. We worked very hard at the beginning of 2008 where we felt like we lost a little bit of ground, we worked to get that back and improve our packages.

Also in making sure that our presentations to families have been improved as well. Also I will tell you that one of things that’s interesting is that our averages are also impacted by cremation and so we’re very pleased with what we’ve seen on the cremation side, but we also see that we’ve lost some of reduction has been in the fact that the direct cremation business has gone elsewhere and slipped away. That’s not necessarily bad.

[Richard Inness] – JC Clark Limited

On cost savings and copper prices are down dramatically, I think around $1.30 a pound down from a peak of over $4.00. Bronze markers are 87% copper, are you seeing big price reductions from your suppliers on bronze markers and if you are are you passing that along to consumers or is that enhancing your margins.

Thomas Crawford

Now a couple of things happen, last year we renegotiated a contract with a couple of our vendors to make sure that we were taking advantage of the best prices we could. You’re right, the bronze prices have diminished, and with our suppliers, we’re constantly reminding them of that as well.

Anything that we pass on, if our prices diminish, we have a consistent pricing mechanism that we use, and we evaluate that market by market.

[Richard Inness] – JC Clark Limited

You have $477 million in insurance contracts and you make reference to [Forethought[ if they were to have financial difficulty it could cause some problems in the future, do you have any basis for any concern about [Forethought’s] financial condition.

Thomas Crawford

Right now, [Forethought] is a very strong company. We’ve met with them probably within the last two weeks in person and over the phone going through their situation. We believe they’re well run. They are secure in what they invest in and their capitalization so as a partner and as a supplier we feel comfortable with [Forethought]. We don’t think that’s an issue.

[Richard Inness] – JC Clark Limited

On the preneed funds and how you calculate the cost of delivery there, if I look at what’s happened to your trust funds in total from what they cost, what they were worth as of October 31, they’re down about 34% so your gross margin is somewhere in the 20% range, you’d say that differential is an impairment. I’m not quite sure I understand why that isn’t the case.

Thomas Kitchen

That’s because when we do this we take into consideration a number of factors. We’ve got, we look at the contract prices. We look at the accumulated earnings that have been realized but –

[Richard Inness] – JC Clark Limited

So the accumulated earnings has been recognized in my calculations.

Thomas Kitchen

I think that’s a big factor, when you look at the unrealized loss in our funeral and cemetery merchandise trust its approximately $256 million. What is also disclosed that was probably up until this point in time not that well known was that we had imbedded gains and income that had been realized but not recognized of some $241 million.

So there, to the certain extent why this happened and I think this is probably true for most typical investors is that much of the gains of the previous five years has been let’s say given up in the recent market experience. So that’s a big factor in determining that but also too you really, when you go through the calculation your direct funeral expenses so certainly less then that let’s say 80% especially when you look at those contracts to be delivered.

[Richard Inness] – JC Clark Limited

So you don’t take into account fixed overhead costs when—

Thomas Kitchen

You’re not going to take into account a G&A cost going forward.

[Richard Inness] – JC Clark Limited

On the trust funds again I noticed in your K where it mentioned asset allocation, the trust fund, thee was a breakdown that basically 10% cash, 20% fixed income, 16% [press], and 43% equity, but that only got me to 89, it didn’t get me to the total so I just was curious where, what piece I’m missing in that calculation.

Thomas Kitchen

Are you looking at the K?

[Richard Inness] – JC Clark Limited

Yes its in the K and there’s a, its in the text section of your K, but it just goes through and if you take the amount listed in cash, fixed income, press, and equity it only adds up to about 89%, so I just wondered where the other 11% of the assets were.

Thomas Kitchen

I think the best way to answer that is just go to the footnote and if you look at the footnotes four, five, and six of the financial statements, you’ll see the breakdown in terms of the securities that are in each of the trust funds.

[Richard Inness] – JC Clark Limited

Another question on the trust, somebody had mentioned it earlier, your sector weighting in financials, just seems inordinately high, and obviously those figures are as of October 31 so the 25% weighting in financials and the funeral and cemetery merchandise trust and the 40% in the perpetual care trust obviously were significantly or somewhat higher prior to that date and I just wondered what risk controls or sector risk limits are in place and frankly it appears that there perhaps aren’t any in place and then it’s a little bit concerning and maybe you could just comment on that.

Thomas Kitchen

Let me just say that, I’d use the benefit of hindsight, the strategy of using preferred securities to generate some income in the financials such as Fannie and Freddie and so forth, was not the best strategy. However when you looked at the equity component of the financials it was done independent of what we considered the fixed income and we considered right or wrong, we considered the preferred securities to be more correlated with the fixed income security.

So there, when we’re buying those securities we’re more concerned with the yield on it, all those securities had an A rating or better when they were purchased and we felt secure that they would be there, that there would not be bankruptcy, there wouldn’t be government take over, that they’d be able to continue the payment of those dividends in order for us to realize the benefit of that income.

So I think that it was really the concentration really resulted as a consequence of our strategy to utilize preferred securities because we felt that based on our investigation and review that they were more correlated as a fixed income security as opposed to a common equity.

[Richard Inness] – JC Clark Limited

So now that obviously that wasn’t the case is the Board or the management team considering putting any risk controls in place or limits on sector concentration?

Thomas Kitchen

Yes, we go through asset allocations and sectors and we’ll be much more sensitive to that.

[Richard Inness] – JC Clark Limited

On your net debt to EBITDA covenant which you talked about also in the K, I on my calculation and again maybe you could walk me through how the calculation works, get a number that’s although below that 3.5x is relatively close to it and I just wondered if maybe my calculation is off base or if you are close to bumping up against that covenant and how you might be looking to mitigate any risk there and deal with that. Is it simply going to be a strategy of using any available cash to pay down debt or perhaps you can comment on that.

Thomas Kitchen

That’s one of those situations where our credit agreement was put in place some four years ago before we changed the accounting for the preneed acquisition costs. So the credit facility calculates EBITDA and the other covenants based on GAAP accounting that existed at the closing of that credit facility in November of 2004.

So there is an adjustment probably of about $25 million, somewhere around $25, $30 million that is to be made to our EBITDA number in order to come back to comply with the same rules or the same accounting that existed at the time we put the credit agreement together.

[Richard Inness] – JC Clark Limited

And that $25 to $30 million would simply be the cost of obtaining the preneed—

Thomas Kitchen

That was the amortization, if you recall we had approximately $240 million of acquisition costs deferred on the company’s balance sheet and we amortized approximately $25 to $30 million annually of that bucket of cost.

That amount was an add back, always in calculating the company’s EBITDA.

[Richard Inness] – JC Clark Limited

Just in relation to your comments on the profitability or the impact, potential impact on profitability of about $10 million for 2009 related to all of the various trust fund issues, the management fees, the recognition when contracts come due, how should we think of that on a longer-term basis going forward. Let’s assume for a second that equity markets are flat over a long period of time and so two, three, four, five years from now how do we think of that impact. Is it sort of a static in nature as far as the magnitude of the impact going forward in subsequent years or how does that vary over time.

Thomas Kitchen

We have looked at a number of alternative scenarios and certainly what you described is a situation that none of us ever hope would happen in effect that the markets don’t recover and that they stay at these depressed levels, so certainly I’m not going to say that somehow we’re going to be immune with regard to future revenues from any prolonged decline but our expectation is that we have the ability to hold these securities.

We’re not pressured into selling these securities because we had adequate cash flows within the trust and we plan on monitoring and determining what we think is the best strategy going forward. So at this point that is speculating about what’s going to happen two, three years down the road and quite frankly I don’t think any of us a year ago saw the downturn in the markets that’s existed or at least that occurred over the last three to four months.

Operator

Your final question comes from the line of Herb Bookbinder – Wachovia

Herb Bookbinder – Wachovia

In terms of this Forethought relationship its 60% of the preneed contracts funded by them, have you been trying to reduce that percentage or has it been, how has it trended and who are some of the other companies that you work with and do you want to bring this percentage down. How high has it been in the past and how many other companies do you use.

Thomas Kitchen

We in the past had used two companies and we split the business generally along the lines of our divisions. One of the companies we used exited the business and since that time over the last couple of years we have been using Forethought exclusively. There are others. It’s a relatively small industry.

There are others such as Homesteaders and Great Western and so forth, that we could use and we do use Homesteaders to a certain extent but the majority of our business has been with Forethought over the last couple of years.

Herb Bookbinder – Wachovia

If you have trouble renegotiating your credit line you apparently have to hold back $31 million in cash to cover a Florida bond, are you, when you manage the allocation of your resources this year are you assuming that you might want to hold onto $30 million or so in cash in case you need this or this is not an issue in how you allocate your resources this year.

Thomas Kitchen

Let me answer that a little bit different way, because we take a look at the liquidity needs for the company on a bit more of a macro basis. While we talked about having let’s say opportunities in using some of our money for different opportunities we intend to maintain a certain level of liquidity going forward so we don’t expect that we’re going to lever up the company to do any of the things that we talked about doing except if we have an acquisition that appears to be very good we would consider that.

So we’ll maintain just in general an adequate amount of liquidity in order for us to meet the daily needs for the company so our intent is to keep our powder dry with regard the liquidity that we currently have and also with regard to any needs going forward until we can get that credit facility renegotiated.

Herb Bookbinder – Wachovia

What’s the timeframe on trying to get that done?

Thomas Kitchen

Well our expectations or at least our goal and timeframe is to get that done before we report our first quarter which would be in early March of 2009.

Herb Bookbinder – Wachovia

In terms of using your cash realistically how much could you use for an acquisition if you really found something. There’s some limits, the most you might spend would be $25, $50, $5 million, $10 million. Have you given it some parameters as to what you might maximum commit to an acquisition given this environment.

Thomas Crawford

That really does depend on the situation. We have looked at some very large deals. We’ve passed on because they were beyond the scope and I think the range that we would look in would not be huge deals. Again we have a strong balance sheet right now. We want to get that credit facility in place so we can put that part behind us and then press ahead with.

Each one is unique and different.

Herb Bookbinder – Wachovia

What is the attitude toward buying stock back.

Thomas Crawford

Right now we have an authorization for about $27 million for share repurchases. We will continue to do that but we’re also again, getting the credit facility in place is critical. Also is we’ve got opportunistic situations we will do that in advance of getting that credit facility in place. But we’ll also reevaluate our capital structure.

Herb Bookbinder – Wachovia

So you will buy stock back even before you get your credit facility redone?

Thomas Crawford

If the situation is right, we will.

Operator

There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

Thomas Crawford

Thank you for your time today. We hope this has been helpful. We’ve had a lot of ground that we’ve had to cover and I am reminded of a statement that was given. I’m not sure what the origin is. I have a feeling it might be, I’m not sure where it is but the statement is, “may you live in interesting times” and that is a statement that is not meant as a compliment.

So I hope, we’ve all lived in interesting times in 2008 and my hope for 2009 for everybody on the phone today is that we don’t live in interesting times and that again, have a joyous holiday season and we’ll see you again in three months.

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Source: Stewart Enterprises, Inc. F4Q08 (Qtr End 10/31/08) Earnings Call Transcript
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