Stewart Enterprises' CEO Discusses Q1 2012 Results - Earnings Call Transcript

| About: Stewart Enterprises, (STEI)

Stewart Enterprises (NASDAQ:STEI)

Q1 2012 Earnings Call

March 08, 2012 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

Analysts

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

Erin E. Wilson

James Clement - Sidoti & Company, LLC

Dick Innes - JC Clark Ltd.

Colin Stewart - JC Clark Ltd.

Operator

Good day, ladies and gentlemen, and welcome to the Stewart Enterprises First Quarter 2012 Earnings Conference Call. [Operator Instructions] Please note this call is being recorded. Now I would like to turn the call over to Martin de Laurèal, Senior Vice President of Corporate Development and Investor Relations. Please go ahead.

Martin R. de Laurèal

Thank you, operator. Good morning, everyone. On behalf of Stewart Enterprises, I would like to welcome everyone. By now, you should have received a copy of our 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 2011, and then we'll be open to the call -- open the call to questions. The information contained in 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 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 forward-looking statements regarding the company and its businesses.

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 of the most directly comparable GAAP financial measure can be found on the company's website at www.stei.com under Investor Information. The reconciliation of non-GAAP financial measures can also be found in the company's press release dated March 7, 2012.

With that said, I'd like to introduce management of Stewart Enterprises. On line, we have Tom Kitchen, our President, 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. And good morning, and thanks -- thank you for joining us on the call today.

I'll offer a few opening comments, and then I'll turn the call over to Lew. He'll review the financial performance in more detail before we open it up for some Q&A.

Overall, many of the core fundamentals of our business were stronger in the quarter. We increased both preneed funeral sales and cemetery property sales, improved average revenue per same-store funeral service and generated impressive total returns on our preneed and perpetual care trust.

As you read in the press release, for the first quarter of 2012, we reported net earnings of $8.5 million or $0.10 per share, compared to net earnings of $8.1 million or $0.09 per share for the same period of last year.

After adjusting net earnings for some unusual items including a prior-year tax charge, we reported adjusted net earnings of $8.8 million or $0.10 per share compared to $10.7 million or $0.12 per share for the same period of last year.

Looking at the reported numbers, however, doesn't tell the whole story regarding the company and its performance during the first quarter. And I'd like to spend a few minutes to put it in the right context.

First, the number of deaths in the United States continues to show downward trends for the quarter, and indicate as we evaluate also suggest our decline is in line with the industry-wide data.

With our funeral events off some 4.4% from the prior year, we recognize we cannot predict or control the number of deaths in our markets. We can come, however, exercise more control of our preneed sales in order to add to our backlog and protect market share and provide future revenue opportunities.

In line with this, and in contrast with the decline in our funeral events, we are encouraged by our preneed sales during the first quarter. We experienced increases in preneed funeral, as well as cemetery property and merchandise sales. Specifically, very pleased with the 17% increase over last year in preneed funeral sales. This 17% increase is impressive, and we believe it shows that the consumer continues to value the services we provide.

We also believe it's a reliable indicator of our future performance since the preneed funeral sales are not recognized as revenue until the underlying contracts are performed.

In addition, we increased cemetery property sales by 4%. These sales are recognized as revenue once a certain deposit requirement is met or as the related construction is completed.

So while we sold more cemetery property this quarter, we recognized some $3.3 million less in cemetery revenue from preneed property sales than we did last year as certain sales did not meet the criteria for revenue recognition.

While our standards for contract were the same in both periods, the overall payments received were less than the GAAP criteria needed to recognize the revenue during the current period.

This condition is similar to my comments regarding revenue recognition for our preneed funeral sales in that these cemetery sales will be revenue in the future.

And further, cemetery revenue recognized in our first quarter from the construction of cemetery projects declined by $1.3 million from 2011.

The timing of revenue recognition is dependent upon a number of factors such as progress achieved on the construction of community mausoleums or private family tombs.

As sales for both of these types of projects have remained strong and have shown continuous improvement in the last couple of years. The nature of these projects and the timing of revenue recognition contribute to the inherent variability of cemetery revenue for the company. But make no mistake, these sales will be recognized as revenue. It's just a matter of time. We do, however, view the growth in property sales as further validation that consumers continue to value our cemeteries as a place for permanent memorialization for their loved ones.

In addition, during the quarter, we continue to invest in our continuous improvement, e-commerce and third-party initiatives, and we remain committed to our cremation initiative.

While each of these investments impacted our first quarter of 2012 results, we believe they are nevertheless important steps for us to take now in order to realize further efficiency and to develop new sources of revenue for the company.

When all of these is considered, the underlying performance of the company was much stronger than the current earnings and EPS suggest. So you may ask, what have we done recently to address these matters? Well, first, we continue to emphasize the importance of selling preneed funeral and cemetery merchandise and services. Our accounting model requires us to expense all of our acquisition costs in the current period, leaving the bulk of the financial benefit to be realized in some future period. We will continue to sell preneed because of its importance in protecting and building our market share.

And regarding preneed cemetery property, we've analyzed and identified steps we can take to tighten up our sales criteria, while continuing to press forward as quickly as we can to move ahead on the construction of cemetery projects.

And finally, we recognized the need to adjust our operating costs to maintain and improve our margins in response to current market conditions.

I'd like to offer a few comments regarding the performance of our trust portfolio, which is a real bright spot for the first quarter. We're very pleased with the 4% total return in both our preneed and perpetual care trust for the quarter and 16% total annual returns for the last 3 years. Considering the volatility of the financial markets, we consider this to be a significant achievement, a very positive factor for our future financial performance. These returns are the results of the steps the company has taken to diversify the portfolio by introducing new asset classes that we previously did not own.

And during the first quarter, the fair market value of the trust portfolio improved by $24 million. And finally, subsequent to January 31 and through the end of February, our investment portfolio improved an additional $17 million.

And with that summary, I'm going to turn the call over to Lew.

Lewis J. Derbes

Thank you, Tom. Today, I'd like to give you some further insight on a few key areas. First, I'll discuss the company's operating performance in a little more detail; second, give you some additional information on the performance of our trust portfolio; and finally, discuss our cash flow.

As for our operating performance during the first quarter, we generated $125 million in consolidated revenue during the first quarter of 2012, including $72 million in funeral revenue and $53 million in cemetery revenue.

In our Funeral segment, we improved the average revenue per funeral service by 1.3% compared to the same period of last year. This improvement was offset by a 4.4% decline in same-store funeral calls. We believe this decline in funeral calls is generally consistent with overall market data from our competitors, as well as our suppliers.

Principally, as a result of the decline in same-store calls, we experienced a nearly $2 million decline in funeral revenue and gross profit compared to the first quarter of 2011. We are pleased with the 17% improvement in preneed funeral sales compared to the prior year. While the increase in these sales does not benefit us currently as revenue, the sales are differed into our backlog and will be recognized in the future as the underlying contracts to perform.

Preneed sales are important to the company's long-term potential, and we believe it provides a strong indication of our market share.

Moving on to our Cemetery segment. During the quarter, we generated $23.4 million or a 4% increase in cemetery property sales. However, a significant portion of property sales did not meet the criteria necessary for revenue recognition during the quarter, either because the inventory was not yet constructed or because of the payments we received.

While we also have -- while we always have some impact from this in our results, the impact this quarter was much more pronounced, resulting in a $0.03 decline in our earnings per share compared to the prior year. However, as construction occurs and additional payments are received, the revenue related to these contracts will be recognized in the future.

In addition, during the quarter, we experienced a nearly $1 million improvement in cemetery revenue related to our trust activities due in part to the positive trust performance that Tom previously discussed.

Also during the first quarter, Eastman Kodak declared bankruptcy prompting us to record a $600,000 charge to record a probable funding obligation in our perpetual care trust, which is included in cemetery expenses this quarter. This charge is the primary reason for the decline in cemetery margins for the first quarter of 2012.

Overall, the company's margins were impacted by the decline in deaths as a result of the high fixed-cost nature of our business. We are taking the necessary action to control these costs.

Further, we invested $1.1 million on new initiatives in the current year or nearly $0.01 per share more than last year on what we think of as Research and Development costs.

These concepts are still too new to show results, but we believe will yield dividends in the future. These investments are included in our corporate G&A expenses, resulting in a $700,000 increase compared to the first quarter of last year.

As we review our overall results, we think it is important to consider the $4.6 million decline in cemetery revenue or $0.03 per share as a result of the timing of construction and the level of payments received, as well as the $700,000 or nearly $0.01 per share additional investment in the future of our company made during the first quarter of 2012.

In regards to our trust portfolio, we have taken the necessary steps to continue to diversify our portfolio. Currently, nearly 25% of our portfolio is invested in asset classes that did not exist in our portfolio 3 years ago, including REITs, high-yields and MLPs among others. These diversification has led to a 16% total annual return in our preneed trust and a 17% total annual return in our perpetual care trust over the past 3 years.

Over that same time period, the fair market value of our portfolio has improved some $217 million or nearly 36%. This bodes well for future revenue recognition associated with the undelivered preneed contracts in our backlog.

We continuously evaluate our investment strategies to have an asset allocation that provides consistent returns with sufficient diversification.

And finally, as it relates to our cash flow, throughout the remainder of the fiscal year, we will continue to use our cash wisely, where we can get the highest and best long-term results for our shareholders.

During the first quarter, we continue to repurchase our outstanding common stock in the open market. Currently for the fiscal year, we have purchased 1.7 million shares for approximately $10 million resulting in a 5% decrease in the total number of shares outstanding over the last 12 months.

In total, over the last 7 years of our share repurchase program, we have bought back more than 26 million shares of our stock for $186 million, resulting in a 24% decrease in the total shares outstanding.

In addition, over the past 3 years, we have reduced the face value of outstanding debt by some 29% or $131 million.

After this significant deployment of free cash flow, I am pleased to report that we have more than $55 million of cash and marketable securities on hand as of January 31.

We also plan to grow our base business through both internal initiatives and strategic acquisitions. We successfully closed 2 acquisitions in fiscal 2011 and we are cautiously optimistic regarding the future.

Our cremation initiative is also an important component of our strategic plan. During the first quarter, we benefited from a 27% improvement in cremation sales to our cemetery customers. We have completed a total of 11 gardens and other cremation-related projects. We have 16 additional projects under construction and more than 25 additional projects under feasibility review.

During the first quarter, we invested approximately $3 million in new cremation inventory projects and are planning to invest the total of approximately $12 million this fiscal year.

In addition, we still expect to pay nominal, Federal cash tax payments throughout most of the current year. We also continue to pursue additional tax planning strategies and are cautiously optimistic they may generate further cash tax savings in the future.

And finally, our leverage coverage ratio, as measured on a net of cash basis, remains solid at 2.7x as of January 2012, which further attest to the strong financial condition of the company.

Now I'd like to turn the call back over to Tom.

Thomas M. Kitchen

Thanks, Lew. In summary, we remain committed to our strategic plan. We continue to emphasize the need to provide exceptional customer service, invest in our people, facilities and technology to help grow our base business and effectively manage our expenses while looking for additional growth through opportunistic acquisitions.

We will utilize our strong cash flow to the advantage of our shareholders to periodically assess the proper capital deployment including dividends, share repurchases, debt retirement and acquisitions.

And in conclusion, I wish to thank and express my gratitude for the hard work of all of our team members for without their contributions, commitment, and leadership, none of this would be possible, and I thank you.

Operator, now we're ready for some questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of AJ Rice representing Susquehanna Financial Group.

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

On the volume question. I know your major peer, they particularly pointed to December and January and said that partly lack of [indiscernible], partly mild winter and just a little tougher comp, those months were unusually soft, and they had been stronger before and expected or saw the early signs of being a little stronger in February. Do you have any similar comments? Is that what you guys are seeing?

Thomas M. Kitchen

AJ, we saw softness in December and January, but actually the largest piece of the softness was in November for us. So we did see those comments coming from our peers, and their experience was a little different than ours. Nevertheless, it's really hard to compare apples to apples, because we saw in our own operations during the course of the quarter, while they were consistently down, we saw operations and markets that were down 1% and others that were down 6% or 7%. On balance, it was 4.4%. So we saw a fair amount of variability from region to region. And I think that it's very hard to get an apples-to-apples comparison when you're comparing us to our peers because these deaths do happen at different levels at different parts of the country.

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

Is there any way to look at the quarter and say versus last year it was an unusually tougher comparison? Because you had been, sort of, flatting out or not?

Thomas M. Kitchen

Yes, that's a good point. That's a -- first quarter last year, we had a nice increase. I say nice increase because I think it was somewhere around 1.5% somewhere approximately 1.5% to 2% of an increase in the first quarter. It was a -- as winters go, it was colder and the seasonality factor for the number of deaths in the country in the prior year did seem to have a more pronounced effect this year. Of course, we all know it's a fairly mild winter and the deaths, the number of number have declined. I would hasten to avoid too much focus and emphasis on a single quarter. These -- we've had events like these in the past and the following quarters. They seem to bounce back, and they even out over a longer period of time. So I would really caution against putting too much emphasis on one single quarter. And just as a way of comment, February was soft as well. So we haven't seen quite -- we haven't quite turned the corner yet with regard to the soft numbers comparison, but again, FY '12 for us, we are actually booked to trend and showed overall for an annual basis, we showed a small increase in the number of calls. So 2011, and from the standpoint of number of deaths, was probably higher overall than 2010. And so consequently, 2012 is probably showing a bit of a tough comparison.

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

All right, okay. On the comments about cemetery revenue recognition this year, some of the activity didn't reach the level where you can recognize it as revenue. Are you finding that there's a change in behavior? Either people are putting less down upfront and wants to finance over a longer period of time, more people are financing? Is there -- or is it that just ebb and flow in the quarter-to-quarter from your perspective?

Thomas M. Kitchen

Yes, AJ, it's probably more of an ebb and flow. We have certain minimum down payment standards that we consistently follow from period to period. And we require down payments in the range of at least 5% to 10%. 10% is that bright line for revenue recognition for us. And it seems in the first quarter this year we had more people taking advantage of, say, that less than 10% down payment. And also, too, sometimes the first payment kicks in at the time when they don't cross over that 10% threshold until maybe the next period. And so what you had were a combination of factors in the first quarter that combined to produce the decline in the revenue realized from the cemetery contracts that were sold during the period. We are confident, just based on past experience, this happens and it happens at different levels throughout the year, throughout the years. And we're just confident though that this is just a matter of time before we make the appropriate collections and we recognize the benefit from those sales.

Lewis J. Derbes

And just to add on, AJ, I want to emphasize, we don't take a contract unless we have a minimum 5% down payment. So these contracts are quality contracts. We expect them to cross over the threshold for revenue recognition in the future as the subsequent payments are made. In most jurisdictions, funds that are committed towards cemetery property are non-refundable, so the customers are committed to these contracts. It's just a matter of the monthly payments crossing the threshold.

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

Sure. And in the prepared remarks, I lost -- I faded out there for a minute, but on the cash flow, if you mentioned this already, that's fine, but you talked about investment in cremation services, Tom, payroll payments and I think you mentioned trust fund withdrawals. Can you expand in each one of those a little bit? And especially on the cremation services investment, does that show up as CapEx or does it show up as incremental inventory investment? I'm assuming it's inventory investment?

Lewis J. Derbes

It's incremental inventory investment for us [indiscernible] in some cases not necessarily compared exactly to the accounting treatment of some of our peers. It's simply going to show up as investment in working capital. So I mean the components there, as we mentioned both in my prepared remarks as well as the Q and the press release, certainly, the decline in earnings associated with the calls is a major driver. The timing of payroll is just when the payroll period ended compared to the prior year, and that produced a little bit of difference. Trust withdrawals and deposits happen right around the end of the month each month, and it was simply some timing of it falling within the quarter last year and outside the quarter this year, I guess, the question or the area you want me to focus on in terms of inventory development. We did have an increase in inventory development type expenses during this period. We've talked about our commitment to developing the cremation inventory. Our investment in cremation inventory was up over $1 million from last year. And that drag -- that was certainly a drag in cash flow level -- the commitment from a capitalization standpoint was about $1 million. It was up almost $2 million in the cash flow impact purely related to the cremation inventory. What I want to emphasize, not like we're -- we're also committed to the traditional inventory development, and we had a slight increase there. And some of that, I think, was reflected in our increased production sales. We mentioned that a portion of it had to be deferred because of construction. That's kind of falling and aligning, if you will, in those 2 comments.

Thomas M. Kitchen

And, AJ, just to add on with what Lew said. We're very pleased with the results, the cremation cemetery sales. We have 11 cremation gardens, and the steps that we have taken have produced some significant gains. In fact, the cemetery property related to cremation types of products and services increased about 25% from the prior year. Now while it's still a relatively small base, 25% growth is a very significant accomplishment for us. And so we think that, that's a preliminary indicator in the sense that we haven't completely rolled out all of our cremation gardens and haven't completely fully fleshed out that strategy. We think that, that 25% increase represents a very positive indicator of what the future holds in store for the cremation gardens that we have. So that to me is an investment well worth making.

Operator

Your next question comes from the line of Robert Willoughby representing Bank of America Merrill Lynch.

Erin E. Wilson

This is Erin Wilson in for Bob today. Just to follow up on that cemetery property sales contracts, I guess, no down payment at all would be unusual, right? It's all within that 5% to 10% range? I mean is it normal for this to occur under the 10% range? Or how often does this happen?

Lewis J. Derbes

First, let me answer -- I'll answer the questions in the order. We will not accept the contract unless we have, at least, a 5% down payment. So it will be extremely unusual to have 0, okay? We -- our minimum down payment requirement of 5% has been consistent for some period. There are times when we run promotions requiring a higher percentage down. That could provide some explanation in terms of the variation over period, but it's very standard for us to get a 5% down payment and then kick into the monthly payments where it may take 1 month or 2 for that contract to triple for that bright line that Tom referred to in terms of revenue recognition. I just want to emphasize that customers committing 5%, we expect a down payment, so we just expect this to be purely timing and the ability for us to recognize the revenue in the near future.

Erin E. Wilson

Okay, great. And then I guess we seem to be underestimating the quarterly investment spending. What sort of run rate should we be using going forward? And when should we start to see that come down?

Thomas M. Kitchen

We spent $1.1 million on these strategic initiatives during the first quarter. Our expectation is that we'll likely track -- that's been the rate for the second quarter of this year. Some time third quarter, we expect the initiatives to be producing some results and that on a net basis would cause that exposure and that net impact on the earnings to be less in the second half of the year.

Operator

Your next question comes from the line of James Clement representing Sidoti.

James Clement - Sidoti & Company, LLC

Two questions, if I may. Just because the investment in the gardens and how well you all have seemed to have done with the locations where you have them established thus far, are sales into a garden -- or do the sales only occur after the garden is totally open? Or is there a component, like, in other words, are they being booked -- are they being booked as preneed cemetery property sales or are they being booked in the other category? For example, where you run -- where there is a revenue recognition, basically, as if it was a mausoleum?

Thomas M. Kitchen

To the extent that we can, we will sell on a preconstruction basis. And generally, that's really one of the interesting things that we have found is that when they're finished and they're open for operation, it makes for a much more impressive sight or at least it impresses more significantly with the potential customer. So the answer is yes. We -- just like a mausoleums or traditional type of inventory development that we go through a presale, to the extent that we can, we will sell this on a preneed basis. But what I have found is the consumers are much more impressed when they see the final product and they can walk out into the cemetery and they can actually visualize it, touch and feel the different monuments and the different components of the cremation garden. So what we see is a significant acceptance of this. And we saw that in particular with the first garden that we opened in Florida, where it was opened on November 1 of 2010. So its operations were -- let's say, they coincided with the company's fiscal year. And when you look at the sales in that garden for the fiscal year '11, the sales were significant enough that it accounted for probably the majority of the improvement in some of the cemeteries that we have in Florida. So again, we see this as a very important part of the company's strategic plan. It's really incumbent upon the company and the industry to address the issue of cremation and, in particular, to address the issue of cremation and show that there is significant value to the cremation family by buying a cremation cemetery memorialization that really gives them the peace of mind of where that urn with the cremated remains is going to be years and years in the future.

James Clement - Sidoti & Company, LLC

Absolutely. Shifting gears to the trust performance, which was obviously very good, both from a balance sheet perspective, but also from a P&L perspective. What I wanted to ask about was the P&L, because when you all took the impairment at fiscal year end, you put out an expectation of sort of the headwind that you would be facing from an accounting standpoint from that impairment. Were those assumptions in play during this quarter, or did you actually end up being too conservative in those assumptions prior? Because $1 million absolute increase in the P&L is great, it's a big number.

Lewis J. Derbes

They're certainly in play, and I don't think we underestimated them. We did see a very strong first quarter in the overall markets and especially in our own performance. I mean we did have a 4% return for the 3-month period. So we did have the opportunity to, as the market was improving, specifically in perpetual care, to realize some gains there, and that helped to -- helped the earnings within the first quarter. But the impairments we had discussed back in the fourth quarter of last year are getting allocated across the preneed funeral and the preneed cemetery merchandise and service contracts. We are seeing the pressure there that we expect.

Operator

Your next question comes from the line of Richard Innes representing JC Clark.

Dick Innes - JC Clark Ltd.

First question is with respect to margins, which are eroding and you indicated in your comments I think, Tom, that, that was an issue for you, can you speak to your cost reduction initiatives.

Thomas M. Kitchen

Yes, Dick, we recognized that we need to take some steps to address our spending where possible. Now I think it's important to demonstrate the fact that the company has taken seriously its cost reduction, and I would point to our general administrative category. Now we're saying the fact that we spent some $1.1 million on these additional initiatives, which we believe are important to the company, but for that, we would have had a decline in our G&A. And if you go back over some time, you will see that the general administrative category of expense is probably running $3 million less per year today than it was 3 or 4 years ago. So from that standpoint, the steps that we've taken with regard to investment and technology will provide us with the dividends and will provide us with opportunities to reduce headcount. We have, over the last couple of years, probably reduced headcount by about 125 to 150 people in part through the investment in technology and the ability to consolidate operations. And that type of investment technology in looking at every opportunity for us to consolidate functions and to achieve these efficiencies would be the areas that we'll look and examine in the future.

Dick Innes - JC Clark Ltd.

Second question is with regard to acquisitions. You didn't make any acquisitions in the quarter, but you indicated you're optimistic about that. Could you add a little color to that? And are the prices reasonable?

Thomas M. Kitchen

Certainly. We have a pipeline of several acquisitions that we're working in different stages, and we're cautiously optimistic that one or more of those will materialize in the second and third quarter. We did, over the last 6 months, participate actively in so many proposals and prices for several operations. We thought the prices that we submitted were fair in relation to the underlying business. We thought it was at the top end of the range, where we thought the property was worth. And what we've seen in the last 6 months with regard to those several proposals that we submitted, we have seen a significant increase in the interest and a significant increase in the prices that buyers are willing to pay. We are pursuing the discipline and process and strategy with regard to buying properties that we believe look like Stewart-type properties, the things that -- properties that have good critical mass in areas where we currently operate, and we'd like combination operations. And that's the ballpark of the target of properties that we're looking at. But we also have some pricing discipline that we feel is it would be inappropriate for us to go above a certain price for an operation. When you look at, in a particular worth, a company what the Stewart stock is selling, we're not going to be paying 10x, 11x EBITDA when the company is selling at 7.5x to 8x EBITDA. That's been the experience recently. It's not for lack of effort or it's not been for lack of identifying potential acquisition. It's not been for lack of submitting proposals. It's really just -- there's been some purchaser out there that's willing to pay the amount that we consider to be on economic for those businesses that we're in competition for.

Dick Innes - JC Clark Ltd.

I certainly agree. You shouldn't pay 10, 11x EBITDA. Next question. Why would you buy back shares subsequent to quarter end when you knew you were going to have a bad quarter and almost certain to have lower prices down the road?

Thomas M. Kitchen

Well, we had a plan that we had implemented and we followed that plan, and we stuck with it. My crystal ball, in terms of what the price of stock is going to be this week and next week, is probably not that accurate. We take a long-term view of what we believe is the right pricing discipline for us to repurchase our shares. And notwithstanding the recent decline and the softness of the price of the stock, we felt that the pricing offered us good opportunity. And we believe that the current market values of the company is -- significantly understates the intrinsic [indiscernible] for the company. I think that point is clear. And anywhere around these prices, we're going to be buying. And that price level target for us to have a high degree of interest existed 1 week or 2 ago, and at these current levels, it will continue for a while. But we do take a long-term view. And we do think that the prices that we were buying after the close of the quarter were still on a long-term basis when you consider all the factors of the interest for us to pursue and to buy those shares.

Colin Stewart - JC Clark Ltd.

Tom, it's Colin Stewart here. I just have one question to add to what Dick asked. Why will the management team and the board of this company not acknowledge the chronic underperformance, the long history of value destruction and the concerns of large shareholders and agree to form an independent committee of directors to explore strategic alternatives?

Thomas M. Kitchen

Colin, I think we've addressed that. And these points that were included in your press release were addressed along with increasing the dividends and share repurchases. And the board understands its responsibility and its fiduciary obligation to do everything in the best interest of the shareholders, and it does. It takes that responsibility very seriously. And so every meeting and every discussion is about how do we make the company better and what do we do to make it more valuable for our shareholders.

Colin Stewart - JC Clark Ltd.

And do you think your discussions, those regular discussions are having a satisfactory impact?

Thomas M. Kitchen

I believe they have.

Colin Stewart - JC Clark Ltd.

Your share price would certainly indicate the contrary, Tom.

Thomas M. Kitchen

Again, Colin, we take the long-term view. And I think the shareholders have to take long-term view. There are going to be prices or there are going to be periods where the price is not going to efficiently value the company stock, and I think that you're in one of those periods at this point in time.

Colin Stewart - JC Clark Ltd.

Tom, the share price underperformed for the past decade?

Thomas M. Kitchen

I think that depends on the points in time that you picked as the starting point in the end. We track that on a consistent basis, and we are satisfied that we understand what's accounted for the variability in the company -- the price of the company's stock.

Operator

[Operator Instructions] Your next question comes from the line of Brad White representing New England Burials at Sea.

Brad White

I'm calling as a shareholder and as a company owner. The first Question as a shareholder, it was a little bit muted at the beginning of the call. Could you reexplain the Kodak write-down? What was that all about?

Lewis J. Derbes

We had an investment in Kodak stock within our perpetual care trust. Perpetual care trust, if you invade the initial corpus, you're required to fund the obligation. When that company declared its bankruptcy, the determination of value was evident, and we have an obligation to restore that investment in the perpetual care trust.

Brad White

And in today's society, we are all getting healthier and death rates are declining, but when the time comes, at-need cremations have increased significantly. My business-related question is, what percentage of your at-need families do not do anything with the cremated remains between the time of their service and/or sale in your gardens, which just sounds like your garden business is increasing? But I'm sure many people don't do anything, and I'm curious as to what percentage that might be?

Thomas M. Kitchen

Well, we haven't gotten specific with regard to that percentage, but we have acknowledged in the past that for many of our cremation families, many of them take the cremated remains and the urn home with them. And what we believe is the opportunity for us is that since we have a large percentage of our funeral homes located on our cemetery properties, that we have an opportunity to convince the families that -- ask them the question of where do they want to see that urn or where do they want that urn to be in 3 to 5 years. And I think people don't really give that serious enough consideration, and we believe that cremation of cemetery niche on memorialization in one of our cemeteries offers them the perfect opportunity of answering that question.

Brad White

So if you do 10,000 family events, do you have any idea at what percentage people do not inure the cremated remains?

Thomas M. Kitchen

We have said in the past that, that percentage is probably about 10% -- not 10%, excuse me, about 20%.

Brad White

Okay. And then do you folks -- last question, do you folks do any data mining, for instance, maybe folks that use your services 10 or 15 or 20 years ago and you just, kind of, tap that file cabinet and email or U.S. mail those folks and say, "Hey, we have new cemeteries that are opening an urn gardens." Do you folks do that?

Lewis J. Derbes

Yes, we do. We mine our data and use that as a lead source all the time. As Tom mentioned in his comments previously, the -- you have to see the cremation gardens that we're developing to appreciate what's there. The advantage that we see is the wealth of combination properties that we have. When the cremation customer comes in, they take a tour of the gardens that we've developed. So when we have a combination operation with the garden there and we take them through, a picture doesn't do justice to what these gardens that have been developed to provide for the families. And we're having families that come through -- they have to touch it and be able to see it and perceive the value as opposed to an explanation out of collateral materials. Our sales teams does a great job trying to doing that, but there's no better solution than having them walk through our gardens and see what opportunities are there. This is new to the whole industry, and it's obviously new for the cremation family. They didn't know what was there. And often times we get, "I didn't know you could do this with a cremation."

Brad White

Sure. Well, I would think that if you have 10% or 20% creeper trade of folks not using your end service in the cremation garden, that's good opportunity, especially in environment of declining comp sales. That's a good way to take a second bite of the apple and earn some money.

Operator

With no further questions at this time, I would now like to turn the call back to management for closing remarks.

Thomas M. Kitchen

And thank you. We like to thank everybody for joining us today. We appreciate your interest and continued support in Stewart Enterprises. And we'll talk again in 3 months. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

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