Mail Stop 0407
June 15, 2005
Via U.S. Mail and Fax (504) 729-1436
Mr. Thomas M. Kitchen
Chief Financial Officer
Stewart Enterprises Inc.
1333 South Clearview Parkway
Jefferson, Louisiana 70121
RE: Stewart Enterprises, Inc.
Form 10-K for the Fiscal Year Ended October 31, 2004
Filed January 11, 2005
Form 10-Q
For the Quarterly Period Ended January 31, 2005
Form 10-Q
For the Quarterly Period Ended April 30, 2005
File No. 1-15449
Dear Mr. Kitchen:
We have reviewed your supplemental response letter dated
June
3, 2005 as well as the above filings and have the following
comments.
Where indicated, we think you should revise your documents in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the Fiscal Year Ended October 31, 2004
Item 1. Business, page 2.
1. We note your response to our prior comment 2.
Item 2(1)
* Considering that rent payments have not commenced under a sixth
lease agreement with the Catholic Archdiocese of Los Angeles, tell
us
if you have accrued for construction period rent. Tell us how you
accounted for rent before and after the construction period.
Refer
to FTB 85-3.
* Since you paid for the construction of the funeral homes it
appears
that you were the owner of the funeral homes during the
construction
period based on EITF 97-10. Tell us how the Archdiocese of Los
Angeles became the legal owner of the funeral homes which you
constructed and paid for. Also tell us how you accounted for the
financing and any incentive that you received in connection with
building the funeral homes. Tell us the consideration given to
EITF
97-10 or SFAS 98 as applicable and revise or advise.
Item 2(3)
* We note your statement that the mausoleum was intended by the
parties to be used primarily by the Catholic parishioners of the
Archdiocese of New Orleans. Please refer to paragraph 2 of EITF
01-9
which denotes that "vendor consideration may be given to direct or
indirect customers of the vendor." The cash consideration paid to
the Archdiocese appears to fall within the scope of Issue 1, which
presumes that cash consideration is a "reduction of the selling
price
of the vendor`s products or services." Additionally, you pay the
Archdiocese a percentage of the mausoleum sales, regardless of
whether the sale could be attributed to its promotional efforts.
Please revise or advise.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Trust Portfolio, page 21
2. We note your response to our prior comment 5 and your statement
that "a loss is considered other than temporary if the security
has a
reduction in market value, compared with its cost basis, of 20%
or
more for a period of six months or longer. Tell us, and disclose,
in
future filings the additional qualitative disclosures for
unrealized
losses as prescribed in paragraph 18(b) of EITF 03-1. Please also
cite factors that that you considered which would negate the
rebuttable presumption that an impairment is considered other than
temporary after a one year period. In your case, the aggregate
unrealized losses that were 12 months or greater were
approximately $
16 million, or over 60% of your unrealized losses.
Notes to Consolidated Financial Statements
(19) Long-term Debt, page 89
3. We note your response to our prior comment 7 and your statement
that EITF 98-14 does "not include the guidance of `looking
through`
to the intermediary` as prescribed by EITF 96-19. Both EITF 96-19
and
98-14 cited SFAS 125, subsequently replaced by SFAS 140, as
reference
material or guidance for implementation in transactions involving
loan syndications or participations.
* Supplementally confirm to us if the revolving credit facility
and
Term Loan B were the subject of a loan syndication or loan
participation as defined in paragraphs 102 and 104 of SFAS 140.
The
nature of the agreement governs as to whether the consensus in
EITF
96-19 would apply. Refer to Exhibit 96-19A for further guidance.
Please revise or advise.
* If you conclude that a debt extinguishment has occurred, tell us
if
it meets the conditions in paragraph 16 of SFAS 140.
4. In addition, we note that your tender offer for the 10.75%
notes
was partially funded by net proceeds of an additional $ 130
million
from your Term loan facility. Citing the lead agents in the
tender
offer and the Term loan facility, please tell us how you concluded
that a debt extinguishment has occurred for the refinanced portion
of
the notes. Refer to the second example under Exchanges or
Modifications of Debt Involving a Third-Party Intermediary in
Exhibit
A of EITF 96-19.
..
5. Confirm to us, if true, that you were in compliance with all
debt
covenants at each balance sheet presented. In future filings
disclose your assertion.
(21) Income Taxes, page 21
6. We note your response to our prior comment 8.
* In future filings, please disclose the nature and effect of any
other significant matters affecting income tax expense or benefit
allocated to continuing operations and separately allocated to
other
items (i.e., discontinued operations, change in accounting
principle)
as required in paragraph 46 of SFAS 109.
* With respect to the statutory tax rate reconciliation, please
disclosed deferred tax expense or benefit exclusive of the effects
of
other components, including adjustments in the valuation
allowance.
Refer to paragraph 45(a) of SFAS 109.
(24) Segment Data, page 104
7. We reviewed the information provided to your CODM and we note
that in each instance the CODM reviews operating results by
division,
as well as product performance (funeral and cemetery) by division.
We
considered your earlier citation of paragraph 15 of SFAS 131,
which
states that if the CODM reviews the operating results of both sets
of
components (ie., products and services and also geographic
regions),
the components based on products and services would constitute the
operating segments. However, paragraph 15 applies to a matrix
form
of organization where certain managers are responsible for
different
products and service lines ... while other managers are
responsible
for specific geographic areas. Your response and accompanying
reports provide overwhelming evidence that division managers are
accountable for operating performance based on metrics related to
their funeral and cemetery businesses by division. It does not
appear that there are segment managers for product lines that
report
to the CODM and are held responsible for operating performance.
Therefore we believe that the divisions constitute the operating
segments. Please revise your segment presentation to comply with
SFAS 131.
8. If you believe that some of your operating segments can be
aggregated, please provide us with your analysis of paragraph 17
of
SFAS 131. Further, provide us with a detailed analysis of
paragraphs
16-24 that supports your determination of your reportable
segments.
9. As a result of our review of the information provided to your
CODM as addressed in our comments above, we believe that you
should
reconsider your evaluation of your reporting units under the
guidance
in paragraph 30 of SFAS 142 and EITF D-101. Please advise or
revise.
Form 10-Q for the quarterly period ended January 31, 2005
Notes to Condensed Consolidated Financial Statements
(13) Long-term Debt, page 39
10. We note that in connection with the tender offer of the 10-
3/4%
Notes, the tendering holders approved, by written consent, the
elimination of substantially "all of the restrictive covenants and
certain events of default contained in the indenture." Please tell
us
why amendments to the indenture subject to the holders` consent
were
required in connection with the tender offer. Further, in view of
the supplemental indenture that eliminates substantially all of
the
restrictive covenants and certain events of default, tell us why
you
believe that the long-term classification of the 10.75% senior
notes
at December 31, 2004 and January 31, 2005 was appropriate. Refer
to
paragraph 5 of SFAS 78 and revise or advise.
Form 10-Q for the quarterly period ended April 30, 2005
Condensed Consolidated Balance Sheets, page 5
11. Tell us the nature of the increase in deferred income taxes,
net,
from $ 43 million to $ 134 million, and your consideration of an
additional valuation allowance. Refer to paragraphs 23 and 24 of
SFAS
109.
(1) Basis of Presentation
(n) Income taxes, page 14.
12. Tell us if a valuation allowance applied to deferred tax
assets
of businesses sold and your consideration of an adjustment to
goodwill. Refer to paragraph 30 of SFAS 109.
(s) Leases, page 17
13. Tell us in detail the nature of the accounting change with
respect to rent escalations and leasehold improvement
amortization.
14. Tell us your basis for "reasonably assured lease renewals."
Tell
us if the lease renewals are within your control.
(12) Discontinued Operations, Assets Held for Sale and
Impairment
Charges, page 45
15. We note that you received proceeds of $ 25.7 million as of the
closing of the sale. Please tell us how this amount was reported
in
the Statements of Cash Flows which reflected only $ 6.3 million in
proceeds from sale of asset, net.
* * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested supplemental information. Detailed cover
letters greatly facilitate our review. Please file your cover
letter
on EDGAR. Please understand that we may have additional comments
after reviewing your amendment and responses to our comments.
You may contact Kathryn Jacobson, Staff Accountant, at (202)
551-3365 or Ivette Leon, Assistant Chief Accountant, at (202) 551-
3351 if you have questions regarding comments on the financial
statements and related matters. Please contact Al Pappas at (202)
551-3378 or me at (202) 551-3810 with any other questions.
Sincerely,
Larry Spirgel
Assistant Director
c.c. Dionne M. Rousseau, Partner
Jones, Walker, Waechter, Poitevant, Carrere & Denegre,
L.L.P.
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Mr. Thomas M. Kitchen
Stewart Enterprises, Inc.
June 15, 2005
Page 6
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE