878522--12/17/2009--STEWART_ENTERPRISES

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Earnings in preneed funeral and cemetery merchandise and services trusts may be reduced by declines in stock and bond prices and will be reduced by declines in interest and dividend rates, resulting in lower future revenues and cash flows, and potential contract impairment charges. Earnings in cemetery perpetual care trusts may be reduced by declines in stock and bond prices and will be reduced by declines in interest and dividend rates, resulting in lower current and potentially future revenues and cash flows. In addition, we may be required to fund realized net capital losses in these trusts, which would have a negative effect on our earnings and cash flow. Our distributions from cemetery perpetual care trusts include net realized capital gains on investment sales in states where permitted. If regulations in these states are changed to no longer permit withdrawal of realized capital gains, our cemetery perpetual care trust eligible distributable earnings may be reduced in the future, which would reduce our earnings and cash flows. A weakening economy could decrease preneed sales. A reduction in discretionary spending could also decrease amounts at-need customers are willing to pay, and could cause third-party insurance providers that fund our insurance-funded preneed funeral contracts to experience financial difficulties. Our same-store funeral call volumes have not increased significantly or have decreased for a number of years due to many factors, such as the number of deaths and competition in our markets, our ability to identify changing consumer preferences and various other factors, some of which are beyond our control. Increased costs, including potential increased health care costs, may have a negative impact on earnings and cash flows. We may be unable to repurchase our 6.25 percent senior notes and our senior convertible notes when required by the holders, or to pay the cash portion of the conversion value upon conversion of our senior convertible notes. In addition, we are subject to counterparty risk on the call options relating to our senior convertible notes. The accounting method for our senior convertible notes will change beginning in fiscal year 2010 and will substantially increase our reported interest expense relating to the senior convertible notes, but will have no impact on cash interest paid or net reported cash flows. The payment of dividends on our common stock in the future is subject to uncertainties. We have experienced an increase in the proportion of lower-priced, non-traditional funeral services and direct cremations, which we believe is part of the continuing national trend toward increased cremation.

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878522--12/17/2009--STEWART_ENTERPRISES_INC